Let’s face it: No furniture retailer wants to waste showroom space on clearance products. It’s called “slow-moving” inventory for a reason, and giving it prime square footage can feel like throwing good money after bad.
But while retailers strive to reserve showroom space for high-velocity inventory, offloading dead stock often requires relinquishing some of that top real estate to clearance. With no alternative method to shepherd customers toward these products, this approach can feel like their best shot at finally lightening the load.
The good news is there’s another way to offload this pesky stock and optimize your showroom floor. In this tactical guide, we’ll explore how traditional clearance sales can cut into your net profits, then break down three proven strategies that successful retailers use to maximize the potential of their showrooms.
Let’s dive in.
Why clearance has no place in your showroom
Most furniture retailers reserve anywhere between 10% and 30% of their showroom space for clearance. While that number may seem small, when the inventory in question is as big as furniture, this can be a lot of real estate to allocate to your lowest-margin stock. Put another way: When you showcase clearance, you do it to the detriment of your revenue per square foot.
How? Let’s sketch a quick hypothetical. Say you display last season’s roughly 24-square-foot sofa — now going at a $300 markdown — instead of this season’s $1000 model. That would take you from $41.67 per square foot to just $12.50 per square foot — a 70% drop. Then, imagine what this revenue loss looks like across 10% of your showroom space.
If that number isn't enough to scare you, the problem runs even deeper. Selling clearance in-store doesn’t just tie up your cash; it takes your best people away from their most profitable work. Your merchandisers must take pains to style your clearance furniture as enticingly as possible, and then your salespeople must sacrifice time — and higher commission — to coax customers into purchasing it.
What’s worse, with all your best people and resources locked up in clearance, you’ll have less to allocate to turning over your full-price stock. As a result, you could start to deter the high-value shoppers who come to your storefront for your latest and greatest inventory.
And fewer full-price shoppers means more inventory backlogs — i.e., even more clearance. Putting clearance in your showroom, in other words, fuels the problem that landed it there in the first place and traps you in a cycle of perpetual dead stock.
3 proven strategies for optimizing your showroom floor
To escape the clearance cycle and make way for your fastest-moving inventory, consider taking some proactive measures. From optimizing product placement to showcasing clearance online, here are three tried-and-true strategies used by top retailers:
1. Perfect (and validate) product placement with predictive analytics
As any good merchandiser knows, it’s hard to predict which product placements will yield the most conversions. Do you greet customers with your hero sofa or the sleekest new addition to your living room line? Will that armchair sell better as an online exclusive or in a physical store where customers can sit on it?
That’s why the most resourceful retailers use analytics to uncover what sells the best where. Without the right data, you might feel the pressure to cede too much space to clearance. But insights into everything from sales data and inventory levels to customer traffic patterns will give you the conviction to prioritize the placements that drive profitability — even if that means kicking some slower-moving inventory to the curb.
Plus, there’s now a bounty of predictive AI tools designed to meet your every merchandising need. To optimize your physical storefront, consider investing in planogram software. To fine-tune virtual product placement, check out the whole ecosystem of eCommerce merchandising tools on the market.
In addition to optimizing your showrooms, you should consider which items perform the best online and which drive more sales the old-fashioned way. End-to-end clearance optimization platforms like SaySo can help here.
SaySo collects top-level clearance merchandising insights that can also inform decisions on full-priced stock. Our analytics dashboard might, for example, surface that leather sofas — whose texture is very predictable — do better online while fabric sofas — whose textures can vary — drive more conversions in person. Leverage these insights to optimize your showroom floor while laying the groundwork for a more robust merchandising strategy.
2. Reduce your inventory-to-sales ratio with precise demand planning
Of course, another way to optimize your showroom space is to generate less clearance inventory in the first place. In fact, retailers should strive for a 15% inventory-to-sales ratio.
If this sounds like more of a pipe dream than a feasible target, consider streamlining your inventory management with a data-backed demand planning strategy. By leveraging real-time insights and demand patterns, you can keep the most popular inventory in stock to increase long-term sell-through and gradually reduce the need to showcase clearance at all.
To automate your demand forecasting and inventory planning, consider investing in inventory management software. Shopify’s native feature works well for this.
And, naturally, there’s always SaySo. SaySo leverages historical and real-time customer data to tell you which SKUs are in the highest demand and selling at the best price points. That way, you can close the loop on both your pricing and demand planning strategies for optimal inventory-to-sales ratios.
3. Sell your slow-moving stock online
The best way to get clearance out of your showrooms? Sell it online.
Moving clearance sales online not only frees up showroom space for high-velocity inventory but also reduces the handling costs associated with physically showcasing and transporting it. Instead, you can store all your excess inventory in one place until it’s purchased by an online shopper. Think of your digital clearance storefront as the margin-friendly version of a dedicated outlet store.
Even better, creating a bespoke online clearance channel enables you to appeal to a new shopper profile: the young deal seeker. This digitally native Gen Z shopper spends less time in showrooms and more time shopping for furniture online — and may not have the budget to make full-price purchases yet. By lowering the barrier to entry with clearance, you can cement their loyalty now and stay on their radar as their buying power increases.
And, as you’re winning over younger generations online, you can continue to preserve the equity of your brick-and-mortar storefront, which will now be perfectly primed to attract the highest-AOV shoppers.
Of course, you might be thinking that building out an entirely new digital sales channel sounds like a lot of work. And you’d generally be correct — if you didn't have a partner like SaySo to help facilitate the change.
SaySo helps furniture retailers create co-branded digital storefronts to profitably liquidate clearance inventory directly from their warehouses and distribution centers. Every aspect of our co-branded shopping experience, from the front to back, is designed to drive conversions and protect margins. On the front end, SaySo facilitates gamified shopping experiences — via Dutch auctions — that engage shoppers and drive faster sell-through. At the same time, the back end quietly collects willingness-to-pay data from every live auction that retailers can use to set the most profitable asking prices and even inform future pricing strategies.
Consider the case of industry-leading retailer Ashley Canada. They partnered with SaySo to launch a co-branded clearance storefront (Ashley x Descend), resulting in a 20% reduction in transportation fees and a 47% 90-day retention rate on clearance sales. Plus, with their excess inventory conveniently displayed online, they can comfortably allocate their people and space back to their best stock.
Are you ready to give new life to your dead stock?
See what SaySo can do for your clearance inventory by booking a demo today.
