Dead stock: what it is, how to spot it and when a markdown beats waiting

Dead stock is inventory that sits in your warehouse and does not sell, or sells so slowly that the stock on hand would last for years. You spot it with three numbers: days since the last sale, months of stock left and the product's share of profit. You get rid of it in order: markdown, bundle, a new sales channel, return to the supplier, write-off.

The main mistake is waiting for the item to sell at full price because "it's already paid for". While it sits there, it costs money every month: shelf space, cash tied up in it, the model getting older. Below is how to calculate that cost and the lowest markdown price that still beats holding the stock.

When people look for what to do with dead stock

What dead stock is and how it differs from regular inventory

Dead stock is inventory with no demand at its current price. Inventory in general is anything on the shelf, and most of it sells normally. The line between them is how fast it sells.

Similar terms you will meet: obsolete inventory (stock that will not sell because the product is outdated), excess inventory (more than you can sell in a reasonable time) and dead inventory, which means the same as dead stock. In fashion and sneaker reselling, "deadstock" means something else — new, never-worn items, often collectible. This article is about the first meaning.

Where dead stock comes from

Dead stock is almost always a purchasing problem, not a sales problem. Typical causes:

• Buying by gut feeling or in a big lot for a discount. A 5% supplier discount does not pay for an item that sits for a year.
• The season ended. Heaters not sold by spring will wait for autumn.
• The model is outdated. A new version came out, and the old one only sells at a discount.
• The price is above competitors'. The product is fine — it is just cheaper elsewhere.
• Nobody sees it. A weak product page, no photos, the item is not in your marketplace or shopping feeds.
• The wrong sizes and colors. The model sells, but the tail of the size range does not.
• Damage and expiry dates. Damaged packaging, missing parts, a best-before date coming up.

The cause decides the fix: an overpriced item is saved by a price correction, an invisible one by a new product page and a new channel, an outdated one only by a markdown.

How to identify dead stock: three numbers

Check every product with stock on hand against three numbers:

1. Days since the last sale. The simplest signal, but it misses items that sell one unit a month.
2. Months of stock — stock on hand divided by average monthly sales. It catches the slow items the first number misses.
3. The ABC group. Group C products with large stock are the first dead stock candidates. How to calculate the groups is in ABC analysis for inventory.

Set the threshold for your own purchasing cycle. A working rule: if a product has had no sales for longer than two of your purchasing cycles, or there is more than six months of stock, it goes on the review list. For seasonal categories, look at sales over the last season, not the last few months.

How much it costs to hold dead stock

Dead stock costs you three things every month: shelf space, the cash tied up in it, and aging — the product gets older and in a year it will fetch less.

Illustrative example for the arithmetic, not market data. 40 units at a cost of €50 each is €2,000 in stock. Storage costs €30 a month. The cost of money is 2% a month: what that cash would earn turning over in products that sell, or what you pay on a loan. Loss of value is €30 a month.

Over a year that is €1,200 — more than half of what the whole lot cost. Even if the warehouse is your own and you pay nothing for space, the other two items do not go away.

When a markdown beats waiting

A markdown pays off as long as each unit leaves you more after it than it would at full price minus holding cost for the whole wait. The cost price plays no part in this comparison: it is already paid whatever you decide.

Back to the example. The full price is €80, one unit sells a month, so the last unit goes in 40 months, and on average a unit waits 20 months.

• Hold at €80: 80 − 2.50 × 20 = €30 per unit.
• Mark down to €60. Suppose 10 units a month sell at that price: the lot is gone in 4 months, the average wait is 2 months. 60 − 2.50 × 2 = €55 per unit.
• Sell the lot to a bulk buyer at €30 now: €30 per unit, no holding cost.

A markdown of a quarter of the price leaves almost twice as much per unit as waiting. And a bulk sale below cost leaves as much as 40 months of waiting at full price — and frees €2,000 at once.

That gives you the markdown floor: the lowest price that still beats waiting is what a unit leaves without a markdown plus holding cost for the new wait. In the example: 30 + 2.50 × 2 = €35. Below €35, at 10 units a month, the markdown loses to waiting. Plug in your own numbers, and test the sales pace after a discount on a few units instead of guessing it.

How to get rid of dead stock: 5 ways, in order

Go from the options that return the most cash to the ones that only clear the shelf:

1. Markdown. Discount down to the floor from the calculation above. Cut the price once by a noticeable amount, not 5% every week: shoppers do not notice small discounts, and holding costs keep running.
2. Bundle. Add the item to a best-seller as a set, or as a free gift with orders over a certain amount. That way it sells at a price the shopper does not compare on its own.
3. A new channel. What does not sell on your website may sell on a marketplace such as eBay or Amazon, or through social media; leftovers can go as a lot to off-price buyers and liquidators who buy surplus stock.
4. Return to the supplier. If your contract allows returns or exchanges of unsold goods, use it. If not, ask to swap it for products that sell: the supplier often prefers that to losing a customer.
5. Write-off. Damaged, expired or completely unwanted goods are written off, disposed of or donated. Document the write-off with a list of items and the reason; how it affects your accounts and taxes depends on your country and business type, so agree the procedure with your accountant.

How to prevent new dead stock

Dead stock is created at the moment of purchase, so that is where you prevent it:

• Buy against sales. Order for average sales and the supplier's lead time, not "the same as last time". For group C products, keep minimum stock or sell to order from the supplier's warehouse.
• Check monthly. Pull a list of items with no movement and with stock above your threshold once a month, not once a year at the stock count.
• Give each season an end date. For seasonal products, decide in advance when the clearance starts.
• An assortment matrix. Drop products that bring neither profit nor steady sales before they become dead stock. How to build that matrix from ABC and XYZ is in the assortment matrix.

The other side of the same problem is stockouts: while cash sits in dead stock, the products that sell run short. What an empty shelf costs is in out-of-stock losses.

When dead stock is better tracked in software

When you have hundreds of products and more than one warehouse: then a spreadsheet list of items without movement is out of date before you finish building it, and sales and stock have to be exported and matched every time.

In Elbuz, stock updates by itself from orders, goods receipts and supplier price lists, and the sales analytics report shows dead stock as a separate block — products in stock with no warehouse movement for more than 30 days, with the date of the last movement and the number of days without it, filtered by warehouse and category. What else the report shows is described in sales analytics in the Elbuz CRM.

One honest caveat: the 30-day threshold in the report is fixed, and the software does not calculate holding cost or the markdown floor — use the formulas above for those. If you have a few dozen products and one warehouse, a spreadsheet is enough.

Orders and stock in ElbuzStock, items without movement and sales in one system, 14 days free

Frequently asked questions

What is dead stock?

Inventory that does not sell, or sells so slowly that the stock would last many months or years. It ties up cash and takes up warehouse space.

What is another name for dead stock?

Dead inventory or obsolete inventory; slow-moving and excess inventory are close but milder terms. Unsold goods in general are simply called inventory or stock on hand.

What is considered dead stock?

It depends on your purchasing cycle. A working rule: no sales for longer than two purchasing cycles, or more than six months of stock at the current sales pace.

How do you sell dead stock?

With a markdown down to the floor below which waiting pays more, in a bundle with a best-seller, or through another channel: a marketplace, social media, bulk buyers. How to calculate the floor is in when a markdown beats waiting.

What do companies do with dead stock?

They mark it down, bundle it, move it to other channels, return or swap it with the supplier, sell it in bulk to liquidators, and write off or donate what is left.

How do you write off dead stock?

Document it with a list of the items and the reason, then dispose of or donate the goods. The accounting and tax treatment depends on your country and business type, so agree the procedure with your accountant.