In this dynamic and competitive world where every company is trying its best to achieve success and increase sales, inventory management has become a significant problem. Businesses can’t decide the market trends, which makes them store excess stock due to high demand. But changes in demand, fast fashion, and the arrival of new products or designs made the stock obsolete after a certain point of time. It affects the company’s financial health, warehouse storage, operational efficiency, wastage, and profit. Companies have found innovative ways to eliminate surplus inventory and maintain their business efficiency. Many businesses still believe in inventory storage with the hope of rekindling interest in such products andgaining the maximum advantage of it. This viewpoint not only affects their current sales but also has a negative effect on the reputation and management of the business. Excess stock restricts them from purchasing trending products and selling them at a huge profit margin duringtheir excess demand. Besides that, surplus stock, if not consigned properly, gets damaged, which ultimately causes a huge loss to the business. In this blog, we will go through the reasons why selling surplus stock is important and beneficial.
Free up the valuable space
Surplus inventory captures a huge and valuable area in your warehouse without providing any benefit. Selling that surplus stock frees up that area which can be used to store the trending goods with high demand and huge profit margins. When you sell such stock, you get some revenue that can be used for marketing, advertising, and promotions. It’s crucial to sell out the surplus inventory way before the arrival of new inventory in order to generate the required space. The maintenance and storage cost of surplus goods is an extra charge that won’t give any revenue or profit at any cost; therefore, it’s suitable to sell that excess stock and free up the precious space of the warehouse.
Ties up your cash flow
Excess inventory ties up the cash flow that can otherwise be used for some fruitful or important cause. The cash is tied up in the form of excess goods that hold no benefit for the company. When businesses sell excess stock, there is an immediate flow of cash in the company that can be used to purchase new goods, utilizein marketing activities, pay off suppliers, and invest in growth opportunities. The inflow of such cash increases business efficiency and gives an edge over competitors to gain a huge market share. Businesses that store excess inventory miss the chances of grabbing the opportunities and gaining huge profits in the present. Investing in the new stock ultimately helps them to take their company to the next level. However, the problem comes when companies get confused about how to sell surplus stock. There are many ways to sell surplus stock and gain revenue, like consigning surplus stock, bundling, discounts, sales, donations, online selling, etc.
High holding cost
Storage or holding cost is a vital expenditure that holds immense importance in business finance. Businesses want that cost to be utilized for goods that can give immense profit and revenue to the company. Now when that precious space is tied up for excess inventory that has no chance of giving any benefit, it is considered a loss for the company. Insurance and repair also come under the holding cost and maintaining such goods that have no ROI is useless. Insurance cost is generally high, which ties up the business capital for a more extended period. Therefore,it’s important to release that stock at the right time in order to save your money and spend it for a valid cause.
Prevents Depreciation and Avoid obsolescence
You must have heard about the depreciation of the assets over time. What it actually means is an asset’s cost gets reduced with time due to changes in market demand and supply and the arrival of new updated products, technological advancements, and innovation. The products in the surplus stock will lose their relevance and value completely after a certain point. After that scenario, the surplus inventory cannot be sold at a reduced price as it will become completely outdated or old-fashioned. It’s always better to sell the surplus inventory at the right time when you can atleastget the nominal valueof the stock.
Increase Sales and Profit
We are in a competitive business world where every company is trying their best to achieve excellence. In such a scenario, staying ahead of the competitors and gaining a huge market share to increase sales and profit is crucial. Surplus inventoryrestrictsyou from investing in high-demand products that have the power to boost sales and profits. They restrict you from tapping the profitable market opportunities and get major advantages from them. They capture a major part of your warehouse that should be used to stock the new products that have the potential to increase sales tremendously. Selling outdated and excess inventory allows you to make your warehouse decluttered and reserve that area for the stock that actually has huge demand. Trendy products have more demand than supply, allowing you to increase the price and gain huge profits until the supply and demand match.
Maintain a positive brand image
Businesses have to match the market demand and standards in order to survive the cutting-edge competition. In such cases, it becomes crucial to invest in seasonal and trending products that have huge demand in the market for a particular time. Customers demand change from time to time, and being a reputable business company, it’s your responsibility to fulfill their demands. This is the world of fast fashion, where it is impossible to return to older things once interest fades away. People consider some brands as out of competition or behind the times when they fail toprovide the things that are trending in the market. Therefore, to maintain a positive brand image and a good reputation in the market, selling the excess stock and purchasing the popular and trending products becomes necessary.
In conclusion, the management of surplus inventory is a crucial aspect of a successful and effective business strategy. Stocking the surplus inventory has many disadvantages but selling it at the right time allows your business to tap the prevailing opportunities and earn huge revenue and profits. When the stock gets cleared at the right time, the chances of obsolescence, damage by natural disasters, high insurance premium, and useless storage cost gets eliminated. When these positive things happen, you get access to the products that have huge demand in the market and can play a significant role in your business success.