“From excess the head does not hurt”. – this saying doesn’t always hold true, especially for companies specializing in manufacturing. After all, excess inventory can be a very serious problem that needs to be solved as quickly as possible. At the same time, it is worth considering how to make money from such surpluses.
How are surplus productions created?
Surplus production is a problem typical of the apparel industry, among others. Why? Because the production of clothes is very cheap in relation to the selling price. A common practice in apparel manufacturing companies, therefore, is to produce far in excess of the alleged demand – since it is more profitable to produce the goods in large quantities and possibly worry about getting rid of them from the warehouse later, than to produce too little to meet demand and, as a result, miss the opportunity to make a profit.
In the case of the apparel industry, the reason for overproduction is primarily the volatility of trends – manufacturers try to offer their customers something new each season, hence clothes that don’t sell within a few months fall out of the range. The same is true of everyday electronics, such as phones – every year new and better technologies are introduced to the market, making products from several months ago no longer attractive to consumers and starting to languish in warehouses. Of course, there are also several other factors independent of the type of products that can affect the formation of surpluses, such as unforeseen changes in the economic situation, changes in consumer habits, changes in regulations, or mistakes in marketing or storage strategies.
How to make money from surpluses?
Surplus production is a problem for several reasons:
- They linger on the shelves in the warehouse, generating costs associated with their storage – this is especially true for goods that require specific conditions, such as low temperature,
- They stop production – this is because factories cannot produce new goods if there is nowhere to store them,
- They are a frozen asset – the funds put into their production do not return to the producer, hence he has fewer opportunities to continue production or develop the company.
With all this said, making money from them is quite difficult – customers, if they have the opportunity to buy clothes in line with current trends, may not be interested in clothes that were fashionable last year. The situation is similar with electronics. In the case of foodstuffs or cosmetics, the problem is their limited shelf life. However, there is one thing that can encourage a customer to choose a surplus product – and that, of course, is the low price. Reducing the price to an appropriate level can ensure that even goods with some defects, from returns and without a box can arouse the interest of buyers. Hence, many companies try to deal with excess inventory on their own by creating promotions or moving unwanted goods to the outlet. Is it a good solution?
Sell surpluses on your own
Promotional campaigns or outlet departments with discounted goods allow manufacturers to get the highest reimbursement – even if the store price is knocked down by a few dozen percent, the manufacturer can still profit from it. Does this mean that such activities are profitable? They can be, provided, however, that they have a quick effect and allow to clean up the warehouse in a short time. Otherwise, the manufacturer will still incur some storage costs. Another drawback of such a mode of selling unwanted items is that introducing promotions, managing marketing or handling the outlet department also costs money. So if the goods are in rather moderate demand despite the discount, the financial loss can be very severe.
Is it worth it to sell the surplus to a buyback?
An alternative to selling the surplus with one’s own efforts is to sell it to a buyback. Although this requires lowering the price to an even lower level than with the promotion, this solution can prove to be much more financially viable. Why? First of all – the manufacturer recovers at least part of the funds put into the production of the goods and can use them for further operations. This is very important. In addition, storage space frees up virtually immediately in such a scenario. There is no need to wait and solicit the interest of potential customers – as a professional company with its own warehouses and means of transport, we are able to receive the entire stock of goods on the spot. Thus, immediately the cost of maintaining storage space drops significantly. With all this going on, selling surplus to buyback eliminates the need to delegate employees to handle promotions or run the outlet. In a situation where the company is struggling to maintain revenue continuity, such savings are at a premium. In short – selling the commodity to a buyer may not bring the highest earnings, but it allows you to significantly reduce the costs generated by the surplus.
Do you have goods you want to get rid of from your warehouse? Are you interested in selling it for purchase? Contact us and we will help you solve this problem.