By Jim Sobeck
Any business with inventory has a certain percentage of inventory that is dead stock or obsolete. However, most businesses let the dead stock sit on the shelves gathering dust for years. I prefer to turn dead stock into cash even though that means taking a profit and loss hit when you do it. Remember, profit is nothing but an accounting term. You pay your bills with cash, not profit.
In our business, we do a lot of things to turn dead stock into cash:
Dead stock list. We publish a dead stock list every month and send it out to our salespeople. Anyone selling an item gets 33% of whatever they can sell the item for. In many cases, this is more than our normal commission. Some people think I’m crazy, but I very badly want to dispose of dead inventory and giving the selling salesperson 33% of whatever they sell it for is a strong motivator to sell dead stock.
Flyers. Each branch operations manager produces a flyer at the end of each month listing the top 10 dead items at their branch, in terms of dollar value. Our salespeople are given those flyers to hand out to their customers, and we have also started emailing them out to our entire customer base each month.
Auctions. We have found a company that specializes in selling building materials at auction. We have been able to get around half of our cost back when we sell dead stock at auction. That is actually a lot better than we thought we would do when disposing of discontinued or obsolete items at auction.
Donations. We donate dead stock to Habitat for Humanity, local technical colleges and other charities. We get rid of dead stock and get a tax write-off as well. It is win-win for us and the charity or school.
Tent sales. We have done tent sales, normally in conjunction with a customer open house at one of our branches. We set up a tent in the parking lot and put the discontinued items on tables with each item priced very attractively. We have disposed of items at tent sales that we never thought we could sell.
Vendor buybacks. When you end up with dead stock because of switching product lines, during the negotiation with the new vendor, try to get the new vendor to buy back all of your current stock from the manufacturer being replaced. Many suppliers will do this in return for a significant opening order of their products.
Offer it to a competitor. If you have a competitor that stocks the product line you are trying to get rid of, offer it to your competitor at an extremely lucrative price. When we are offered inventory this way we almost always jump at it. Your competitors probably will as well.
Give it away. When none of the above ideas works, give the dead stock away to your good customers. While this doesn’t generate cash, it creates extra space in your showroom or warehouse, and is a goodwill gesture to your customer. This isn’t as lucrative as the above ideas, but at least you are rid of the dead stock.
Jim Sobeck is CEO of New South Construction Supply, a building products distributor based in Greenville with nine locations in the Carolinas and Georgia. He is the author of “The Real Business 101: Lessons From the Trenches.”
