How to Turn Dead Inventory Into Cash Through a Warehouse Sale

Obsolete, dead inventory haunts most small businesses, especially growing companies in need of cash. Old product lines, failed concepts, or just too much of what used to be good inventory can weigh on your balance sheet and drag down investment in future opportunities. You may be sick of pitching your dead inventory to customers and about ready to send it all to the dump. However, one great way to recover some cash is to turn your warehouse into a temporary store and host a warehouse sale. A cowboy knows that with the right price, an old cow can still put some much-needed cash in his pocket.

In order to run a successful warehouse sale, you’ll need to do three things: effectively advertise, thoroughly prepare, and actively manage the sale.

Effectively Advertise

Opening up your warehouse to the public creates a new shopping destination with which consumers are unfamiliar. Even if you price everything for pennies on the dollar, you won’t sell much at all if no one knows about the sale. Here are some ways to get the word out about your sale:

  • Fliers – placed on cars and passed out to friends. This is the most cost-effective way to begin advertising. Focus on parking lots of stores that relate to your products. Also, obey all laws and respect businesses’ rules.
  • Craigslist – post some of the higher ticket items you’d like to sell to generate interest bring people to you.
  • Newspapers and Classifieds – depending on your target audience, this is still a great way to reach people effectively.
  • Facebook – even if you don’t have a company Facebook page, encouraging employees to take some time at work to share with all their friends is effective at generating a crowd.
  • Neighboring Businesses – visit your neighbors, vendors, and customers and let them know about the sale. Many will drop by on lunch to see what you’re offering.
  • Signs – in conjunction with local businesses and neighbors, posting signs and arrows all around will help generate curiosity and customers. Just as garage sale signs lead people to the destination, you’ll want to place many signs to lead people to your warehouse, which may be hard to find otherwise. Billboards are an added bonus if budget permits.
  • Email Blasts – if you have an email list, this is the perfect time to use it. Offering incentives through the blast can help build loyalty to the company even after the sale. If you don’t have an email list, use the warehouse sale as an opportunity to create one.
  • Word of Mouth – kindly ask people who come and purchase from you to tell others about the sale. This can go a long way to bring in more customers.
  • Radio – if you have the budget, usually several thousand for an effective campaign, radio is a great way to bring in scores of people. Start advertising around 10 days before and increase the ads’ frequency leading up to the event.
  • Television – although commercials can be expensive, local news stations may have several options to feature the sale for less.

A successful marketing campaign for a warehouse sale, especially a first time sale, requires 10 to 20% of how much you would like to sell. If you only want $10,000, then a budget of $1500 will suffice. If you’d like to unload a lot more, then plan to advertise more.

Thoroughly Prepare

Chances are your warehouse was not designed for consumer shopping. Converting your warehouse into a store will help consumers feel more comfortable and spend more. Preparation requires two parts: (1) safety and traffic flow, and (2) pricing and merchandising.

Safety and Traffic Flow

Some of your customers will probably bring children with them. This is paramount to remember as you make your plans for the sale because a typical warehouse has many dangers to six-year-old boys running around. To both protect your shoppers and manage inventory that will not be included in the sale, you will need to block off areas of your warehouse where you don’t want everything touched. Some orange safety fence from Uline works great. You’ll also want to post signs to answer common questions you’ll hear, “Do you have restrooms?”, “Do you accept returns?”, “Do you take credit cards?”, or “Where do I check out?” IKEA does a great job with signage in answering their customers’ questions, so use IKEA as an example.

Pricing and Merchandising

Extremely low pricing is the key to moving your dead inventory. Remember, no matter how much you paid for it, your products are only worth what consumer will pay for them. Discounting 75% or more from what the product retails at is a good place to start, but you will likely need to reduce some products much more. Let the cliche of “Stack it Deep, Sell it Cheap” guide your pricing decisions. Remember, warehouse sales aren’t about margin; warehouse sales are about recovering cash from dead inventory. If for some reason they do generate margin, you may want to consider opening a retail channel.

Whether black marker on cardboard or nicely printed graphics, large signs work great at informing customers of your amazing prices. Usually showing several prices helps: Retail Price $79.99, Sale Price $29.99, Warehouse Sale Price $8. This technique helps the customers know what a great price they are getting.

Work with your accounting department to figure out how to include sales tax in your prices and sell everything at round numbers ($1 or $3 rather than $0.99 or $2.97). Although 99 cents is below a psychological barrier of one dollar, never dealing with coins at the checkout line will help people get through much quicker than counting out change.

For loose miscellaneous items, or anything you just have tons of, let people fill a bag for ten or twenty dollars. This creates excitement and sells products that you wouldn’t sell much of individually.

Although many people come to a warehouse sale expecting to dig through boxes, bins, and pallet, the easier you make it for customers to get to products, the more you’ll be able to move. Stacking six pallets, placing a slip-sheet on top, and then laying out items is a great way to bring merchandise up to where consumers can easily reach it. Additionally, wide aisles reduce congestion – especially for mothers with strollers or customers loading up on what you’re selling.

Actively Manage

You’ve gotten the word out about your warehouse sale and you know hundreds are planning to come. You’ve also spent hours with your team preparing everything with beautiful signage and low pricing. So far, you’ve done a fantastic job, but as the first customers walk into your warehouse, the bull ride has just begun.

The key to moving the most inventory – and generating the most cash – is having someone who can make pricing decisions present during the entire sale making decisions. You should have a big black marker in your pocket, and you should use it often. Know which products you absolutely want to disappear and reduce the price until they start moving. If five dollars is two high, try three dollars – or buy one at five, get one free. Be strategic in your pricing though, you’ll get more cash from selling two items for five dollars than each individual item for three.

Another reason to be out on the floor is to negotiate. “Interested in that old water cooler? – make me an offer,” – and accept almost anything. Talk with customers and answer their questions. With such low pricing, selling is very easy, and usually just explaining the price will make the sale.

Warehouse sales are also great opportunities for your product development team to talk directly with customers. Consider putting a few future products out at highly discounted prices to see which ones sell. Talk with people and learn what you can do to avoid dumping future inventory. In addition, the presence of people who can explain all the features and benefits of your product, and even give personal endorsements, helps convince many people to buy more.

At the end of the sale, invite liquidation partners to take everything that’s left over. This will not only help you save payroll dollars on cleanup, but also completely clear everything out so you can move forward. Selling at a loss hurts, but it does get cash in your pocket. A business can survive a net income loss, but a business easily drowns in a cash flow dam – which a warehouse sale can break through.

Source by Alex T Fuller