I severely overstocked my business. What should I do?

This article first appeared on December 8th, 2011.

I made the mistake of severely overstocking my sports equipment business. What should I do?

This existing stock that you have not been able to shift is utilizing valuable shelf space and tying up working capital, and needs to be cleared to maximise the shop’s profit performance.

There is a range of options available for selling old or unpopular stock, including the obvious one of reducing prices.

The stock could also be used for weekly specials, giveaways where appropriate or advertised prominently (either in your shop window or website home page) with the aim of enticing customers into the store. It could even be treated as a loss leader to entice the sale of other profitable stock items.

Finally, consider eBay or other online avenues and also talk to your suppliers and reps as to whether they may be willing to swap stock items.

Your main question is how to get stock orders right in the future. Here, it is crucial to gain a good understanding of your customer, your demographic and your industry.

There are several approaches that can be taken to build this knowledge base aside from observing customer purchases in your store and talking to customers.

Utilise the knowledge of the sales representatives and suppliers who sell you the stock.

They sell stock to retailers on a daily basis and should have an accurate feel for consumer preferences in the sports equipment industry at any given time.

Actively visit other stores to find out what is on their shelves, and ask questions as if you were a customer.

Consider general trends in customer preferences and tastes and the demographics of the area where your store is located – on the latter you can obtain information about income levels, age demographics, etc. from the Bureau of Statistics website.

Finally, utilize other information sources; for example websites, annual reports and marketing campaigns of large sports retailers (e.g. Rebel Sports). This will improve your knowledge of industry trends, product trends and strategic movements of competitors.

It is also vital to monitor stock and conduct periodic reviews of stock on hand to help determine future order quantities.

Ideally, stock will be ordered on a “just in time” basis. That is, it arrives just soon enough to fulfil all sales requirements but not before it is required. That way, it won’t be taking up valuable storage, shelf space and working capital.

In the sports equipment industry, demand for products will fluctuate seasonally; therefore it may take 12 months or more to get a thorough understanding of ongoing stock requirements.

Also, new sports equipment is being released each season and customers generally want the latest models- you will need to be aware of this and may need to adjust prices as the stock ages, in order to clear existing stock and make way for new upgrades.

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