A variety of global economic trends have caused excess inventory to become a very topical issue for brands and retailers. But it’s an issue with no easy remedy because the specific challenges and solutions are dependent on so many factors: your industry, your specific products, your region, your relationships with channel partners and, not least of all, your profit margins.
Whether you’re just looking to help move some products this season that didn’t sell as well as you thought, or your retailers have scaled back their orders and you’re considering more fundamental changes to your channel strategy, brands need both short- and long-term strategies to keep inventory flowing. Below, we’ve outlined a few considerations and strategies to help you think through your options.
Again, each one will have contingencies, based on your size, vertical and business goals.
[Also, keep in mind that these strategies are geared toward brands (i.e., the supplier of the products), who have unique challenges in the e-commerce world. If you’re a retailer (i.e., selling directly to consumers), and want more retail-centric strategies, please see this recent blog on how retailers can eliminate excess inventory.]
Considerations for Online Brands
The Advertising Dilemma
Advertising can be a difficult subject for brands, especially if a retailer is refusing to purchase more of your products. If the retailer already holds your inventory, and you no longer have control over how the products are priced, are your advertising efforts worth the costs? Some questions to ask yourself:
- What are your current profit margins? If they’re already slim, can you afford to further reduce your bottom line by spending on more advertising?
- Where is the product in its lifecycle? Has it been on the digital shelf for months or is it part of a new line that you’d like to keep pushing?
- Are there minimum advertised price (MAP) policies with your retailers that you need to uphold? Or are you free to run promotions on heavily-discounted items?
- Are you advertising to build brand awareness or improve sales? Does your brand or product already have good name recognition in this category or region?
- Are you playing defense or offense when it comes to advertising? Are competitors currently encroaching on your brand space and marketplace product detail pages with their ads?
Rethinking How and Where You Sell
Your options for moving excess inventory from your warehouse come down to your business model, product type, ability to set pricing, channel strategies and capacity for online distribution.
- Your profit margins will drive a lot of your decisions here as well. Will it cost more to warehouse, sell and fulfill orders of older inventory than to liquidate it, give it away or destroy it?
- Do you have existing relationships with alternative wholesale or 1P channels to sell inventory?
- Do you have the capacity to sell directly to consumers, either through your website or as a third party (3P) on a marketplace?
- What is the shelf life of your products? Are they seasonal (e.g., fashion), becoming outdated (e.g., electronics) or more evergreen? Again, where is the product in its lifecycle?
- Are there new channels of demand or regions you haven’t tapped into with your products? How much would it cost to experiment there?
Become more hybrid.
If your business can support the marketing, selling and fulfilling components of a direct-to-consumer model (and if your retail partners allow it), try to develop a hybrid (1P and 3P) selling structure on major marketplaces, so you’re not solely reliant on their 1P purchases. A hybrid approach to marketplaces, retail sites and your own website gives you more flexibility when it comes to product distribution and more resiliency in the face of unforeseen events (e.g., canceled orders, pandemic, market fluctuations). Right now, some brands are dipping their toe into 3P selling by piloting selling programs on marketplaces with limited product lines or in smaller markets.
Try a different mix of channels.
If you can add your products to new retail sites profitably, each one presents a new channel of demand and potentially new customers who are searching for products like yours.
There are a variety of channels that brands have used historically to move excess inventory, whether that’s via a regularly-recurring distribution process or on an as-needed basis. Channels such as TK Maxx, Zalando (for apparel) and Secret Sales can be good options to explore, but a lot depends on your products and margins. Some Rithum clients who sell refurbished consumer electronics have seen success selling to Back Market, the Walmart Restored Program and Newegg.
Also, don’t forget about your old partners. Channels like eBay have seen a resurgence of former brands who left the site years ago, return to tap into the loyal customer base. But be sure to consider whether the channel is aligned with your brand image. If that’s debatable, one option could be to open a “refurbished or returned items” store on a marketplace with quality guarantees — this helps distinguish the inventory from in-season stock and protect existing retail distribution.
Relatedly, smaller, niche marketplaces are becoming more prevalent and a good option to explore, depending on your categories and location. While the e-commerce headlines are dominated by global giants such as Amazon, Alibaba, Etsy and others, emerging marketplaces are gaining ground and proliferating across the world.
The same is true when exploring new regions. If you’re not able to launch on a net new channel, there are probably selling programs on your existing marketplaces that allow consumers in other regions to access your products. Amazon and eBay both have global selling programs that are options for brands looking to sell internationally.
Need help looking for new retail partners? Rithum’s Commerce Network is an interactive portal that allows sellers and channels to discover, attract and connect with one another.
Before you liquidate or donate your remaining, unsold inventory, try to think outside the box with the materials you have. Can any of the parts or pieces be repurposed into new products? Are there industry partners — or even competitors — who would be willing to purchase certain components of your products due to supply chain issues of their own?
Use every free tool available to you.
In addition to common low-cost, retail-centric strategies to boost sales for surplus products, such as bundling products or developing shoppable media campaigns, there are other areas that you might be neglecting that can help ensure you’re putting your brand in the best light — with minimal cost to you. For example, if you’re a registered brand on Amazon, Amazon A+ Content provides a fantastic opportunity to present your brand and your products the way you want to be experienced. It’s free and unlimited for both vendors and sellers and one of the most efficient and cost-effective ways to increase traffic and sales — and to cross-promote your other products.
Social media channels and email, though they require internal effort and resources, offer cost-effective ways to keep consumers engaged with your brand and products. Driving promotions through these channels, however, obviously introduces some of the more of the tricky pricing considerations mentioned above. If the retailer owns your products (or some of them), you won’t want to violate MAP policies with heavily-discounted promotions. On the other hand, if you own the products and try to move products through deep discounts, you could hurt the integrity of your brand and other full-price products.
Again, there are no easy solutions when it comes to excess inventory, but there are still an abundance of options and channels you can use to lighten your load and get extra inventory in the hands of happy consumers. E-commerce is still growing, there’s plenty of demand to tap, and there are still numerous options for turning just about any overstock problem into sales.
Experiment with different strategies based on your business goals and the amount of excess inventory you’re working with.
If you want to talk to an e-commerce consultant about how your business can improve your e-commerce operations, expand to new channels or optimise your channel strategies, reach out today for a quick discussion or a demo of our platform.