Questions · Inventory and stock
What is dead stock, and what should you do with it?
The answer
Dead stock is stock that has not sold for a long time and is unlikely to sell at its normal price, such as last season’s sizes, discontinued models or slow lines bought in bulk. It ties up cash and shelf space, so spot it early, clear it through supplier returns, transfers, bundles or markdowns, and buy more carefully so it does not build up again.
Dead stock is not the same as slow stock. A slow item still sells now and then; a dead one has stopped. The longer it sits, the less it is worth, so the aim is to notice it early, while it can still be sold for close to what it cost.
How to spot it
Pick a period that suits your trade and list every item with no sales in that time. For most shops 90 days is a sensible first filter; for slow categories such as furniture or bridal wear, 180 days may be fairer. Then look at:
- Last sale date, not just total stock.
- Stock value at cost, so you deal with the largest amounts first.
- Age: items from previous seasons, old packaging or superseded models.
What it really costs
- Cash. Money paid for stock that is not selling cannot buy stock that is.
- Space. Shelf and storage space that fast sellers could use.
- Value. Fashion dates, packaging fades and electronics are replaced by newer models, so the price you can get falls every month.
Worked example: clearing it
A shop has 25 handbags bought at ₹640 each and priced at ₹1,100. None has sold in seven months. The cash tied up is 25 × ₹640 = ₹16,000.
| Option | Money back | Result against cost |
|---|---|---|
| Mark down to ₹800 | 25 × ₹800 = ₹20,000 | ₹4,000 profit (a 20% margin) |
| Mark down to ₹600 | 25 × ₹600 = ₹15,000 | ₹1,000 loss |
| Keep waiting | Nothing yet | ₹16,000 still tied up |
Even the sale below cost may be the better choice if the bags are unlikely to sell at all next season, because ₹15,000 back in the till can be spent on stock that sells. The discount calculator shows what a markdown does to your margin before you commit.
Other ways to clear it
- Return it to the supplier if your terms allow, or swap it for faster lines.
- Transfer it to another branch where it may sell.
- Bundle it with a popular item, such as a wallet with a handbag.
- Write it off if it is truly unsaleable, with a reason, so your stock value is honest.
How to prevent it
- Buy smaller first orders of new lines, and reorder only what sells.
- Review a dead stock list every month, not once a year.
- Sell older stock first; see what is FIFO in inventory.
Software can produce this list for you. BILL OS includes a dead stock report and flags stock unsold for 90 days in its reports and Guardian review list. For the wider set of habits that let dead stock build up, read inventory mistakes to avoid.
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General information, not legal, tax or financial advice. Published by Chameron Digital.