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When inventory is declared dead, retailers can find themselves in a spooky situation. Without some kind of afterlife planned for these products, whether in a resale market or a landfill, they become what some in the industry call a “zombie SKU."
“It’s inventory that’s not going anywhere,” Kate Klemmer Terry, chief commerce officer at third-party logistics provider Outerspace, told Retail Brew. “It’s not selling for a variety of reasons. It never sold in the first place, or it came back and it’s now in need of refurbishing, or it’s passed its life cycle.”
She said Outerspace, which specializes in serving apparel, beauty, and home goods brands, is like a lot of 3PLs in that it doesn’t want to waste valuable space on products that are not moving, because it would rather get paid for outbound shipment than storage. Where it hopes to differentiate itself is in working directly with retailers to bring that inventory back from the dead.
The company is doing this in several ways. One is to avoid the problem of dead stock in the first place by helping brands track and analyze their inventory flow or velocity, so that allocators have a better sense of demand and distribution in real-time.
Once a SKU becomes a zombie, however, Outerspace offers two basic options. The first, and often preferred option, is to facilitate the resale of the inventory to a down-market wholesaler such as Marshalls or TJMaxx. For more evergreen products such as a black suitcase, she added, Outerspace will try to offer an affordable storage option until next season, though she described this as a “worse-case scenario.”
If resale isn’t economically feasible or if a brand simply doesn’t want their higher-end product popping up at a discounter, the other option is to recycle zombie SKUs. In the case of damaged or worn returned products, it also refurbishes products so they are ready for resale.
Terry said prior to recent supply chain disruptions, a number of the brands Outerspace serves were keeping just three months of inventory. Now it’s closer to six months. “If I’m sitting on six months of supply, that’s a lot of risk if something is not selling the way it’s supposed to sell”