GUEST COMMENT Overcoming the burden of overstock: How to regain velocity, revenue and operational control

Retailers have revealed that a minimum of £10,000 worth of revenue is being lost per quarter due to unsold inventory, while a third of those surveyed in ROI Hunter’s recent Retail Resilience Barometer 2023 reported losses as high as £500,000 – £1mn per quarter.

When it comes to overstock, retailers face a dual challenge of recouping losses from depreciating items while embracing eco-conscious practices. Streamlining the reverse logistics process, leveraging forecasting technology, exploring secondary markets, and utilising recommerce platforms is the key to achieving this delicate balance, writes Jess Morris, head European marketplace manager, B-Stock.

Adapting the reverse logistics process
Retailers’ sustainability efforts aren’t limited to the decarbonisation of their manufacturing processes and warehouse facilities, but also to how they effectively manage excess and return inventory. Streamlining the reverse logistics process ensures excess inventory is moving out of warehouses in a timely fashion and keeps items from depreciating in value.

Retailers have options when it comes to streamlining this type of inventory. They can choose to invest in repair and refurbishment, Primark, for example, is spearheading its own durability and repair initiatives, or choose to donate and recycle excess and returns inventory through charitable and non-profit organisations. While they will accept these tax-deductible donations of returned and slow-moving stock, retailers are still faced with the logistical challenges of developing these partnerships and aren’t recouping any value from said goods.

Utilisation of forecasting technology to avoid excessive inventory
The best way retailers can ensure returns don’t pile up is by utilising data-backed strategies.

When suppliers were experiencing massive shipping delays, many switched from a ‘just in time’ inventory model to ‘just in case’, in a bid to stay afloat but are now faced with operational costs and losses and spiralling further out of orbit. Forecasting technology can ease the burden of excess stock and returns inventory – by looking at seasonal historical data, retailers can better predict future demand for specific items and identify commonly returned products, or reasons for returns. This type of forecasting, paired with innovative, AI-powered virtual try-on options may help lessen the amount of returns related to sizing issues. And thus, the overall rate of returns and excessive inventory.

How retailers can benefit from the demand for excess goods on the secondary market
C2C marketplaces across Europe tell us that the appetite for pre-owned and second-hand goods is consistently growing. Depop and Vinted are platforms dedicated to the buying and selling of secondhand clothing with 30 million and 80 million registered users worldwide, respectively.

These platforms give consumers who seek sold-out, popular items a new outlet while encouraging a more sustainable approach to shopping. For apparel resellers, keeping up with the demand for pre-loved items means their businesses are fuelled by retailers’ excess stock. This demonstrates how the circular economy comes into its own by delivering win-win situations for retailers, resellers and consumers.

For retailers wanting a piece of this resale pie, they may pursue their own resale channels as a marketing strategy to promote customer loyalty and maintain brand and channel control. And for consumers looking for branded items at a lower price, this can be especially appealing. However, most companies looking to offload inventory as quickly as possible may find this is not the most cost-effective option.

Another category to note is the market for discounted and refurbished mobile phones and consumer electronics. This product category of excess and trade-in inventory follows a steady cadence of new model releases and improved technologies and can be funnelled into the secondary market by retailers and manufacturers.

Optimising recovery with third-party logistics (3PL) to reduce operational pressures
The asset recovery solution that retailers need in order to tackle their excess inventory problems lies with recommerce platforms. Optimising warehouse operations by utilising an automated method of listing excess goods can get inventory out of storage and into the hands of qualified buyers. This practice involves 3PL warehousing, sorting, and grading of goods to be sold into the secondary market and ultimately reduces inventory carrying costs, fuel costs related to shipping, and handling inventory multiple times.

Retailers can better manage overstock and unwanted customer items by selling lot sizes from individual pallets to multiple truckloads. Thanks to dedicated buyers of excess and returned stock across the UK and Europe, retailers speed up the process of clearing out warehouse space, recovering a portion of the value, and keeping items out of landfills.

Recommerce platforms have built-in networks of dedicated buyers, allowing retailers to free up capital faster than traditional methods of liquidating and individual negotiations. The reliability and regularity that secondary market buyers provide is the most cost-effective method of managing excess and returns stock across multiple facilities and locations with minimal logistics and admin required.

By aligning with these data-backed inventory recovery solutions to proactively prepare for surge-return time periods, retailers can successfully manage their overstock goods and returns. The demand for excess goods on the secondary market is ever-growing and should encourage retailers to explore selling this inventory to qualified buyers in order to achieve their asset recovery and velocity goals.

Jess Morris, head European marketplace manager, B-Stock