Why UK businesses are stockpiling inventory (and what to do instead)
Samir Kamnani
·September 16, 2024
Has your ecommerce shop begun stockpiling merchandise? If so, you’re not alone: Recent data from the Government’s Office for National Statistics shows that nearly one in 10 businesses have been ordering large quantities of items for future use.
Stockpiling can deplete cash reserves and reduce available inventory. Yet businesses have a valid number of reasons for stockpiling in the current economy.
In this article, we’ll take a deeper look at the reasons why some businesses are stockpiling merchandise—and strategies that you can take to stop stockpiling and build a healthier approach to inventory management.
Why are businesses stockpiling goods?
Many UK businesses are increasing their inventory stock at a rate that exceeds their current market demand. The last time businesses stockpiled goods in such a manner was during the period before Brexit, when merchants were worried about the impact of new Brexit regulations.
The current stockpiling event may take root in the same sense of anxiety, says Parcelhero’s head of customer research, David Jinks M.I.L.T. He believes that the former Prime Minister Rishi Sunak’s snap general election call on 22 May “could have spooked some companies that were likely anticipating a much later date.”
As a result, he believes that brands may be stockpiling merchandise in anticipation of financial uncertainty, with some worrying about the chances of a market collapse under a new government.
On the flip side, some merchants may be stockpiling goods in optimism around increased consumer demand after the change in government. “A number of companies may have anticipated a rise in consumer confidence following a Labour victory, reasoning, ‘Things can only get better,’” he told Retail Technology Review.
Supply chain issues are another likely cause of stockpiling. In 2021, when post-COVID lockdowns caused global supply chain shortages, retailers like grocer Sahadi’s resorted to stockpiling excess merchandise because they knew that it could take products months to arrive.
In any case, stockpiling excess inventory reflects uncertainty about future sales and demand. However, to build a sustainable brand, merchants must take a more practical approach to stock control.
Managing inventory more efficiently
Stockpiling goods can lead to product waste, especially for items with limited shelf lives. Even for products that can sit on shelves indefinitely, retailers will likely have to liquidate goods at low prices to make room for other products—and the longer you keep excess inventory, the more you’re spending on storage for items that won’t turn over quickly.
Instead of stockpiling excess inventory, try these tips:
Pay attention to historic trends
Before loading up on extra orders of merchandise, look at your past sales patterns. What product types do shoppers buy most frequently, and when? Take a look at supplier trends, too: How long does each supplier take to get stock to you on average?
If you have legitimate reason to suspect supply chain disruptions, it may make sense to order some extra stock as a buffer, or consider alternate stockists who are not impacted by the shortage.
But if that’s not the case, you should be able to set up an automated replenishment system within your inventory management solution. When you’re down to a set level of your available stock, your tool can automatically place a new order based on historical demand, ensuring that you always have just enough inventory to meet anticipated demand.
Use a 3PL for inventory management
By partnering with a 3PL for your inventory storage and fulfilment needs, you’ll be able to more easily track your inventory, restock goods efficiently, and fulfil orders quickly. If you sell products internationally, choosing a 3PL that has locations in each country you service will ensure that your stock and orders are not held up by customs or logistics issues getting from one country to another. As a result, you’ll be able to give your customers a streamlined experience with faster fulfilment.
Take control of your reverse ecommerce logistics process
All too often, merchants end up scrapping perfectly good returned products because they don’t have a solid system in place for managing their reverse logistics—and depending on the industry, this can amount to as much as 30% of your inventory.
With an effective reverse logistics strategy, you’ll be able to build a transparent reverse supply chain that helps you restock inventory to meet consumer demand, and protect your profit margins.
Using an automated UK returns management solution like Loop, you can:
- Set conditions around your return policiesOne size return policy doesn’t fit all. You should have a different process for warranty returns v. returns of like-new merchandise that can be resold. Loop’s ecommerce workflows encourage shoppers to share the reason why they’re returning a product, so that you can select the most logical and cost-efficient return path. For instance, while a warranty return due to a defect might be sent to a recycling plant, a like-new item can be returned to your warehouse, where it can be inspected and stocked for resale.
- Get more visibility around returned itemsOur solution integrates with 3 Boxes, an application that provides data integrations from your warehouse and 3PLs to your inventory management system. That means you’ll get access to data around each return’s condition and disposition as soon as it is inspected, making it easier to decide whether to restock or dispose of the item.
- Optimise for product exchangesRetain revenue and improve your customer retention rates with Loop’s Shop Now & Later feature, which encourages customers to choose another item for exchange rather than requesting a refund. The seamless exchange process helps you retain revenue from 50% of returns, and boosts customer loyalty with a great returns experience.
- Understand trends in product performanceLearn more about which items to stock up on and which ones to eliminate from inventory by tracking your product return trends. Loop’s Insights feature provides granular data around not only which products are being returned, but also why—empowering you to make data-driven decisions around restocking and product marketing to reduce your future return rate and protect profit margins.
Build a logical approach to inventory management with the right practises and technology at hand, and say goodbye to stockpiling.
Learn how Loop can help you build a more efficient approach to inventory management. Book a demo.
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