There are many reasons why dead stock accumulates. Here are four.
Changes in the Demand
Rapid changes in demand can leave you with a lot of unsold items. For example, products with high seasonal demand can become obsolete when the season ends. For clothing and shoes, dead stocks are often items that are no longer in season or have gone out of fashion. These products are less in demand because of new trends.
Economic variations also contribute to changing consumer demand. Economic downturns, recessions and unexpected events, such as war, natural disasters or political instability, can have a significant impact on people’s spending habits. These upheavals lead to a reduction in demand for certain products.
For example, due to the current inflation, customers have continued to spend on restaurants and travel, but have significantly reduced their purchases in retail stores. However, there are products that remain particularly popular during inflation.
Demand may also change due to ever-changing customer preferences. Rapid changes in consumer preferences can make products obsolete and unwanted, leading to lower sales.
Technological changes make some products obsolete. If products undergo significant changes or improvements, older versions are less desirable. Old products therefore become dead stock.
Bad Inventory Management or Poor Marketing
The accumulation of dead stock can be caused by inaccurate inventory tracking, lack of real-time data or a poor inventory control system. Ordering excessive quantities of products without accurately forecasting demand can also result in excess inventory that eventually becomes dead stock.
Ordering too many products without first having an idea of the quantity you will sell is indeed an excellent way to accumulate dead stock and increase storage costs. However, miscalculations are also harmful. Mistakes in demand forecasting occur when inventory is not tracked properly, with the right tools.
Ineffective marketing strategies or poor brand positioning also lead to a slowdown in sales and contribute to dead stock. Even high-quality, low-price products are left unsold if marketing and sales efforts are not sufficient, thoughtful and tailored to the target audience. Advertisements that do not reach the target audience, a poor web experience or low awareness of the products and of your store mean that the most sought-after products sometimes stay too long in the warehouse or on the shelves.
Also, difficulties with suppliers, such as delays, quality issues or sudden price changes disrupt the supply chain and also contribute to dead stock.
Short Product Lifespan
Perishable products or products with a limited shelf life may become dead stock if they are not sold before reaching their expiration date. Expired products cannot be sold to customers. They have to be thrown away, causing the retailer to lose money.