Even the most efficient of apparel companies often stumble when it comes to managing excess inventory. Common practices such as discounting or liquidating items devalue products and undermine sales. E-commerce can magnify that problem, making it easier for shoppers to find apparel products for cut-rate prices, but it doesn’t have to be that way. Here’s how to avoid the biggest inventory management mistakes and come out on top.
1. Make a Plan
It sounds simple, but one of the biggest mistakes companies make is putting off decisions about what to do with their slow-moving inventory. The inevitable accumulation of inventory could lead to a company paying increased taxes at the year’s end.
2. Avoid the Hoarder Mentality
Leasing additional space to store overage might sound like a good idea, but all it will be doing is contributing to the profitability of storage and logistics warehouse companies and incurring more costs.
3. Rethink Liquidation
Selling excess apparel inventory or apparel decoration consumables for a dime or even pennies on the dollar may cost more than just a loss in profits for those items. The product may wind up in secondary markets competing against a company’s efforts to sell current stock. When price comparisons are just a click away, you can bet that many customers and potential customers will choose the cheaper option.
4. Move On
Sure, you can continue to sell merchandise that has become outdated or stale, but why would you want to? If sales have tapered off on certain products, there is no reason to believe those sales will magically pick up at a later date. Why not move on to newer, more attractive, and likely, more profitable product lines?
5. Remember, Employees are not Your Customers
Sure, employee discounts are a nice perk, but offering unsold items at steep discounts to employees is just a Band-Aid approach that will only mildly, and temporarily, reduce inventory levels.
6. Employees are not Charities, Either
Thinking about spreading some goodwill by donating excess inventory to your staff? If employees are allowed to take moderate amounts of product home with them, expect that product to be resold or end up in landfills.
7. Avoid Landfills
Besides risking multi-channel products landing on the secondary market, in today’s environmentally-friendly society, do you really want to tarnish your company’s image by just dumping products in the trash?
8. Donate for Tax Benefits
Excess inventory can be donated to nonprofit schools, civic groups, churches, and other charitable organizations that need it. If you’re a regular C corporation, you can receive as much as a twice-cost federal tax deduction. Plus, there is no worry about the products finding their way back on the open market. That’s because provisions in the tax code stipulate that donated merchandise cannot be resold, bartered, or traded and must be used in a manner consistent with the charity’s mission. When you weigh the pros and cons, donating excess inventory to a company that distributes it to charities nationwide could be the best way to solve inventory headaches while protecting a company’s brand and bottom line.