Many furniture retailers see their clearance operations as little more than glorified cost centers. So much so that some would rather burn excess inventory than return it to the showroom floor — again.
And who can blame them? When you weigh the immense cost and effort of showcasing clearance against its already low margins, cutting the loss is often more profitable.
While the high handling costs associated with clearance typically erode its ROI, this outcome is entirely preventable. With the right strategy guiding your decisions, you can simultaneously eliminate these operational costs clouding your bottom line and turn clearance into an expected new revenue stream.
Read ahead to explore how handling costs impact retailers' net profits and the proven tactics to reduce them.
Why handling clearance compromises your top and bottom lines
It’s no secret that handling costs are a top expense for furniture retailers. Depending on the nature of the inventory, they can set you back anywhere from $500 to $3,000 a month.
Of course, retailers are happy to accept these costs as just another business expense for most inventory. However, they can be much harder to swallow when the inventory in question is clearance.
Why? Despite clearance’s much lower margins, it’s very high-maintenance to handle. In fact, between all the repairs and relocations, overstock inventory can be even costlier to hold onto than full-price furniture. And high handling costs only tie up more capital you could have allocated toward higher-ROI opportunities.
In other words, clearance is a nightmare for every line of your P&L. Here’s how:
Endless inventory relocations
Inventory that sits stagnant rarely sells. In an effort to offload their clearance furniture, retailers often shell out more than it’s worth, shuttling it from one location to the next. And, the longer an item takes to sell, the more stops it will inevitably make.
Consider the journey of a gently damaged sofa before it (hopefully) lands with an end customer:
The sofa is sent to a distribution center for repairs
The distribution center ships it to a showroom for display
If it doesn’t sell, the sofa is repackaged and sent back to the distribution center
It remains at the distribution center until the retailer decides to sell it again
Meanwhile, the item racks up handling costs at every step of this process — including fixed labor, fuel, and truck rental costs, to name a few.
Many retailers attempt to out-maneuver this process with heavy markdowns. After all, you can move anything if you price it low enough — but you’re only sacrificing your margins to steeper discounts instead of handling costs. Either way, you’re missing out on a revenue opportunity.
Finally, while some retailers might prefer to end the cycle and simply destroy this inventory, they also know that doing so comes at considerable cost to the environment, and, in turn, their reputations.
Threats to open-to-buy
If the threat to your bottom line weren’t enough, clearance also jeopardizes top-line sales. With the bulk of your working capital tied up in handling clearance, your open-to-buy budget may not support acquiring the newest, in-demand products.
As a result, you could find yourself with a disproportionate amount of slow-moving inventory. While certain evergreen pieces (like a classic leather couch) will always keep their value, seasonal SKUs or products that release new editions every year (like mattresses) will just depreciate, becoming harder to offload as more time passes.
All the while, this stale showroom will make your brand look increasingly outdated and compel your trendiest, highest-value shoppers to take their business elsewhere. This could then cause your full-price sell-through rates to dip, leaving you saddled with even more clearance over time.
Streamline logistics with a virtual clearance storefront
Fortunately, handling costs don’t have to be an eternal handcuff. But how are the most successful retailers reducing them? They’re marketing their clearance inventory online.
With your furniture on full digital display, there’s no need to keep carting it around. Instead of moving items between the showroom, the distribution center, and back again, you can simply store your clearance in a distribution center until it sells.
And if building out your dedicated virtual storefront sounds like its own headache — there’s a solution for that, too. SaySo’s end-to-end clearance optimization platform does the heavy lifting for you at no additional cost. So you can streamline your clearance operations without the usual financial and resource investment.
More specifically, SaySo partners with industry-leading retailers to create co-branded digital storefronts for their clearance inventory. This way, they can confidently keep all their inventory in one place — reducing handling fees in the process.
Take it from Ashley Canada. After moving their inventory to a co-branded storefront (Ashley x Descend), the leading retailer slashed clearance operating costs by 20% while driving even more traffic to their regular site.
But reduced handling costs aren’t the only advantage. There's no need to worry about typically slow-moving inventory sitting idle. SaySo optimizes every aspect of your storefront for conversion, from front to back end.
On the front end, SaySo’s gamified Dutch auction shopping experiences engage clearance customers by inviting them to name their prices. The promise of negotiation instills a sense of urgency that encourages them to pounce fast.
However, even though shoppers have a say in what they pay, SaySo still ensures their bids never dip below your reserve price. The platform’s back-end markdown and price optimization engine collects real-time willingness-to-pay data from every auction — so you can set the most profitable asking prices and even unlock a smarter, long-term pricing strategy.
Gone are the days of steep discounts. With SaySo, you’ll never offload a SKU for less than the maximum amount a customer will pay.
Best of all, by entrusting your clearance marketing to SaySo, you free up your people and cash for your highest ROI work: acquiring and offloading high-value inventory.
Put your clearance operations on autopilot with SaySo
See what SaySo can do for your clearance inventory by booking a demo today.
