What Is The Real Cost Of Dead and Obsolete Inventory?

Keeping your warehouse free of dead inventory and closeouts is vitally important. The health of your entire operation may hinge on your ability to sell excess inventory and get rid of surplus merchandise. Selling old merchandise is like finding money because the cost of dead merchandise is so high. Letting closeouts sit in your warehouse is much more expensive than many business owners realize.

If you are in the wholesale business you must dedicate manpower to selling old merchandise just like you would if you were selling brand new products. Inventory is inventory and in any case can be converted into real dollars. Excess inventory that sits idle in a warehouse not only costs you money because it isn’t being converted to cash, but the space it is taking up also has value and can be used for something else. If you sell online and aren’t moving goods, you may consider closing your Amazon site or selling old merchandise at a discount to get rid of it. If you don’t sell excess inventory it will just continue to sit around and cost you money for months or maybe even years into the future.

Closeouts have other hidden costs to them like opportunity cost. In other words, what else could you invest the money in if you were to sell all your old merchandise and buy more goods. Just think about how much new product you can buy with the money you would generate if you were to sell excess inventory and get rid of all that dead stock. Opportunity cost is something we don’t always think about when dealing with overstock merchandise that is lying in the warehouse.

Another thing we don’t often consider is the cost of the warehouse space. If you were to calculate the cost of every pallet for every month old merchandise doesn’t sell, you would likely become more motivated. Selling closeouts is equally important if you use your own warehouse or store product at a 3PL warehouse or even at Amazon FBA. You should close your Amazon store immediately if sales are poor because this is possibly the most expensive warehousing of all. You will be charged long term storage fees for product that is selling to slow or not selling at all. Many sellers close their Amazon businesses because after the cost of goods, Amazon fees, warehouse costs and customer returns, it simply is not worth it.

Getting rid of old merchandise is also great for cash flow. If you are like most businesses, you have more month left at the end of your money and are always looking for ways to stretch your dollar. Wouldn’t it be great if instead of a truckload of dead inventory in the warehouse you had $10,000 or $20,000 dollars? Think about how many things you could do with that extra money. And this is especially useful if you have company debt you are servicing every month, or if you have trouble meeting payroll.

We should all sell excess inventory as a matter of everyday practice because it keeps our warehouses clean and our cash flow strong. Selling old merchandise and getting rid of closeouts is as important as landing a brand new account. And it is equally as effective in adding to your bottom line.