Excess inventory doesn't have to be a problem if you know what to do with it.
- If you're looking to get rid of excess inventory and need cash, you can use inventory liquidators or liquidation auctions.
- Other offloading options include making tax-deductible donations and sponsoring customer giveaways to make the most out of your extra merchandise.
- Sometimes excess inventory can benefit your business, as in the case of large, unexpected purchase orders.
Running a business requires wearing multiple hats. Often, one of the duties of small business owners is effectively managing inventory. Inventory management can be a challenging task.
You don't want too much inventory siting idly in your business or a warehouse, but you also want enough inventory to fulfill all orders that come in. It's a tricky situation. Sometimes, it's impossible to find the inventory sweet spot. When you find that your business has excess inventory, it's easy to get concerned.
Excess inventory can be a serious financial drag for any business. But what to do with excess items – no matter what they are or where they came from – can be a difficult dilemma. Selling what you have through normal channels – special sales, for example, or online – may be out of the question. After all, the reason you have the surplus is because your regular outlets haven't done the job.
You may also be running out of space to continue storing the extra load. There are several tactics that can either net you a cash return on your items or a nifty tax write-off. Some of these services are places where you can buy as well as sell excess inventory. These are a few basic choices:
- Sign up to sell in bulk on a business-to-business inventory liquidation marketplace.
- Sell everything at once to an "instant" liquidator.
- Sell small quantities at sites targeting consumer volume sales.
- Launch an online sales channel for your business on eBay.
- Donate qualified items to a charity and earn a tax deduction of up to twice the cost of the goods.
- Run giveaway campaigns for customers to receive discounted inventory.
Here's how you can get it done, depending on what goods you have on hand and in what quantities.
1. Unload excess inventory in bulk, business to business.
Retailers, wholesalers, manufacturers, distributors and others can sell goods via centralized liquidation auctions. For example, Liquidation.com is a B2B bulk marketplace where companies sell all kinds of excess goods. It welcomes inventory from small businesses to sell on its auction marketplace and has a track record of providing returns higher than other liquidation methods.
Using inventory liquidators is an easy way to get some cash for your excess inventory. Such platforms can be a good way to get the best bang for your buck, and the auction setting can be a good way to maximize the value of your excess inventory.
2. Net instant cash on your excess inventory.
If you need cash for your excess inventory quickly, you can avoid the bother of auctions by selling to a surplus inventory liquidator. Liquidators, Merchandise USA and Power Retailing all buy a wide range of customer-returned and excess inventory.
3. Open a sales channel for your business on eBay.
If you need to get rid of your inventory but want more control over the sales channel than you get when using an inventory liquidator, eBay is a good option.
Opening a business seller account on eBay can be a great way to sell some of your excess inventory at competitive prices. Setting up your business seller account is free and simple. Be sure to check out the selling guide that walks you through the process with tips and advice. Visit the eBay Seller Center to get started.
4. Donate your excess inventory for a juicy tax deduction.
Your incorporated business can earn an above-cost, federal income tax deduction, clear out warehouse space, avoid liquidation nightmares, and help schools and nonprofits at the same time. The National Association for the Exchange of Industrial Resources takes donations of new, overstock or discontinued product and redistributes it to schools and nonprofits nationwide.
Donor companies can receive an enhanced income tax deduction of up to twice the cost of the goods, courtesy of Internal Revenue Tax Code Section 170 (e)(3). NAEIR takes donations of consumer goods such as school and office supplies, toys, games, building materials, clothing, tools and much more. NAEIR also provides the paperwork to aid in filing taxes.
You can deduct the cost of goods sold, as carried on your books, plus half the difference between cost (basis) and the fair-market value, except that the tax deduction cannot exceed twice the cost. For example, items carried on the books at a cost of $100 that have an established fair market value of $200 may be donated, and a deduction of $150 may be taken. If, however, those items carried at a $100 cost have an established fair market value of $300, they may be donated, and a deduction of $200 may be taken.
5. Run giveaway campaigns.
You can excite customers by giving away discounted items from your excess inventory stash. This helps make your business some money, and it helps put your products in the hands of customers.
"Use the excess inventory items to give out as a reward to loyal customers or those who have accumulated a certain amount of points," said Igor Mitic, co-founder of Fortunly. "Another way is to create promotions where customers are rewarded for sharing posts on Facebook or Instagram, or participating in online polls or surveys, and convert the excess inventory into marketing."
Asking social media followers to share posts for discounted or even free items helps spread your business's social profiles. This can extend your brand reach and put your business in front of new potential customers.
Another option is to give the excess product or products away to influencers in your industry. They might be willing to review the product, or they'll just use it, and your business will have its product being used by an influencer in your industry.
"When I was running a store, we got stuck with a little over 20 units of a specific product and didn't know what to do with it, " said Ruth Even Haim, co-founder and head of marketing at StilyoApps. "We ended up selling a few more units using post-purchase upsells and giving the rest away to small influencers who agreed to create a review of the product for free."
Giving a product to an influencer is a creative way to get rid of excess inventory while still benefiting your business. If you have a lot of excess inventory, you may decide to use multiple methods of unloading it. For example, you might take some of your inventory to an inventory liquidator while keeping just a few pieces of inventory to give to influencers.
6. Plan ahead.
To avoid the problem of excess inventory in the future, consider using inventory management software to keep better track of your goods. When it comes to avoiding excess inventory, the planning process is key.
"The best way to avoid excess inventory is by having excellent recordkeeping, automated inventory management and only stocking top sellers," said John Dinsmore, associate marketing professor at Wright State University.
Sometimes, if you have the space to store it, it's also not the worst idea to keep your excess inventory. Depending on the products your business sells, you may find that keeping excess inventory on hand isn't a problem.
"Having excess inventory definitely helps by removing the risk of revenue loss due to out-of-stock issues," said Jeremy Ong, founder of HUSTLR. "This is, of course, only applicable if you have products that are nonperishable and have enough operating cash flow to support excess inventory."
If your inventory is perishable, however, keeping obsolete inventory isn't feasible for your business. Local grocery stores shouldn't run giveaways to offload rotten fruit, and expired products shouldn't be donated either. For some companies, keeping obsolete inventory is a very real concern. For others, keeping excess inventory isn't a major issue, because the business's products have a longer life cycle.
The bottom line about excess inventory
If you have excess inventory, don't panic. You can use inventory liquidators, giveaways and donations to get rid of your unnecessary inventory. It can be frustrating to be stuck with merchandise that's staying put, but there are several ways to get it off your shelves.