The exit cost of aged inventory
THE RUB
“You’d be surprised by how many flowers we throw away.” My daughter works at a floral shop, and I love talking retail with anyone, but especially my kids.
She went on to explain that they don’t wait for the flowers to wilt. They will get rid of them when they only have a few days left. It’s a bad customer experience to sell beautiful flowers that die soon at home.
When my wife and I went to the shop to see our daughter at work, we noticed how expensive all the bouquets were. Gina is an avid gardener, and we often have “free” fresh flowers on our table.
I justified the retail prices, “You’re not just paying for these flowers, you’re also paying for all the flowers that didn’t sell.”
THE FRAMEWORK
My dad worked his entire career in the grocery business. Same issue. Produce, baked goods, dairy, meats all have sell by dates. If they don’t sell they get tossed.
When I worked in the department store business, if boot season arrived and we still had too many sandals, the aged inventory often left through the back door. We’d either return it to the vendor, or sell it to a jobber or discount store.
Not true at Payless ShoeSource. There we managed to push aged inventory out the front door. We just kept marking the price down until someone bought it.
When I first started working in jewelry two decades ago, I was amazed at how much aged inventory we just kept in the case. Over the years we’ve gotten better about getting it out of the store via both the front and back doors.
No matter the exit strategy — front door, back door, dumpster — all come at a cost, and that cost is reflected in the retail price.
THE PRACTICE
Our microwave conked out. It’s 21 years old. When I ordered a new one from Home Depot, there wasn’t a pick up in store option. I could only get it delivered, and I had to pay $39.99 for that delivery. I’ve got to get rid of the old one.
I could pay a professional to take care of it for me (back door). Home Depot will haul away the old appliance for $50. I laughed when I saw the $40 option to “Move old appliance to another room.”
I could mark it down for FREE and run an ad on Facebook Marketplace for a scraper to pick it up (front door). The cost would be having to answer all those annoying inquiries.
I’ll likely take advantage of our city’s bulky pick item pick up program (dumpster). Only costs is to fill out the online form and carry it to the curb.
Going through my project list at work, there are a handful of projects that aren’t currently moving forward. I identified one I can turnover to another department. I found another I can lessen the scope with cheaper deliverable (don’t worry, I’ll call it a minimally viable option). And, of course, I found a few we can junk entirely.
Gina and I came home from visiting our daughter’s work with a cute honeybee decorated planter. It had just been marked down to clearance for $5.