“Balancing Inventory: Making Friends With Retail Pricing and Clearance Sales” by Bob Phibbs via The Retail Doctor Blog

“Balancing Inventory: Making Friends With Retail Pricing and Clearance Sales” by Bob Phibbs via The Retail Doctor Blog

What is the difference between a clearance and a sale? A sale is often a specific brand promotion or even a storewide discount.

Why do stores have clearance sales? To help get some of their money back when an item doesn’t sell in a profitable timeframe.

Clearance or closeout permanently removes merchandise, often one-offs and items that did not sell. Whether it is women’s clothes or shoe markdowns, inventory clearance is a fresh start that makes way for new product in your store. But slow-moving inventory can point to bigger problems.

Retail clearance sales are the easiest ways to declutter your store, so only the best merchandise remains. Closeouts are important; Zara reports 13 percent of annual revenues are attributed to clearance sales.

One of the best ways to show your clearance sale is to create window displays that feature the deals.

Clearance sales function as a way to get some of your investment back before it is totally worthless.

Many merchants tiptoe around markdowns, and that is unnecessary.

Your money is already gone; holding on to it ties you to the past.

But many retailers feel they must get back whatever they paid for their inventory, no matter how many years ago the merchandise first arrived in their store.

This thinking is murder on their cash flow.

Other retailers feel there will always be a demand for a part or accessory to a model or product, even if that product is no longer sold, maybe on eBay, but not on your display shelves.

This blog isn’t about inventory being like milk and getting spoiled if it sits too long. That blog is Open-To-Buy: Merchandise Doesn’t Get Better With Age.

This blog is about the difference between a sale and clearance. Too many retailers avoid aggressively clearing out old merchandise either because they feel they will lose money when they sell it or because it’s too complicated to know what to clear out. Neither is true.

If that widget you knew would sell at a show hasn’t sold after eight months, you’ve already lost the money. The fact it is sitting on your display shelves doesn’t make that any less true, but it does make your entire store look dated, out-of-touch, or just plain old.

Inventory clearance is an aggressive form of balancing open-to-buy. If you’re unsure what that is, here are Four Tips How To Avoid Overbuying Merchandise For Your Retail Store, so you don’t get in this predicament again.

No matter how you look at it, there is bound to be leftover merchandise at times that must be put on clearance to get it out the door.

I’m not talking about a generic promotion or storewide 20 percent-off sales of your best and brightest. That won’t help clear out the oldest inventory. However, such a sale will reduce the best sizes of your product at deep discounts, which can limit the amount of money you have to reinvest in stock. I am talking about selling off the 10 types of products you need to clear out at the beginning of every year.

ID the discount based on the original price to move clearance markdowns fast. Remember, when shoppers approach these types of unsold merchandise, they only think about their savings off the original price, not how much they will spend.

Here’s my 3-part rule of thumb for clearing out old merchandise:

1. Start your clearance with clearance sale signs at 30% off marked prices for one week. Alert customers via social media or email about the great bargain on their favorite brands, and note that selections are limited. that helps them get off the couch and visit and see your deals.

2. The following week, mark down whatever merchandise is left at 60% off for another week. Again alert your social media followers – maybe even with a paid Facebook ad for one great deal after another.

3. Donate it to charity after another week, or if you have to – write it off as a loss and throw it out. Do not let it stay in your store or backroom.

Once you have aggressively cleared out your laggards, do a physical inventory, so you have an accurate picture of new product you need to buy at trade shows.

See also, 3 Ways To Maximize A Retail Clearance Sale Promotion

In Sum

Nothing feels better than getting rid of old baggage. Putting old clearance items on sale makes it possible to buy fresh inventory and make a fresh start for your store.

We are pleased to mention that the author Bob Phibbs aka the Retail Doctor (who has contributed to BRA with outstanding articles like this one and so many others that we have reposted over the past few years) has also contributed to BRA monetarily. We value his relevant retail insight and encourage you to learn more about his offerings by clicking on the following link to his website:

– Doug Works, Executive Director BRA

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