An average of £3.5million in revenue is lost per year due to overstocking across the country, ROI Hunter finds
UK retailers are losing millions in revenue with tied-up capital due to excess stock, according to ROI Hunter. Additionally, these businesses are putting themselves at the risk of failing.
The scale of the stocking crisis in the retail sector has been laid bare. There’s an average of nearly £900,000 of revenue lost every quarter due to overstocking, the research revealed. Currently, as many as 62 percent of retailers are struggling with overstocking, which is threatening their financial stability.
The buildup of stock has forced retailers to discount around 48 percent of their inventory on average. Short-term discounting will only go so far in preventing an accumulation of products sat in warehouses. Despite the unsustainable nature of the practice, however, it will somewhat stem financial losses and address reduced profit margins.
“Overstocking began last year due to misconceptions around consumer demand for products. This reflects the period’s little foresight into how the current cost of living crisis would shake the retail industry. Beyond this, the current promotion strategies favoured by retailers are unknowingly worsening the situation. For example, many are unable to promote seasonal items online quickly enough at full price. As a result, these often go out of season or become discounted as it takes weeks for advertising algorithms to catch up,” says Karel Schindler, CEO at ROI Hunter.
Poor visibility of product inventory and lack of purchasing control are exacerbating stocking problems for retailers.
“Retailers need to face the stocking problem head on, or otherwise suffer both financial losses and reputational damage, as excess deadstock might ultimately need to be sent to landfill. To ease the issue, inventory product management and promotional strategies that are informed by real-time product performance data can allow retailers to track deadstock items and accurately forecast demand,” says Schindler.