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Where crowded markets are concerned (such as our MSME sectors), dead inventory is very common
Where crowded markets are concerned (such as our small business sector), deadstock is very common. Deadstock, or dead inventory, is the term used to refer to items that have not been sold and have been sitting in a company’s inventory for a long time. A substantial portion of SME capital — amounting to hundreds of billions — finds itself immobilized in deadstock. This scenario primarily arises when an excessive number of businesses attempt to sell identical products to homogeneous markets.
Your business’ main loss caused by dead stock is the lost potential for income. For example, if Mama Jimmy General Store cannot sell 20 units of Shoes, each purchased at KES 1,000 and retailing at KES 1,200 per unit, the business theoretically will lose KES 24,000 in anticipated revenue. The losses are magnified if Mama Jimmy took an M-Shwari loan at 9% interest to procure all 20 units (or even just a fraction of it).
Beware not to overlook the overhead costs incurred in storing these unsold goods. Carrying costs are the costs a company has to pay for holding inventory over time. This can be as much as 20–30 percent of the company’s reserves at any point. Where SMEs are concerned, it’s very hard to determine how much of these costs are caused by deadstock, which explains why there is limited data pertaining to small business deadstock in the entire region.
Each additional day an item remains unsold increases the costs of keeping it, making dead stock the worst for carrying costs. To simplify, imagine you have 50 cans of peanut butter that you need to sell. If the 50 cans don’t sell immediately, you’d have to pay for a space to keep them, possibly electric refrigeration to keep them fresh, and maybe even insurance in case something happens. All these costs contribute to carrying costs. The longer the cans stay unsold, the more money you’ll have to spend keeping them, and that’s why dead stock is a nightmare.
Essentially, when dead stock hogs up all your storage, you’re basically throwing money away. All the money trapped in your unsold stuff can’t be used for new, more profitable inventory. Now, isn’t that wasteful?
Many small businesses across the globe face the daunting challenge of dealing with deadstock, and it’s particularly severe in Africa. Here, SMEs (Small & Medium-sized Enterprises) serve as the backbone of local economies, constituting up to 90% of all businesses. About 30% of these business’ inventory is deadstock & takes longer than 2 years to sell.
Our 600 Million MSMEs collectively face a $ 300 Billion credit gap, which means the negative impact of surplus, unproductive deadstock is extremely massive.
We’re always finding creative ways to deal with our problems. In our experience as retailers, we tried the strategies below.
A shift in perspective can sometimes yield astounding results. ‘Deadstock’ doesn’t have to be ‘dead’ — it can be seen as a dormant cache of opportunities waiting to be tapped. We are hinting at the concept of Deadstock Redistribution. This involves re-allocating items to other businesses or consumers in a different location or region from the point of origin. The idea is to ensure that businesses in need of new inventory prioritize existing stock rather than new productions or imports.
Deadstock Re-allocation & Redistribution
Can you believe that hundreds of millions of sought-after products scattered across Africa are currently disregarded as deadstock by countless businesses throughout the continent? It would seem almost amusing if it didn’t lead to significant financial loss and hardship.
By reallocating or redistributing, a product deemed to be deadstock by one business could transform into a precious commodity for another. This shift hinges on two key assumptions: firstly, the willingness of the deadstock owner to relinquish their excess stock causing financial loss, and secondly, their accessibility to an expansive, decentralized distribution network that allows for such redistribution to transpire smoothly and effectively.
Why Business Communities
Leveraging the power of local business communities can be instrumental in tackling the deadstock issue. These communities, made up of like-minded entrepreneurs and businesses, can help in the sharing, trading, and redistribution of deadstock. They’re based on familiarity, proximity, and shared history and vision. I’m talking of business chamas & you definitely should be part of one.
In the intensely competitive landscape of small and medium-sized enterprises (SMEs), effective strategies to manage deadstock are essential for survival. The following strategies provide a tactical roadmap for addressing this issue:
Shifting Perspectives: At WymBee, we encourage businesses to view deadstock not as an insurmountable challenge, but as a hidden trove of untapped potential. This paradigm shift is crucial to implementing innovative solutions. WymBee is instrumental in fostering this change in perception by building business communities that inherently create a collaborative culture, which opens up many simple & clear-cut solutions. We enable businesses to tap into this network’s cumulative benefits without requiring any confidential data, fostering a climate that promotes transparent redistribution of deadstock. Highlighting the iterative value of this community-level systematic approach, businesses can appreciate the significant losses linked to maintaining deadstock. They are thus motivated to liquidate latent inventory, transforming it from a burden into potential capital. This change in perspective is crucial in turning the tide against deadstock by leveraging it as an opportunity for growth and profit.
Strategic Revitalization: Implement strategies aimed at revitalizing deadstock. Explore a mix of solutions from inventory management to sales and marketing initiatives to adapt to the unique challenges of your business.
Community Collaboration: Utilize local business communities as a resource. Exchange ideas, share best practices, redistribute deadstock, and work together to create a healthier business ecosystem.
Persistence and Resilience: This journey requires determination and a resilient spirit; the obstacles might be daunting, but the reward is worth the effort.
Leverage Technical Advancements and Collective Data Sharing: By adopting advanced technology offered by WymBee’s Point of Sale system, SMEs can bolster their inventory management. We empower businesses by offering aggregated market data from different businesses, leading to insightful understanding of market dynamics. This shared ecosystem of non-consequential data leads to better demand forecasting, and knowledge of what sells and doesn’t, ultimately benefiting all businesses involved. With this collaborative and transparent approach, businesses can turn the tables on deadstock management, contributing to their success, and the well-being of the entire business ecosystem. After all, mutual data sharing is a key to addressing deadstock challenges and boosting the bottom line.
By adhering to these strategies, SMEs can transform their perceived
'deadstock crisis' into opportunities for growth and success.
These proposed solutions urge SMEs to re-evaluate their current practices,
leverage modern technologies, and promote collaboration—thereby paving
their path from adversity to triumph.
In conclusion, while dealing with deadstock may seem like an uphill battle for SMEs, adopting a strategic and resourceful approach can effectively turn deadstock into an opportunity, rather than a liability. By re-evaluating, redistributing, and maximizing the potential of these seemingly ‘dead’ products, businesses can breathe new life into their stagnant stock and turn the tables on the deadstock problem.
Now, isn’t that a survival tip worth sharing?
