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How To Address Overstock Problems In Online Stores During Holiday Sales

Posted by Ellie Ho on

How To Address Overstock Problems In Online Stores During Holiday Sales

A foreseeable economic slowdown is pushing consumers to tighten their budgets and hunt for the biggest sales. Therefore, merchants have all reason to be excited about the BFCM frenzy this year.

Still, this also casts a shadow over inventory management. Rapid shifts in shopping behaviors make it harder than ever for businesses to predict demands and create stocking plans for large-scale shopping seasons like BFCM and Christmas.

In this article, we analyze the root cause of overstocking and propose some solutions to address it.

Understanding Overstocking Problems

What is Excess Inventory?

Excess inventory or overstocking happens when the stock amount in the warehouse is over the customers' demands. In other words, it’s stores having more products than they are able to sell.

Why Is It So Easy To Get Overstocked?

It's common for retailers, especially start-ups, to experience surplus inventory. The very first reason is the failure to forecast demand. Stores may overstock (as well as understock) as a result of inaccurate demand predictions. You may not have enough sales data (as a new retailer) or your methods and techniques are insufficient to handle market complexities. It's also easy to overlook a number of demand-influencing factors such as seasonality and the overall economic situation.

inventory management and fulfillment

Businesses usually order in surplus to guarantee high levels of product availability when the supply chain gets difficult (like when COVID-19 broke out). However, many find it difficult to sell their goods when demand ultimately drops. The circumstance is an illustration of how companies attempt to overcompensate as a result of market concerns. Moreover, surplus inventory can also be the result of a bargain. Brands may stock their warehouses with products that aren't necessarily in demand when offers are too good to pass up.

Last but not least, inappropriate marketing efforts to clear out inventory make overstocking problems even worse. Most of the products have a life cycle. While demand is at its peak during the maturation of a product, inadequate merchandising strategies don't do justice to the sales potential. That leads to excessive stock at the end of the product life cycle. Having too much inventory is a result of not selling things when they are most in demand.

What Happens When You Overstock?

The excessive inventory does no good for brands.

overstock during bfcm

The most obvious issue is a restriction on capital flow. Unsold items limit the amount of cash that may be utilized for other purposes. In other words, sales revenues support ongoing corporate activities that won't generate benefits. Keeping slow-moving merchandise is expensive since you have to pay for storage space without seeing a return. And that doesn't include paid staff, utility costs, insurance, taxes, and other costs.

Additionally, surplus consumes space in your warehouse that may be used for more lucrative goods. ​​Products depreciate quicker the longer they are stored. Along with passing up that chance, you run the risk of failing to seize an emerging trend.

Product obsolescence is also a big problem. While this normally refers to goods that have expiration dates, like food and medicine, it might also refer to products that have lost value because they are out of style or have degenerated in quality or materials. Businesses occasionally have little choice but to discard inventory because it cannot be sold, even at a discount.

How Does Reasonable Stocking Help With BFCM & Year-end Sales?

Your company's performance in the future BFCM and Christmas periods will be directly impacted by your ability to manage your inventory effectively. Your brand must provide things when clients need them if it wants to remain competitive. Here are some more advantages of having good inventory control.

inventory management during bfcm

Apparently, it helps to optimize spending. The cost of keeping products in a warehouse is not cheap, especially if your offerings need to be stored in a special condition. Therefore, if these items are not purchased, it's such a great waste. Inventory control ensures you don't overspend on resources and unpopular products.

Keeping track of your inventory ensures you stock sufficient quantities that will sell. This determines how financially successful your company is. Additionally, you may decide which SKUs to restock to make sure that orders keep coming in. It maximizes the completion of orders. Based on the sales number of products, you may determine how to disperse your inventory.

Great inventory management improves customer satisfaction by speeding up delivery and paying less for shipping. When combined with the appropriate product discovery tools, such as recommendation engines, it brings the right product to the right shoppers, increasing the chance of sealing a sale. Moreover, at least 30% of customers feel negative when coming across stockouts. 70% will switch to a rival after seeing their desired items out of stock three times.

Get how important it is for managing inventory during the biggest sales events of the year? Let's move to the best part - some tactics to prevent and handle overstocking.

Better Stock Forecasting Through Data

How do you decide which products to stock? Data analytics may provide insightful information about what products are in demand. Site search history is definitely an excellent source to predict customers' demands. The Top search terms reports let you know your trending keywords while the Top search terms without results reveal potential sales. Collections that have the highest views or traffic are also a signal for a rise in customers' interest.

boost product filter and search analytics

Boost's Analytics feature gives you insightful data about shoppers' behaviors so you can make better predictions for inventory.

Compare this to market and economic trends to identify changes in consumer demand and the supplier chain. When you combine your market research with your vendors, you might gain even more insights.

It will be possible to plan how much to order from suppliers and manufacturers after you have determined which SKUs will be in high demand. Months or weeks before BFCM & Year-end sales, having enough goods will go a long way toward guaranteeing consumer happiness.

Better Preparation For Annual Or Holiday Sales

You may start with sales preparation once you've decided which goods should occupy your retail space on BFCM, year-end, and new year. Stock up on your highlighted products and start promoting them right away. How much you should stock will be determined by your pre-sale stats.

Estimates from your inventory management also help you with the new product launch. Even though it may be riskier, you may gauge consumers' degree of interest by looking at how they interact with wishlists, and email registration forms. To let customers know when it's ideal to make purchases through your app or website, use an integrated email campaign.

Annual shopping occasions like BFCM are excellent venues for selling surplus stock and seasonal merchandise. During this time, consumers are very motivated to make purchases, both for themselves and for loved ones.

The Thanksgiving weekend, also known as BFCM, is not the only significant holiday you may observe. Easter, Mother's Day, Back-to-College, and Back-to-School are some of the top US consumer spending occasions. Even Amazon Prime Day poses a halo effect on non-Amazon retailers.

It's vital to adjust your on-site experience to accommodate customers of different occasions if you want to maximize the benefits of shopping holidays and seasonal specials.

amazon prime day halo effect on online merchants

In the US, sales from rival competitors’ sales events are catching up to Amazon Prime Day (Source: eMarketer)

Better Marketing Strategy With e-Commerce Merchandising

When choosing which brand or retailer to buy from, 88% of consumers say that having a wide selection of products is vital. Make sure your surplus products are visible to your customers, especially if it fits their needs. Some practical strategies to make your overstock inventory more noticeable are:

  • In-line banners, pop-ups, and appealing areas on the homepage and product listing page using product ranking or rule-based merchandising.
  • Product comparison. Give customers access to items with comparable appearances. While promoting the extra inventory, you are also providing customers with more alternatives that are tailored to their tastes.
  • “Complete the look” product recommendation. By putting your items in context, you may less intrusively surface more of your offerings.

Make it simple for customers to browse your overstock inventory, especially if you have hundreds or even thousands of goods that are currently on sale. For instance, Sage+Paige offers a range slider for the filter by price, which is useful for the price-conscious.

product filters on sage and paige fashion store make product discovery easier

With faceted search, you can provide customers with more options for exploring product results. It gives more detailed and precise filtering choices to your search results page, often known as guided navigation. According to the type of items your customers are browsing, the filter options often vary. With faceted search, your consumers will not only locate what they were looking for but also discover more about your product range.

faceted search on reddress shopify store | handle overstock with search merchandising | boost product filter and search

A good example of the faceted search on Red Dress. You can try this with Boost Product Filter & Search.

Before You Leave

Making the most of excess inventory is an important aspect to keep your competitive edge over rivals. Consumer behaviors will change in a way that makes it challenging to precisely estimate demand and manage the supply chain. Still, with a clear mind, data, and complete insight in your hands, you can be better at forecasting and handling overstock. After all, being flexible and staying in sync with what customers want and need is the key to success in a time of uncertainty or downturn.