By Kira Renee
As a business leader, you’ve probably experienced feeling “stuck” with a catalog full of sellable items that just aren’t moving. This is especially frustrating after you spend hours making predictions, analyzing reports, and forecasting sales to estimate your stock needs. Despite all that planning, unfortunately—and it seems all too often—we can miscalculate and wind up with dreaded overstock inventory. Inventory overstock results from a business buying more of a product than it can sell, which is most often a result of poor forecasting quality.
So what considerations should e-commerce brands make when evaluating their inventory needs? How can they avoid the accumulation of unneeded products—and mitigate the impact when overstock inventory inevitably occurs?
Below, you’ll find some essential information about managing e-commerce overstock, plus explore a few low-risk strategies for moving it out without taking a huge loss.
The Causes of Overstock Inventory
The first step in alleviating overstock inventory for your e-commerce brand is identifying the cause of your miscalculation. By understanding what led to this surplus, you can work to prevent it from occurring in the future. A few common causes of overstock inventory include:
- Misjudging existing demand
- Overcorrecting for previous stocking errors
- Maintaining poor inventory management processes
- Using ineffective or nonstrategic promotional marketing strategies
- Attempting to mitigate supply chain issues
Seasonality is a huge factor in e-commerce inventory management. Sometimes the degree of seasonality can be predicted, and other times it shifts drastically with no warning. The months of August and September, for example, often see a significant boost in sales for any retailer of back-to-school items. Toward the end of the calendar year, buyers tend to spend more as the holidays approach and they stock up on gifts for their loved ones. Seasonal fluctuations are also common for clothing merchants and vendors of outdoor activities or supplies. If possible, sellers must account for this volatility when forecasting.
The Implications of Overstock Inventory
Apart from simply taking up space, overstock inventory can potentially lead to negative implications on your bottom line. For one, excess inventory can tie up funds that could be invested elsewhere in the company. It creates a strain on cash flow and limits the ability to invest in other critical areas such as marketing, product development, or operational improvements.
Additionally, attempts to push this inventory usually result in price markdowns of these items to get them out the door. Markdowns erode profit margins and, in some cases, may result in significant losses. To put it in perspective, consider your plan of action should you face one of the following stocking scenarios:
- Perishable items that expired
- Trendy items that became obsolete or irrelevant
- A sudden rise in storage expenses
- Unpredictable changes in seasonality
4 Marketing Strategies to Move E-Commerce Overstock
Struggling with too much inventory? Try implementing one or more of these creative marketing strategies for moving e-commerce products:
1. Show what needs to go.
Ensure that surplus inventory is prominently displayed and easily discoverable on your website. Optimize product descriptions and images to highlight the value and benefits of these items, making them more appealing to potential buyers.
2. Use targeted marketing.
Target specific customer segments that may be interested in your overstocked items and personalize their experience. Take the time to conduct thorough market research to determine competitive pricing, and explore creative ways to offset overstock through promotional efforts like email and social media.
3. Experiment with selling options.
Cross-promote overstock items with complementary products or upsell them as add-ons with other purchases. Try testing out bulk options or offering a discounted “mystery box” filled with products from your excess inventory.
4. Leverage your connections.
Partner with relevant influencers or bloggers who can promote your overstocked items to their audiences. These valuable endorsements are excellent for increasing visibility and credibility, potentially leading to increased sales.
Preventing Overstock Inventory
The bottom line: Inaccurate forecasting ultimately leads to cash flow strain. When you’re trying to prevent inventory accumulation, use data-driven insights to identify patterns and trends in consumer demand. Taking this proactive measure will help you accurately forecast inventory needs and avoid excessive stock that may lead to overstock situations or losses.
If you’re still looking for more guidance when developing your e-commerce marketing strategy, check out SmartBug’s Email & SMS New Year's & Overstock Calendar Template for some inspiration.
About the author
Kira Renee Kira is our E-Commerce Product Marketing Manager at SmartBug. She believes in a people-first and data-driven marketing approach. Previously working with many reputable e-comm brands, building their online brand presence and teaching companies how to enhance their marketing strategy to be customer-centric. When she's not creating a stellar marketing strategy, you can find her enjoying a crisp sour beer surrounded by her hundreds of plants and receiving cuddles from her Labradoodle. Read more articles by Kira Renee.