Need Liquidity? Start with Your Excess Stock
Many retailers are sitting on years of unsold stock that could be turned into cash. Our experts explain why the first loss is often the best.
We recently helped a fashion retailer sell off its stock. Some of it was tricky to find: rail upon rail of garments in the corner of a warehouse. The packaging was grimy, but the clothes were in perfect condition. They were also more than a decade out of fashion.
This scene is far from unusual. Our Retail team regularly uncovers old stock held at full book value, or written down slightly, and then forgotten. In the most extreme cases, it is 10 to 15 years old.
Below, we explore why this happens and why it matters. But first, a challenge: what is the oldest stock in your warehouse, and what is it costing your business?
The Costs That Don’t Appear on the Price Tag
While a retailer sits on excess stock, storage and logistics must be paid whether the warehouse is owned or rented, and it loses value each season. Cash tied up in old stock cannot buy the products customers want now. Stores run short of the right lines while warehouses fill with the wrong ones.
Would You Put Cash into Storage?
Viewing excess stock as a profit and loss problem misses the cash flow opportunity. You may have paid 100 for the stock originally, but selling it for 50 brings money into the business today. There is a paper loss, but the cash can be reinvested into strengthening the business. That is why, when a client asks us about liquidity, our first question is often: “What’s in your warehouse?”
Why Are so Many Retailers Stuck with Old Stock?
In our experience, three things keep old stock on the books.
1. Unwillingness to Take an Accounting Hit
Part of the problem lies in accounts. Suppose a retailer holds stock with a book value of 100 that will now only sell for 50. Selling it means writing it down, a loss of 50 on the profit and loss account. A business under pressure would rather not add that to a difficult year, and a business doing well would rather not spoil a good one. Senior teams are prone to dismiss the problem as “good stock that will sell once the right promotion comes along,” yet it rarely does, and each year a little more joins it.
2. The Blame Game
Many retailers treat inventory as an operational matter for the warehouse and logistics teams, rather than a commercial one. Buying, merchandising and store teams each look after their own numbers, so when stock fails to sell, nobody owns the problem and each team blames another.
Excess stock isn’t always a selling problem. It often starts with how buyers are rewarded. Many are judged on their “buy-in margin,” the gap between what they pay for stock and the planned full price. They may also agree volume-related rebates, which make a larger order look commercially attractive.
If the product then sells fewer units than planned, or only sells at a heavy discount, the “sell margin” (what the business actually makes) falls well below the buy-in margin. The business is left with surplus stock, the stores get the blame, and the buyer still gets credit for the deal.
The same happens when retailers let suppliers decide what fills the shelf. Ask a supplier which assortment is really needed and, unsurprisingly, they will say, “all of it.” In the end, sometimes perhaps only 20% will sell.
Retailers that avoid this start with the customer. They buy what they can sell at a healthy margin, and evaluate buyers against realised margin and sell-through rather than negotiated terms alone. They also work with suppliers against a shared set of commercial KPIs, like sell-through, margin, stock turn and returns, to make better range and volume decisions.
3. Rigid Supply Chains
After the COVID-19 pandemic, many companies stocked up to protect availability, and much of that stock went unsold. Even the best forecasting tools cannot predict demand reliably, so shorter lead times, alternative suppliers and smaller first orders on riskier lines help a business follow real demand.
Leading retailers increasingly complement traditional forecasts with AI-enabled demand sensing and scenario planning, combining internal data with external signals. This gives them earlier visibility and more time to adjust buying, pricing and promotional decisions before slow-moving stock becomes a structural problem.
The strongest tailor the range, price and promotional approach for each store or group of stores, based not only on size, but on the function of the store, location and local demand patterns. For example, a store near tourist sites needs a different mix to a store in a business district. They decide deliberately how much stock to push out to stores and how much to hold back for reorders. Finally, they review their stock regularly, sometimes with an outside view, to spot underperforming product lines early.
How to Turn Old Stock Back into Cash
There is an old retail saying that the first loss is the best loss. The longer a retailer sits on stock, the less it is worth and the bigger the pile grows, until no single channel can clear it.
So, which channel should you use? The choice comes down to five factors: expected cash recovery (how much of the stock’s value comes back), speed and volume capacity (how much stock the channel can sell and how quickly), brand exposure, operational costs and restrictions on where the merchandise can be resold.
These two examples demonstrate the balancing act:
Store Closures: Higher Recoverability and Capacity
Most large chains naturally close a few stores each year as leases expire, as well as for strategic reasons. Store closures can be used to clear stock from across the network. Customers are already familiar with the brand and location, there are no set-up costs and there is an opportunity to create “last chance to buy” urgency.
In-store Clearance and Outlets: Medium Recoverability and Capacity
Clearing stock through existing stores brings ready-made footfall and brand recognition, though it risks drawing sales away from full-price lines. Concern about brand damage is understandable, but customers accept a well-run clearance event every year or two.
Fashion businesses, which tend to preserve full-price space for new collections, can also use outlet stores, off-price retailers and online marketplaces, as well as their own website. The success of TK Maxx shows the appetite for good brands at lower prices.
Turning Stock Back Into a Strategic Asset
Excess stock is easy to ignore and selling it means taking a loss on paper. But it is cash the business has already spent. A retailer that takes the first loss early, chooses the right channel to clear it, and buys more carefully in future can put that money back to work where customers are spending now. It has liquidity to respond, instead of cash on hangers in a dusty warehouse.
For a full inventory health check of your retail business, please contact us.