Topic: Retail Sales

Balancing Retail Inventory: Making Friends With Clearance

By Bob Phibbs

clearance how to retail sales
Clearance. A fresh start that makes way for new inventory in your store.

A way to declutter your store so only the best merchandise remains.

A way to get some of your investment back before it is totally worthless.

Many merchants tiptoe around markdowns, and it is unnecessary.

Your money is already gone; holding on to it just ties you to the past.

But many retailers feel that they must get back whatever they paid for their inventory, no matter how many years ago the merchandise first arrived in their store.

This thinking is murder on their cash flow.

Other retailers feel there will always be a demand for a part or accessory to a model or product, even if that product is no longer sold. Maybe on Ebay, but not on your display shelves.

This blog isn’t about inventory being like milk and getting spoiled if it sits too long – that blog Merchandise Doesn’t Get Better With Age is here

This blog is about the difference between a sale and clearance. Too many retailers avoid aggressively clearing out old merchandise either because they feel they will lose money when they sell it, or it’s too complicated to know what to clear out. Neither is true.

If merchandise is old, you’ve already lost the money. The fact it is sitting on your display shelves doesn’t make that any less true, but it does make your entire store look dated, out-of-touch or just plain old.

Inventory clearance is an aggressive form of balancing open-to-buy. If you’re not sure of what that is, here are Four Tips How To Avoid Overbuying Merchandise For Your Retail Store so you don’t get in this predicament again.

No matter how you look at it there is bound to be leftover merchandise in January that needs to be put on clearance to get it out the door.

I’m not talking about a storewide 20% sale of your best and brightest. That won’t help clear out the oldest inventory. I am talking about selling off the ten types of merchandise you need to clear out at the beginning of every year.

The more impressive the clearance markdown is from the original price, the faster the old inventory will go. Remember when customers approach these types of merchandise, they are only thinking about their savings off the original price; not how much they are going to spend.

Here’s my rule of thumb for clearing out old merchandise:

1. Start your clearance at 30% off marked prices for one week. Alert customers via social media or email that selections are limited.

2. The following week, markdown whatever merchandise is left at 60% off for another week. Again alert your social media followers – maybe even with a paid Facebook ad.

3. After another week, donate it to charity or if you have to - write it off as a loss and throw it out. Do not let it stay in your store or backroom.

Once you have aggressively cleared out your laggards, do a physical inventory (see how here) so you have an accurate picture of new product you need to buy at trade shows.

See also, 3 Ways To Maximize A Retail Clearance Sale Promotion

In Sum

Nothing feels better than getting rid of old baggage. Putting old merchandise on clearance makes it possible to buy fresh inventory and a fresh start for your store. To learn more about clearing out old merchandise, download my list. 

Snag Your 10 Types Of Merchandise To Put On Clearance

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