What could cause Nike’s Chief Financial Officer to say the word “inventory” a whopping 48 times on an analyst call? If you’re like many e-commerce owners, you already know.
Excess holiday inventory gathering dust on shelves is costing the modern retailer big time. With rising warehouse storage fees, the current “holiday hangover” and its impact on over-inventoried retailers might be the biggest inventory headache yet.
This, coupled with layers of confusion around inflation and inconsistent consumer trends, has made demand forecasting a legitimate challenge for almost every e-commerce brand. The past year has been a whirlwind of unpredictable price hikes, supply chain mishaps, and impossible forecasting.
But that’s just one side of the coin.
Even though inventory planning in Q4 feels like peering into a murky crystal ball, you can still put strategies in place to ease your post-holiday inventory hangovers and keep the revenue coming.
What to Do with Excess Inventory After the Holidays
- What Is Excess Inventory?
- 5 Ways to Deal With Excess Inventory After the Holidays
- Sell Your Excess Inventory and Cure Your Holiday Hangover
What Is Excess Inventory? (And Why There May Be More of It Than Usual This Year)
In short, excess inventory or ‘overstock’ is exactly what it sounds like. When you have more products than you can sell, you have excess inventory.
After the pandemic-driven sales spike and inevitable market correction, hopes were high that Q4 2022 would resemble, if not exceed, last year’s holiday season.
In 2021, wholesale inventory rose by 2.3% as the holiday season approached, with products expected to clear shelves within 1.22 months. Not too shabby for a cooling e-commerce market.
But within less than a year, the market has shifted yet again.
Consumers who had planned to purchase 16 gifts last year are only expecting to buy an average of nine this year.
Fortunately, the situation may not be as dire as it seems.
While consumers plan on buying fewer gifts, they also expect to spend $507 per household. This is nearly the same as last year.
Not to mention, 100% of retailers surveyed by Deloitte feel confident their inventory will arrive on time thanks to fewer supply chain challenges compared to 2021. 👏🏽
Taking a broad view, this may mean overall revenue from this holiday season will be roughly the same. But thanks to increased product costs, sellers will likely see more inventory left on shelves as consumers purchase fewer products for the same amount of money.
No One’s Safe from Overstocks
If you’re struggling to sell your surplus inventory, you’re not alone. Not even large retailers are immune to overstocks.
Walmart, Target, Macy’s, and Kohl’s all experienced a big drop in Q2 sales. This left them with excess inventory that even heavily discounted prices couldn’t sell.
Unsurprisingly, over-inventoried retailers who didn’t manage to offload excess inventory earlier in the year are facing a shortage of shelf space. They also face cluttered storage units and they have no escape hatch for their unsold products.
Then there’s Amazon’s 30% increase in storage fees. For FBA sellers, you may easily end up paying more in storage fees than your inventory is worth or losing out on space that your best-selling products could have occupied.
While the holiday season is usually the most profitable quarter for retailers and a great opportunity to clear their inventory, the reality is that this year we’re expecting only a modest 1–3% growth in sales (below the 10-year average).
But that doesn’t mean you have to relinquish your margins and cash flow. With a few key tactics, you can beat the dreaded holiday hangover and position your store for a profitable year.
5 Ways to Deal With Excess Inventory After the Holidays
If your products are non-perishable, you can store them until the next holiday season rolls around. However, with soaring storage costs, this option isn’t always feasible for growing brands.
This year, sellers may have to get more creative about how to liquidate and store excess inventory. The tactics you choose will depend on your unique brand and e-commerce business model, but here are a few ideas to consider:
1. Host a Post-Holiday Sale
Once the holiday season is over, many consumers cut down on their purchases, but remain on the hunt for lower prices.
In fact, 68% of holiday consumers will likely shop the week after Christmas to take advantage of post-holiday sales and promos, while putting their holiday gift cards to use.
If you serve a younger demographic, you’re in luck. Shoppers between the ages of 18–24 are the most likely to shop the week after Christmas.
By marking down prices and promoting your post-holiday products on your most visited channels, you may be able to offload excess inventory and at the very least, break even.
With the right tools and data insights, you can also implement retargeting strategies that nudge bargain-hungry post-holiday shoppers closer to conversion on your overstocked products.
2. Reduce Returns by Offering Exchanges and Gifts
An equally busy return season often follows the busy holiday sales season. In fact, most retailers in 2021 expected roughly 18% of consumers to return their holiday gifts.
This is obviously a nightmare for over-inventoried retailers who are already short on storage space for their existing overstock. One possible solution?
Ease the sting of high returns by encouraging customers to exchange their products and promise them a surprise gift along with their new product.
This is a great way to reduce excess inventory by offering products as free gifts that also help increase customer loyalty. Studies have even shown that this could have a positive effect on purchase satisfaction, which can help boost your customer retention rate.
3. Bundle Your Excess Products
When in doubt, consider creating “bundles” at discounted rates.
In fact, consumers prefer buying bundles since they cut down on search time and help them save money.
By bundling up your best sellers with your less popular or slower-moving items, you can clear out your excess inventory, increase your bottom line, and improve the customer experience. A three-in-one bundle wins for you too. 😉
Want to get really creative? The Running Buddy kills it with its “Super Saver Pouch Bundle” display.
The brand’s website includes an entire page dedicated to promoting cost-saving bundles and prominently displays its slashed prices. With cost-saving bundles like this, post-holiday shoppers can instantly see how much they’d end up paying if they purchased the products separately vs. in a bundle. It’s FOMO marketing at its finest.
4. Pop-Up Shops
From brick-and-mortar stores to e-commerce websites, many brands have seen successful with pop-up stores. Some have even seen tangible revenue outcomes to the tune of a 46% increase in sales and a 51% lift in visibility.
Pop-ups not only create great opportunities to liquidate overstocked inventory, but the physical store setting can also help you build closer connections with your customers and contribute to an omnichannel presence.
This increased visibility can set you up for more sales and customer loyalty as you launch new products next year.
5. Don’t Destroy; Donate!
If you want to make the best out of excess inventory, donating it may have some valuable benefits.
It’s no secret modern shoppers have an increased focus on social responsibility. By donating your overstocked products to an important cause or organization, you can increase customer loyalty. Socially conscious shoppers love it and you can sleep well knowing you’ve done a good thing.
Depending on where your brand is domiciled, donating may also help you secure certain tax advantages.
Interested in donating part or all of your excess holiday inventory? Be sure to meet with your tax professional to see which tax benefits you might qualify for.
Sell Your Excess Inventory and Cure Your Holiday Hangover
The only thing worse than running out of stock is having excess inventory at the end of a sales season. But if you find yourself with excess inventory after the Q4 holiday rush, know that you’re not alone.
Slower sales and higher storage costs put increasing pressure on the bottom line. Many sellers are facing tight cash flow heading into the new year as a result.
Luckily, that’s where we come in.
At SellersFunding, we’re committed to helping e-commerce entrepreneurs achieve their goals during the busy holiday season and beyond. With all-in-one funding solutions, you can secure the e-commerce funding you need to launch new products and expand into new markets. Funding can also help you offload your overstocked inventory and get your forecasting back on track.
Learn more about how SellersFunding helps brands grow. Check out our growing library of success stories from sellers just like you.
