The cost of dead and unsold inventory

Inventory that exists in a warehouse or stockroom but doesn’t have a real shot at ever being sold represents a huge handicap for retailers. Most importantly, dead inventory represents precious working capital.

“Unsold stock might be one of retail market biggest handicaps.”

Haley Smith Recer

Covid-19 ended up accelerating some of industry’s weaknesses, such as inventory management. Efficient inventory management has been consistently underestimated as dead inventory is costing the US retail industry as much as $50 billion a year.

“The solution lies not in addressing what consumers are buying, but in how much retailers are purchasing.”

Haley Smith Recer

Some amount of excess inventory might be necessary to ensure a certain level of flexibility to the retailers, but retailers need to buy lean! The fashion industry oversupply is mainly related with its inability to predict customer preferences and trends correctly, which doesn’t need to be the case as about 85% of the global sales are digitally influenced. Predictive tools based on real-time market data plus machine learning and artificial intelligence technology will allow to reduce uncertainty and forecast errors by about half.

“Brands over-stock because they fail to predict customer preferences correctly and then have to slash prices, damaging their margins So watch for a new trend to sweep the fashion industry: applying artificial intelligence to these problems will be all the rage.”

The Economist

At Stokedge, we believe the costs of dead and unsold inventory can become negligible through increased transparency, market knowledge and intraday liquidity.

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