Let Go of Obsolete Inventory

One of the problems that sellers in this industry face is inventory that does not sell. In many cases, this old obsolete inventory is shoved away in some corner, packed up in boxes for storage, stuck in a store or relisted over and over again. Ouch!

For some sellers (and I am so guilty of this) it becomes emotional and not about the money or the numbers, but about the bad buying decisions. Sometimes you paid too much or picked the wrong product or got into the market too late. Whatever the reason, it’s hard to let go. It’s akin to admitting failure and none of us like to do that.

In addition to eBay or Store fees, there is a large cost associated with carrying obsolete inventory that is often missed. These are such things as rent and utilities, insurance, physical handling, damage, theft and so forth. For sellers in this industry, one of the most destructive carrying costs is that holding onto the obsolete inventory reduces the capital available for new inventory – If your money is tied up in stuff that is not selling, there is no new money to buy stuff that does sell.

It costs a lot more than your initial investment to hold onto inventory that does not sell. It would be hard to calculate the “general carrying costs” for sellers in this industry, but it’s NOT a low number. A sheer guesstimate for this industry is likely higher than the 25% rule of thumb, thus your $100.00 item in a year’s time has cost you at least $125.00 (before you list it anywhere).

If you carry inventory on your books, there can be tax advantages to disposing or liquidating your unsold inventory. Definitely talk to a tax professional before the end of the year to determine how you want to dispose of your obsolete inventory.

4 Responses to “Let Go of Obsolete Inventory”

  1. TekGems Says:

    This is so true. Obsolete products definitely have an emotional component to them. After getting over that, do you have any thoughts on how to go about moving the inventory out of the warehouse space?

  2. crystalwells-miller Says:

    Hi TekGems
    Good question. The possibilities are endless. You can have an inventory reduction sale, and let the items go for whatever you can get (end of year clearance sale). You can take it to your local auction or have a garage sale. For large inventory quantities, you can find a liquidator. You can donate it to charity. You can even put it in the trash. It does pay, however, to talk to your tax professional as disposal or donation is sometimes better than investing time in trying to sell it.

  3. Vendable » Blog Archive » Holiday Headaches..Excess Inventory and Taxes Says:

    [...] thing to consider is to get rid of your obsolete inventory. Previously, we posted about “Letting Go of Obsolete Inventory”, and this may an opportunity for you to have an inventory reduction sale, or reduce your [...]

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