Inventory Management for Liquidation
By Alan Miklofsky
Managing inventory effectively during liquidation is essential to maximizing revenue and ensuring a smooth closure. Unlike regular sales, liquidation involves balancing the need to move merchandise quickly with the goal of recovering as much value as possible. In this article, I’ll walk through three key strategies: pricing tactics with progressive markdowns, segmenting inventory, and handling unsold stock through jobbers, bulk buyers, or charitable donations.
1. Pricing Strategies: Initial Discounts and Progressive Markdowns
Liquidation pricing must create urgency while leaving room to adjust markdowns as the sale progresses. An effective pricing strategy strikes the right balance between enticing customers and avoiding overly steep discounts early on.
Initial Discounts:
Start with modest discounts (10-20%) to attract initial traffic without depleting your best inventory too quickly. This allows loyal customers to engage with the sale early while still leaving room for deeper markdowns.
Focus your marketing on phrases like “Limited-Time Savings” and “First Pick!” to drive excitement for the early phases of the sale.
Progressive Markdowns:
Introduce scheduled markdowns over the course of the liquidation. For example:
Weeks 1-2: 10-20% off
Weeks 3-4: 30-40% off
Final Week: 50-70% off
Clearly communicate markdown schedules to customers to create a sense of urgency. Announcements like “Next Week: Prices Drop Again!” can prompt customers to buy sooner rather than waiting too long.
Avoid steep discounts at the start to protect margins—if inventory is moving too slowly, you can always adjust markdowns mid-sale.
Final Days Clearance:
As the sale nears its end, you may need to offer aggressive final markdowns (up to 80%) to clear out remaining stock.
Consider using bundling tactics (e.g., “Buy Two, Get One Free”) to move inventory that isn’t selling individually.
2. Segmenting Inventory: Core Products vs. Aged Stock
Not all products require the same markdown strategy. Segmenting your inventory allows you to apply targeted discounts that maximize profits while still moving merchandise efficiently.
Core Products:
Popular items and recent arrivals should receive more moderate markdowns initially since they still carry value. These are products that customers are willing to pay closer to full price, even during liquidation.
These products should be showcased at the front of the store or on well-organized racks to maximize their visibility and perceived value.
Aged and Seasonal Stock:
Inventory that has been sitting for months or is out of season (e.g., winter boots in spring) should be marked down more aggressively. The goal is to clear out slow-moving stock quickly to free up space for core items.
Place aged stock in high-traffic areas with bold signage, such as “Clearance - Up to 60% Off!”
Accessories and Add-Ons:
Items like socks, insoles, or shoe care products can enhance overall sales by being offered as add-ons. Consider bundling accessories with shoes or promoting impulse buys at checkout.
These items typically have higher margins and can help offset the deeper discounts offered on footwear.
3. Options for Unsold Stock: Jobbers, Bulk Buyers, or Charity Donations
Despite your best efforts, it’s common to have inventory left over at the end of a liquidation sale. Developing a plan for unsold stock helps you close the store without lingering inventory problems.
Jobbers:
Jobbers are wholesale buyers who specialize in purchasing bulk inventory at a discount. They often buy end-of-season or clearance products and resell them in secondary markets.
Selling to jobbers can be a fast way to liquidate leftover stock, but the prices they offer are typically lower than what you’d earn from individual customers.
Research reputable jobbers in your area and negotiate fair terms to maximize the return on your remaining inventory.
Bulk Buyers:
Local retailers, flea market sellers, or discount stores may be interested in purchasing your remaining stock in bulk.
Contact other shoe stores or independent retailers to see if they’d be willing to buy inventory at wholesale prices.
Bulk buyers are often more flexible than jobbers and may pay a bit more if the merchandise aligns with their needs.
Charity Donations:
Donating leftover stock to charities or non-profit organizations can offer a tax benefit. Charities often need shoes, especially for homeless shelters, disaster relief, or back-to-school programs.
Ensure you get documentation for your donation to qualify for a tax deduction.
Partnering with a charity can also generate positive PR for your business, leaving a good impression as you close operations.
Conclusion
Inventory management is the backbone of a successful liquidation. By implementing pricing strategies that start with modest discounts and progress over time, you can keep customers engaged while maintaining profit margins. Segmenting your inventory ensures that core products and aged stock are priced appropriately to maximize revenue. And when the sale ends, having a plan for leftover inventory—whether through jobbers, bulk buyers, or charitable donations—helps you wrap up operations efficiently.
With careful planning and execution, you can turn your inventory into revenue, meet your liquidation goals, and close your store on a positive note.