July 10, 2018
The ripple effect of excess stock
For any business there is a fine balance between survival and success in the first 5 years of existence. The cost of holding, storing and managing inventory is difficult to overlook or ignore especially if some of the inventory doesn’t perform as well as anticipated. Write-downs, write-offs, non-liquid capital, storage costs and Inventory services costs can and will be an issue for any business at some point.
For any business there is a fine balance between survival and success in the first 5 years of existence.
The cost of holding, storing and managing inventory is difficult to overlook or ignore especially if some of the inventory doesn’t perform as well as anticipated. Write-downs, write-offs, non-liquid capital, storage costs and Inventory services costs can and will be an issue for any business at some point.
While inventory costs are different for every business type and model, the purchase of inventory and its subsequent handling are one of the biggest expenditures a small business makes. Carrying inventory has a ripple effect on almost every aspect of a business. Businesses can choose liquidation to eliminate the inventory costs but this comes at a significant loss for the business.
“The good news is that when a write-down happens when stock has not sold and its market price has fallen below what it was purchased for, it doesn’t mean that the item itself is worthless; it is no longer valued at its original purchased price.
“Thankfully Corporate Trade offers a number of ways to recover the lost value. As a corporate trade business we offer our clients the opportunity to eliminate their ongoing costs and in many cases recover up to 3 times the liquidation value of the excess stock” commented Cameron Swan, Managing Director at Active International Australia.
Restoring value to excess stock
As an answer to the excess stock solution, Corporate Trade allows businesses to use their unwanted stock to part fund future marketing activity or business costs, releasing the capital or realising extra value from the asset. Businesses are able to:
- Increase budgets – excess, slow moving or short dated stock is issued to help offset existing procurement budgets, in particular media plans.
- Maximise the return– receive a higher than current market value for your excess stock.
- Expand distribution– help find new clearance distribution channels, whether international or local, for the excess stock.
A large FMCG client had stock parcel and they needed a solution to minimised the loss to the business and an alternate distribution channel to restore value.
Active was able to purchase the stock and issue the client with Trade Credit and manage to reach the wholesale value. The excess stock was sold through Active’s local remarketing network while keeping in line with the client’s remarketing restrictions.
This solution delivered the strong results helping the client to avoid taking a loss for the excess stock and reach their target price.
“We identified with the client areas of their procurement spend to utilise their Trade Credit which best fitted with their business requirements. They were also able to use their Trade Credit to invest in advertising media, generating additional value back to the business. In essence, the client utilised their excess stock to part-fund their marketing and media budget and increased their brand awareness and ROI” Mr Swan commented.
“With a global footprint across 16 countries, we are able to offer remarketing opportunities within Australia and overseas. Our strong portfolio of partners and remarketing channels makes our offering second to none.
“Recently a large pharmaceutical company was faced with a large excess inventory of vitamins they needed clearing. The challenge was the number of restrictions which were in place such as restricting the product from being be sold within Australia to avoid cannibalising current market in stores. We were able to offer remarketing opportunities for the excess stock to be sold in China providing the client with the full target value of their product. The stock was shipped straight from their warehouse to the end buyer in China freeing up space in their warehouse to make way for the new vitamins. The problem was solved in one single transaction delivering the client a real result to their challenge” Mr Swan explained.