What Manufacturers Need to Know About Overstock Liquidation

As a manufacturer, supplier or distributor, you’ve likely spent the last several months trying to clear your warehouse shelves of excess inventory. And you’ve also likely found that the task isn’t as simple as blasting out an overstock to your retail partners. Enter: The deep discount list.   

While brands have been more than eager to liquidate inventory alongside 2023’s softened demand, there came an added challenge: getting participation from retail partners. With reduced staff, slower sales and an overstock of overstock, all retailers are feeling especially stretched, and liquidating a supplier’s inventory may not be at the top of their list.

But that doesn’t mean it’s not possible. We’ll provide some insights and approaches for manufacturers to effectively navigate their liquidation strategies with their retail partners.

The Liquidation Opportunity: Deep Discounts for Discerning Consumers

Macroeconomic factors have made consumers especially price sensitive. That means deep discounts have a significant appeal right now for reaching shoppers where they’re at.

Even if you’ve already made progress in clearing out inventory in the first half of the year, leveraging deep discounting can serve as an opportunity to enhance brand awareness through promotional campaigns. By capitalizing on the current appetite for heavily discounted goods, you can reach new customers who may have otherwise overlooked your brand—and that can lead them to purchase full-price items down the line. 

The Challenges: Overstock is Everywhere, Retailers are Stretched Thin

While liquidation has a clear benefit to manufacturers, it’s important to acknowledge the challenges faced by your retail partners that could lead them to decline participation or ignore your offer altogether.

• Overstock is everywhere. Given the number of manufacturers who are overstocked and the economic environment, sending a retailer a deep-discount list isn’t a unique offering right now. The volume of clearance opportunities in a buyer’s inbox is likely overwhelming at best.
• Retailers already have scheduled promotions in place that they’re working to execute. Adding an additional deep discount to that requires more time and effort for them.
• Retailers are stretched. We’ve all seen the reduction-in-force announcements from retailers. Their teams are having to ruthlessly prioritize, and since participating in a clearance offer from a partner is entirely optional, it’s not likely to be one of them.
• Being an outlet for clearance may not align with a retailer’s overall strategy, particularly for products that haven’t sold well previously.
• While today’s shoppers are price sensitive, they’re also inundated with discount offers everywhere they look, and that can diminish the impact of your promotion.

How to Create a Successful Deep Discount Offer for Retailers

This doesn't mean you should give up on getting your deep discount offer in front of retailers. While the challenges are real, so is the opportunity. Here are some strategies manufacturers can use to increase participation:

1. Provide ample notice: Be mindful that securing discounted product placement will take time. Notify retailers of your offer at least 30 days in advance to allow them to plan accordingly.
   
   
2. Be deliberate about pricing: If the primary goal is to move products quickly, be aggressive with your discounts from the beginning. Offering the deepest possible discount upfront, rather than incremental reductions over time, can incentivize retailers to take action. However, consider any existing everyday pricing agreements with retailers to avoid conflicts.
   
   
3. Keep the execution simple: Make it easy for retailers to execute your deep discount offer. Consider offering a blanket percentage off the entire range of products, as this simplifies messaging and implementation. Cumbersome processes may discourage retailers from engaging with the offer.
   
   
4. Streamline communication: Double-check your product list to ensure accuracy and avoid the need for corrections or additions that could complicate the process. By providing a comprehensive and error-free list, you increase the likelihood of retailers acknowledging and acting upon your offer.

As with any part of your ecommerce strategy, setting up a successful deep-discount offer requires thoughtful execution. While there are challenges, the opportunities for reaching price-conscious consumers remain significant.

By giving retailers ample notice, being deliberate with pricing, and simplifying implementation, brands can increase the likelihood of a successful collaboration and use deep discounting as a tool to not only move excess inventory but to expand your reach to a broader customer base.

Get the latest ecommerce insights for the home furnishings industry with our monthly newsletter: