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Six Ways to Shift Your Stranded Stock After the COVID-19 Lockdown

Many retailers are facing large quantities of inventory that they may not be able to sell. Fashion retailers, for example, could be facing up to £15bn in stock write-offs as a result of the coronavirus lockdown.  Inditex alone estimated its inventory losses would amount to nearly €300 million. In addition to slow-steaming, retailers have several options that could help them capitalize on their excess stock and minimize their losses.

Turn stores into online fulfillment centers

First and foremost, retailers should leverage physical locations and turn them into fulfillment centers to support their e-commerce, either by setting up curbside pickup or fulfilling orders from stores closest to the destination to speed up delivery times.

On average, online sales accounted for only about 15% of the total revenue for brick-and-mortar retailers, but this is already changing. Non-store retail sales in the UK experienced a 125 percent increase in the week to April 12, the biggest year-on-year increase since 2010. Even if it won’t make up for all the lost sales, customers are more likely to buy online when possible and use curbside pickup until they feel comfortable shopping in stores again.

Use targeted promotions

Retailers have long relied on promotions to move low sell-through items and free up capital for new merchandise – because promotions work. As stores were forced to shutter their doors, many retailers were quick to offer online promotions, carefully choosing products targeted to meet their customers’ at-home needs to encourage customers to shop online.

Bundling slow-moving items with a best-seller, complementary items, or multiple units of the same item can all help turn a profit on those aging products. Free gifts can be used for certain items or purchases over a certain amount. Flash sales and other sales events create a sense of urgency for customers, so long as retailers do not resort to them so often that they undercut their own value.  and of course, retailers armed with good customer data will be able to capitalize from targeted promotions.

Consider adding consignment options

Consignment is becoming an increasingly popular model, particularly amongst millennial and Gen Z consumers, many of whom prefer temporary over long-term ownership. This option offers retailers a way to add a new revenue stream using “old” inventory for multiple seasons to come. Whether its fashion or furniture, this new breed of retailers allows retailers to maintain ownership while taking a cut of sales, often a 75/25 split. Levi’s, for instance, offers about 40 items for rental or purchase on Rent-the-Runway, turning a profit on the same item multiple times. Another variation includes a buy-back program, where buyers get up to 70% of their investment provided the item is returned in good condition and under a certain period of time.

Retailers may want to use a third party like Rent the Runway  or Rebag.com, or they may decide to make a larger investment and manage it themselves. However, this innovative business model may require additional processes, including delivery, reverse logistics, cleaning, quality control, and repair – a process which can be integrated using modern POS solutions.

Recycle to make new products

Retailers may find that using some of that excess inventory to make at least some of their new products is more cost-effective than using new materials, even when transport and labor are considered. Moreover, strengthening this circular economy could deliver some of the resilience in supply chains that help your business become more sustainable for the long-term. Uniqlo, for example, has a renowned sustainability model where unsold items are either recycled into new clothing or donated.

Donate, donate, donate…

Instead of selling unsold inventory, companies may choose to donate it. The value of write-off helps to recover some of the original cost, while creating goodwill in the community. Many today have donated their supply chain capabilities, services, and even a percentage of their profit margins towards charitable funds and relief initiatives, and there are countless examples of brands donating their products to fill a specific and critical need, such as Spanish heritage linens brand, Bassols, which donated bedding and bath linens for provisional hospitals and quarantine housing.

Liquidate excess inventory

And finally, retailers have the option to liquidate their inventory. Liquidation companies take the excess inventory at cost and source it to retailers like TJX Companies and Marshalls. It’s rarely profitable, but it does cover losses. However, without being able to move merchandise themselves, liquidation companies may temporarily be at capacity for the time being, at least until stores are allowed to re-open and customers feel comfortable shopping in their stores.

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