In a perfect world, businesses would never have to liquidate inventory. Winter items would sell out just in time before the new year, and customers wouldn’t move on to new fashion trends so quickly with each passing season. Alas, in this world, businesses get stuck with old snowboard models, and out-of-style metallic crop tops.
While no one wants to sell for less, it is necessary to free up warehouse space and get rid of items before you have to sell them at a loss. Let’s take a look at how to liquidate inventory the correct way:
Quick Tips for Liquidating Inventory:
Get rid of products by new year that will be pushed out by new styles
It’s better to sell of products at a smaller margin, instead of at a loss
You don’t have to have a sale to liquidate inventory
Liquidate Inventory with Purpose
The key is to act quickly—and intentionally. No one will want to buy last year’s snowboard, so don’t wait until the new year has already come to start selling at a discount.
Keep track of which products you sell are highly seasonal or likely to be pushed out by newer models/styles. Before these items become outdated, start liquidating them. You don’t want to get stuck with these products when the new model is already out, as it will be much harder to move them.
Pay Close Attention to Margin
As a business owner, you might be frustrated moving products with small margins. At Omnitail, we base all our bids off margins. Margins are our bread and butter. We know that you want to see products move off the shelves, but you also want to see revenue. We can make it profitable revenue.
Example of Using Margin to Liquidate Inventory
For example, let’s say you have a seasonal product that typically produces a 20% margin. The product is priced at $200, so per sale, you take home $40 after cost of goods and ad spend are accounted for.
In peak season, it’s fine to maintain that 20% ideal, but as the end of the season approaches, it’s time to begin trying to liquidate inventory. Over time, you lower that to a 5% margin. This means you take home just $10 per sale, but $10 is better than nothing!
Remember, it’s better to sell soon-to-be-outdated products at a diminished margin now, instead of selling at a loss later. Our bidding process allows even these liquidated products to become profitable — check out our blog on advertising clearance items here!
You Don’t Have to Have a Sale
As an agency, we will never suggest having a sale simply to cover our end. Sales are a way to help your business get rid of inventory on the sales side – but they’re not strictly necessary! You can keep advertising products as usual, but just target a lower margin.
The additional ad spend will ideally drive enough sales to help you move the product at its usual pricing, without needing to resort to sales and discounts.
This is why we ask our clients to let us know which SKUs or categories they are trying to push toward the end of the season, so we can react accordingly and maximize profit!
Need Help Liquidating Inventory?
If you’re not sure where to start, let us know what products you need to get rid of. We can take a look at your account and help you sell at the correct margin in order to remain profitable. Reach out to speak to an analyst here.