Whether you are a newbie or a veteran in eCommerce, you would end up in this situation at some point in time: buying products that do not sell well. Research has shown that on average, around 20% of a seller’s inventory will become no-sell products, or what I call “dead stocks”.

Whether you are a newbie or a veteran in eCommerce, you would end up in this situation at some point in time: buying products that do not sell well. Research has shown that on average, around 20% of a seller’s inventory will become no-sell products, or what I call “dead stocks”.

Now, dead stocks are a big problem and can affect your cash flow and profit margins significantly. Especially for new sellers who are not experienced in the trade yet, having a large number of dead stocks can easily cripple your entire business. Therefore, you will definitely want to be able to avoid these products before you purchase them.

Essentially, the reason for ending up with dead stocks is usually two-fold. Firstly, sellers may purchase inventory purchases that were not based on sufficient market or product data. Secondly, sellers may purchase products that were driven by the wrong data. In either case, both hint at the inadequate amount of research done when sellers were making their purchasing decisions.

Today, I will focus on how to avoid dead stocks from happening. To help you understand what it takes to avoid, or at least reduce the amount of dead stock in your inventory, consider the few points below.
 

1. Abandon Gut Feelings

This might seem like a no-brainer, but it surprises me that a lot of eCommerce sellers make purchasing decisions based on gut feelings. Literally, if they feel like a product would sell well, then they purchase it – in bulk some more. Sad to say, the outcomes of those rash sourcing decisions made by gut feelings are typically much worse than those driven by data. Sellers will more often than not end up with a large amount of inventory that can’t be sold off, resulting in drastic impacts on their businesses.

So here’s my advice: though it’s good to do things with a passionate attitude, it doesn’t mean charging ahead without careful considerations. The next time you base your sourcing decisions on gut feelings, think twice again. Ask yourself these two questions:

A) How much data do you have on this product?

If you really think about it, how much data have you collected about the product? You will need valid data to back up your sourcing decisions at all times. And by data, I mean getting specific numbers, like knowing how many units of this product is sold per month, how much revenue are sellers getting from selling the product, and what is the estimated profit margin you can get from selling this product, etc. If you cannot even get any of this crucial data for the product, then I suggest you drop it and move on to the next product instead.

B) How well do you know the product?

Take a look at the product’s design, features, and claimed benefits. These are all elements that will affect how well this product sells. Do you have experience using this product? Do you enjoy using this product as a user yourself? Are you certain that this product really delivers what it claims to do? If you have not even tried or tested out the product yourself, please do not put it out there to sell to your customers!

Based on the answers that you come up with, you will then be able to decide whether this product is worth selling or not. If your gut feeling is insisting that you should buy more of it, but the data and information you collected just doesn’t show any value in doing so, then please stand down and take a look at the whole picture before making any purchasing decisions.

2. Check Out Competitors’ Data and Experiences

This point is closely tied to the first one. However, instead of looking at data from your own business, you will look at product data and user experiences for similar and competing products out there. To do this effectively, you can use several different types of tools that I have spoken about in my previous podcasts and blog posts.

For example, you can use Jungle Scout to find out the search volume for a product on Amazon and track the amount of revenue other sellers are getting by selling this type of product. This will allow you to gauge effectively if such a product is worth your time and money. There are other tools that you can use for this purpose too, so there are no excuses for you to buy a product that you don’t know much about.

3. Always Get The Most Up-To-Date Data

Now, I absolutely believe that data is the only way to lead your understanding of how well a product is expected to perform. However, do take note that times change, and the preferences for products change even faster. If you are depending on historical data to analyze which products to buy, you are just not going to get very far. For example, if you see that there’s been high demand for a product for the past two years, you might think that this product is worth your investment. But that may not be true. You have to take note that most products have fluctuating demand patterns, and what sold well in the past may not sell well now.

Hence, the safest way is to check if the data you get is the most up-to-date data. Don’t just rely on one data source – research about your products thoroughly using different methods, different platforms, or different apps and cross-check against each source. That way, you will be assured that the data you get about your products is the most relevant.

4. Make Sure You Purchase Based on Product Value, Not Price

Who would have thought that price would be one of the reasons for dead stocks? I know I should go after bargains and deals when buying products, but too much bargain hunting can actually hurt me in the long run. When I get used to the mentality of buying cheap products, I will forget my real purpose for sourcing – to get a valuable product. I will buy products just because I can get them at low costs, and this will tempt me to buy more stock than I should have. As a result, I end up with dead stocks.

This is why I always stress the importance of purchasing based on product value, not on price alone. This advice holds especially true when it comes to competitive products. Although it is tempting to look at the cheapest ones first, I always recommend that you purchase the more expensive item instead, if it has a higher value. A simple way to check for a product’s value is to ask yourself this question: can this product resolve a specific, real-world problem? For if you cannot even articulate clearly what kind of issue your product can resolve, how can you convince your customers to buy them? In the end, your product is just going to end up collecting dust as dead stocks in a corner of your warehouses.

5. Double-Check and Triple-Check Recommendations

Last but not least, be cautious of the products recommended by your suppliers. When you get familiar with suppliers, many of them will gladly recommend you many supposedly “winning” products to sell. However, do remember that suppliers are sellers themselves. They are generally far more worried about being able to sell their products to you, than about you being able to sell those products to your customers. While that’s not to say all suppliers will give you unworthy recommendations, it’s always best to play safe – for you will be the one to suffer the consequences if these recommended products end up as dead stocks in your warehouses!

So, the next time you receive recommendations from your supplier, inspect the products as if they came from a competitor. Always do more research to check if those products really sell!

And this shall be the end of my article. I hope it has helped you learn something about avoiding dead stocks, and do continue following me if you want to learn more tips like these!