How to Cut Dead Stock in Your Shop and Free Up Cash

Dead stock is anything that has not sold for a long time and is unlikely to sell at its current price. The cut-off depends on what you sell. For groceries it might be 60 days. In a hardware shop, six months can be normal for some items.

The cost is not only what you paid for it. Money tied up in stock is money you cannot spend on fast sellers. It takes shelf space, gathers dust, gets damaged and, if it has an expiry date, eventually becomes a write-off.

Worked example. A general store holds ₹6 lakh of stock. A review finds ₹90,000 of it has not sold in 120 days. That is 15% of the shop's stock money doing nothing. If half of it, ₹45,000, were turned into fast-moving stock that earns a 15% margin and sells through every month, it would bring in about ₹6,750 of extra gross profit a month.

List every product with stock on hand, its last sale date and the value of what you hold. Sort by the value of stock that has not sold in your chosen period. You will usually find that a small number of items holds most of the dead money.

For slow items, work out months of cover. If you hold 48 units and sell 4 a month, you have 12 months of cover. In most small shops, anything beyond three months of cover deserves a look.

Do not trust the list alone. Walk the shelves with it. Some items listed as dead are actually gone, and some dead stock is missing from the records because it was never entered.

• Dead: no sales in the period, stock still on hand.
• Slow-moving: it sells, but current stock would take many months to clear.
• Overstocked: it sells well, but you hold far more than you need.
• Expiring: it will pass its expiry date before it sells at the current rate.

Before clearing anything, ask why it is stuck. The answer decides whether to clear it, move it or keep it.

Some items turn out to be fine once they are moved to the front or near the billing counter. Try that first. It costs nothing.

• Wrong place: it is on a back shelf or behind the counter where nobody sees it.
• Wrong price: a nearby shop or an online listing sells it for less.
• Wrong range: a newer version or a better pack size has replaced it.
• Over-buying: a scheme offer led you to buy a year's stock at once.
• Wrong store: it sells at your other branch but not here.

Work through these options in order. Each one usually costs more than the one before it.

Worked example. You hold 30 bottles of a body lotion that cost ₹140 each, MRP ₹220. None has sold in five months. A 20% discount, selling at ₹176, still makes ₹36 a bottle. If 20 sell in a month, you recover ₹3,520 in cash and make ₹720 profit. The last 10 can be bundled or returned. Compare that with writing off ₹4,200 if they reach expiry on the shelf.

Give each action a date. A discount that runs for two weeks and then moves to the next step keeps stock moving. One that runs for ever teaches customers to wait for it.

• Return it to the supplier, if your terms allow. Check before the return window closes.
• Move it to another branch where it sells.
• Bundle it with a fast seller, such as a slow shampoo with a popular soap.
• Discount it, starting small, staying within MRP and above cost where you can.
• Sell it in bulk to another trader at cost or a little below.
• Donate or write off what is left, and record the loss.

Clearing dead stock once is easy. Not creating more is the real work. Most dead stock was bought on hope, on a scheme or on a guess about a new product. Before placing any order, glance at the dead stock list for the same supplier.

• Buy new or untested items in small quantities, even at a higher price per unit.
• Treat scheme deals with care. One free carton on ten is not free if eight cartons sit for a year.
• Set a maximum stock level for each item, not only a reorder point.
• Stop reordering slow items until their stock is close to zero.
• Ask staff what customers ask for that you do not have. That list is just as useful as the dead stock list.

Set one day a month for a stock health check. Look at dead, slow-moving, overstocked and expiring stock, decide an action for each line, and check whether last month's actions worked. Track the total value of dead stock over time. If it falls month on month, the habit is working.

Keep an eye on a different problem at the same time. Stock the records say you have but that is not on the shelf is not dead stock. It is missing stock, and it needs a different fix: a count first, and then a look at who handles it.

Okount's inventory module sorts stock health into dead, slow-moving, expiring and overstocked. Reports show sales and margin by product, category and store, and transfers between stores keep batch, expiry and cost with the stock. When goods need to go back, purchasing handles returns to the vendor, and supplier dues update with every return.