With mortgage rates rising and home sales declining, demand for furniture and home decor has taken a significant hit, leaving retailers in a difficult position. As warehouses and distribution centers become flooded with unsold inventory, many turn to clearance pricing as a last resort to recuperate cash and clear space for new products.
The problem? Handling and showcasing clearance products can be a costly endeavor. From transportation costs to stealing valuable showroom space from full-priced items, relying on clearance to unlock your cash flow is a daunting initiative.
That’s why the savviest furniture retailers are investing in more efficient strategies for offloading their clearance inventory and reclaiming the cash it holds captive.
In this tactical guide, we’ll break down why traditional clearance sales constrain cash flow and dive into three actionable steps you can take to transform excess stock into a potent revenue stream.
Why excess inventory is the silent killer when it comes to cash flow
There’s a reason having a warehouse full of excess inventory is every retailer’s worst nightmare. For starters, it comes with hefty holding costs, from warehousing fees to labor and insurance. These fixed and variable costs tie up cash, leaving panicked retailers to resort to steep discounts to lighten the load.
In an ideal world, clearance sales would drive short-term revenue and free up working capital for more profitable ventures. However, as many retailers discover the hard way, steep discounts are more of a stopgap solution than a viable long-term strategy.
Showcasing clearance inventory often means shuffling it between locations while piling on handling and transportation costs. Add these to the razor-thin margins of deep markdowns, and the margin leakage is staggering before the product even sells. Across hundreds or thousands of SKUs, the losses multiply fast.
Not only does this affect a retailer's bottom line, but it also endangers their open-to-buy, handcuffing them from acquiring the newest and highest-demand product lines. Meanwhile, clearance inventory becomes increasingly outdated and less likely to sell, dragging down the retailer’s ability to attract high-value customers.
In the end, the opportunity costs of excess inventory can rival, if not exceed, the direct holding costs.
3 steps to recapture the value of your dead stock
If the aforementioned scenario feels all too familiar, it's time to rethink your clearance operations and reclaim the value of your overstock inventory. Let's dive into three proven steps used by leading furniture retailers:
1. Move clearance sales to a digital storefront
Shifting your clearance sales to a digital storefront enables you to sell directly from your warehouses and distribution centers. This eliminates the need to transport unsold products between stores, showrooms, and storage locations, slashing operational costs. This freed-up cash can then be allocated to other higher-priority initiatives, such as filling your showrooms with high-velocity inventory.
While shifting to an eCommerce format for clearance sales might seem daunting, solutions like SaySo can easily streamline this process. SaySo helps retailers launch co-branded digital clearance storefronts where shoppers can view, compare, and purchase overstock inventory. By integrating with your existing product catalog, SaySo condenses the product listing process from hours to minutes, helping you offload your peskiest inventory in record time (and at more favorable prices).
And while SaySo is happy to do the heavy lifting to get your clearance site live, you retain complete control throughout the partnership.
2. Leverage willingness-to-pay data to set strategic prices
Price leakage can wreak havoc on your cash flow, but the good news is that it’s avoidable. By tapping into willingness-to-pay (WTP) data, you can clarify where to set your pricing on every clearance SKU — balancing margins while still moving inventory.
There are several ways to collect WTP data, including surveys, price experiments, and even focus groups. However, while these methods are proven, executing them can be a significant time and resource commitment. Fortunately, SaySo can facilitate the gathering of this data on your behalf.
Every co-branded storefront launched by SaySo employs a Dutch auction sales model, where clearance products are listed at higher prices that incrementally get reduced until a bid is placed. Not only does this gamified experience engage your shoppers, but it's also the source of SaySo’s WTP data.
By analyzing every bid and purchase price for each clearance product sold, SaySo lays the foundation for a more efficient long-term pricing strategy that keeps your cash flow steady and your inventory in motion.
3. Optimize demand planning to keep the fastest-moving inventory in stock
The best way to cut clearance off at the source is by drilling into a more strategic demand planning strategy. This will tighten the gap between supply and demand to reduce the need for clearance—and the cash it ties up—altogether.
Effective demand planning hinges on actionable insights. The goal is to pinpoint which SKUs are in the highest demand and fetch the best prices so you can manage stock levels more effectively.
Such granular demand planning can be achieved through inventory management software, ideally one specializing in furniture. Alternatively, SaySo also facilitates this need by collecting and analyzing the data from each transaction driven on our co-branded clearance storefronts. This data helps retailers uncover demand patterns, establish data-driven pricing strategies, and optimize inventory decisions to improve bottom-line profits.
Take it from leading furniture retailer Ashley Canada. With SaySo’s co-branded storefront (dubbed Ashley x Descend), their team slashed transportation expenses by 20% and saw a 6x ROAS boost to their full-price ecommerce site and in-store purchases. Plus, the transaction data collected from its co-branded site has been instrumental in keeping high-velocity inventory on showroom floors while eliminating a buildup of overstock inventory.
Are you ready to turn your dead stock into a new revenue stream?
See what SaySo can do for your clearance inventory by booking a demo today.
