Seasonal products can be a problem for any retailer because, when the season ends, there are always some products left unsold. Storing them until next season is not practical because they take up too much valuable space that is needed for the new season's items.
Excess seasonal stock normally results from retailers over-ordering due to demand for the products being less than they anticipated. This can be caused by unseasonable weather influencing demand, such as a warmer than normal fall delaying sales of winter clothing, or it may be due to poor economic conditions, or can simply result from the retailer being too optimistic about sales levels.
How Retailers Try to Avoid Excess Seasonal Inventory
Retailers can, of course, avoid excess inventory by simply ordering less. However, this poses the real danger of them running out of products entirely, which will annoy customers who rely on the company and will result in a loss of sales at the time and possibly longer term if customers move to a different retailer, so the adverse effects can be serious. Flexible ordering may be possible, but this relies on prompt supplies of the required products when inventory runs low.
Retailers tread a fine line between letting down their customers and risking being left with excess seasonal inventory when the season ends. Many will try to overcome these problems by using trend analysis and effective inventory management.
Trend analysis uses historical data to make predictions of future performance. By comparing a company's past performance with industry data, it is possible to determine how well the company performed and identify where improvements can be made. This can include analyzing how well the company responded to past trends, identifying periods when inventory needs to be increased or scaled back, and how the company can do better.
Seasonal trends can cause inventory shortages, overstocking, and strain on the supply chain to meet demand. Inventory management strategies should therefore cover real-time monitoring of stock levels, seasonal demand forecasting, and promotions to move inventory as the season comes to an end.
Many companies of all sizes rely on seasonal demand to keep their businesses profitable. Some companies are estimated to receive almost 90% of their revenue during holiday shopping periods, so getting seasonal demand right is crucial. Nevertheless, many retailers are left with excess inventory at the end of a season and need to clear this to make way for the new season's stock.
This excess inventory is often cleared through inventory liquidators at very low cost. As a result, a lot of inventory items become available and provide an opportunity for smaller retailers to buy and then sell on at a profit.
Dealing with Seasonal Liquidated Inventory
Many companies rely on liquidated merchandise as a source of products they can sell. These products are generally available at very low prices to ensure they are disposed of quickly, but can create potential problems for those companies that buy them to sell on:
- A very large volume of goods may be suddenly available, and potential buyers need to identify the most appropriate products from those on offer.
- Although prices are low, they can fluctuate due to varying demand, so close attention is needed to buy at the best price.
- Products move quickly, so decisions to buy have to be made promptly so that the opportunity is not missed.
- Adequate inventory management needs to be available so that levels can be adjusted quickly and overstocking or shortages are avoided.
- Sufficient cash resources are necessary to finance a sudden increase in inventory.
Avoiding Overstocks
Retailers that buy liquidated seasonal inventory face the same challenges as the companies that are disposing of the products, namely that the season has ended and demand is reduced. Effective inventory management is needed to ensure excess products don't remain and sales and demand have to be analyzed to be confident the products will sell.
Although liquidated merchandise provides great opportunities for retailers, there are potential problems that will arise without proper planning and effective strategies. Simply offering out-of-season products at low prices is unlikely to achieve the level of sales you want.
You have to publicize their availability using social media, email marketing campaigns, and traditional forms of advertising. Use effective signage in stores and engage employees to get the word out to customers. You can incorporate products as part of bundled deals to help them sell, offer quantity discounts or two-for-one deals, and employ a variety of promotional tactics to drive sales. Customers generally love bargains, but they won't buy if they are not aware of them or don't know what's included, so you need to treat publicity as a priority.
Being alert and innovative will ensure you are able to successfully sell liquidated merchandise, as will buying the right products in the first place, which we can help you with here at Quicklotz.
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