Certain product categories are particularly susceptible to becoming shelf warmers. They include promotional and seasonal goods as well as licensed merchandise linked to film releases. The latter are particularly common in the toys sector and can be particularly difficult to plan for. Depending on the industry, various ways have evolved to deal with these goods.
The fashion industry thrives on sales cycles
The fashion industry has long attuned itself to seasonal business. Cyclical sales of fashion collections are now the norm. However, in order to avoid excessive price erosion, higher-quality labels have turned to other strategies, ranging from limiting the number of goods at the end of the season to private shopping. The aim is to keep the value of the goods high, i.e. not to sell off branded goods at a loss.
Peculiarities of the toy industry
The toy industry has its own cycle with one major sales period in the year. But surprisingly, the market forces in this sector act contrary to what one might expect: before Christmas, retailers underbid each other to obtain a larger piece of the toy sales cake.
Licensed toy articles lead a life of their own. Their success is linked to the success of the film, book or TV series. If, for example, a film becomes a hit in the cinemas, sales of the licensed merchandise are likely to be correspondingly high. Depending on the licence in question and the efforts of the licensor, the merchandise may spread well beyond the film. This means that retailers can, therefore, keep on selling the licensed products. However, the opposite also occurs again and again. Both the film and its merchandise fall short of expectations. And after the film has done the rounds of all the cinemas, the warehouses are still full of its related merchandise.
So what methods to deal with overstock and slow-selling products actually exist?
Sales methods for retailers
One thing that is recommended for retailers is that they organise special campaigns in good time, i.e. themed sales and "flash sales" that put the merchandise at their centre. When it comes to licensed products, this may take the form of themed tables and events that are linked to the hype relating to the brand. Retailers would be advised to accept or even plan that they will be "out of stock" rather than miss the main selling period because they organised their sales campaign too late or thought it would last longer. Because there's nothing more annoying than sinking money into re-orders of what will eventually become the shelf warmers of the future.
- Flexible pricing with promotions
When you're running a promotion, you have more of a free hand when it comes to pricing products – without causing any harm to the brand and the product value itself. Customers understand that products will be more expensive after the promotional period. Such campaigns attract customers' attention and offer additional marketing potential.
- Bundled pricing of slow-sellers
Bundled pricing and add-on campaigns also allow slow-selling products to be sold: in the form of a free gift with a certain value of purchase or as part of your customer rewards programme, these articles can act as an added incentive to buy.
- Exclusivity through private shopping
For retailers with an extensive customer list, private shopping or event-related sales of inventory are recommended. The customer focus here is on the exclusivity of the invitation – and the supposed scarcity of the merchandise increases its desirability. Shifting overstock this way means that these "special sales" rarely have any adverse impact on brand value.
- Special discounts with a large amount of overstock
If it's a matter of a large amount of overstock, there's often no way of getting around special discounts. It makes sense to put them into some larger context, so that the individual product isn't seen as mere junk you're trying to sell off cheaply. For example, some topics and product groups can be bundled into "Back to School Sales" or "Easter Gifts" offers or similar seasonal events.
Sales methods for manufacturers
Even manufacturers are familiar with the problem of overstock. They need to manage the difficult balancing act between supply availability and empty warehouses, and need to sense how the sales cycles are evolving. Often, well-functioning networks that can handle slow-moving products without any loss of image are already in place. They consist of retailers who specialise in slow-selling items.
- Introductory offers in new markets
When it comes to selling off stock on a larger scale, markets that have not yet been tapped by the brand are recommended. This will prevent the domestic market from being adversely affected by knock-down prices, which will ultimately harm the brand value. For example, markets that are still being developed can be offered "introductory offers". The manufacturer thus gets to know new customers and establishes initial brand contacts at "test prices".
The distribution partners get the chance to enter a new market with attractive prices. Afterwards, they can then start to develop the market properly with a wider distribution than if they had had to start from scratch and establish initial contacts. Of course, this method is difficult to carry out with trendy topics that have generally peaked. This is an area where the bundling of various offers – e.g. DVD or game plus merchandising products – is recommended.
- Private shopping through online retailers
Several online retailers specialise in private shopping. They are a sales channel that can be used to sell slow-selling items "exclusively" – without reducing the brand value. They are, therefore, a welcome partner for branded companies with overstock.
- Pop-up or concept stores
In recent years, both retailers and manufacturers have found another way to sell goods, one which builds brands while at the same time coming across as exclusive and in line with the zeitgeist: vacancies in prime locations are used for pop-up and concept stores. Accompanied by social media campaigns that promote the special sales venue, old goods can be sold off and, at the same time, new goods tested and launched.
- Write off goods, but maintain brand value
In sum, however, the art of selling leftover merchandise is always a fine balance between brand value and stock value. Writing off goods before they flood the market as cheap products and the brand value sustains long-term damage may, therefore, be the most sensible solution in some cases.
A balanced product range or portfolio protects retailers and manufacturers alike. Given a solid foundation of year-round revenue generators, trend-driven sales products or seasonal goods will keep the cash registers ringing.
The opinions expressed in this article are those of the author and do not necessarily reflect the views of Spielwarenmesse eG.
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