Industry Overstock Trends: Experts Speak on Sales Enablement in Destocking

Overstocking is a major and growing problem in retail. Springing from supply chain issues during the pandemic, and now carrying on as consumers increase their caution, overstock issues are real and must be addressed directly. Learning and development tools, sales gamification software, and other solutions can help with this. Before we get to tech, it’s important to think about strategy around destocking, as well as mapping out overstock snafus.

At Rallyware, we hosted a live conversation between Till Kaletsch of IS:Y, a major bike brand, and Robert Diehl, General Manager at Wolfi’s Bike Shop, the biggest bike store group in the MENA regions. Warehouses worldwide continue to face stagnant inventory, resulting in increased prices for customers, which depresses demand. This vicious cycle can be stopped but it takes real strategizing. (The conversation can be viewed online here.) In this article, we’ll summarize some of their insights on destocking, learning and development tools, brand-retailer collaboration, and more.

Currently, 53% of surveyed stores say there will be “dangerous ramifications” if they cannot destock at scale. That’s a problem.

Retailers need to know what to do when a product isn’t selling, and the problem is that right now, they’re going along to get along. A mere 36% of supply chain managers think inventories will return to normal levels by 2024. Take heed. It’s time to rethink destocking and overstocking.

What Is Overstocking?

Overstocking in retail refers to the situation in which a retailer has accumulated an excessive amount of inventory or goods beyond what is necessary to meet customer demand, likeNike’s inventory did in 2022. According to CNN, Nike’s inventory grew 65%. Such excess inventory can be problematic for several reasons:

• 1. Increased Holding Costs: Retailers must store and manage inventory, and excess stock increases storage costs, such as warehousing fees, utilities, and insurance. This ties up capital that could be used elsewhere in the business.
• 2. Obsolescence: Products can become obsolete or outdated if they are not sold in a timely manner. This is especially true in industries with rapidly changing trends or technology.
• 3. Reduced Cash Flow: Money that is tied up in excess inventory could be used for other business purposes, such as investments, paying down debt, or expanding operations.
• 4. Increased Risk of Shrinkage: The longer inventory sits on the shelves, the higher the risk of theft, damage, or spoilage, which can result in financial losses.
• 5. Inefficiency: Managing and organizing excess inventory can be time-consuming and require additional labor and resources.
• 6. Lost Opportunities: Overstocking can prevent retailers from investing in new products or opportunities that might be more profitable.
• 7. Markdowns and Discounts: To clear out excess inventory, retailers often have to resort to markdowns, discounts, or promotions, which can erode profit margins.

To avoid overstocking, retailers use inventory management techniques such as demand forecasting, just-in-time inventory systems, and regular inventory audits. These strategies, along with learning and development tools and Customer Relationship Management software, help ensure that a retailer maintains an optimal level of inventory that matches customer demand, reduces carrying costs, and minimizes the risks associated with excess stock.

IS:Y and Wolfi’s Bike Shop: Overstocking, Learning and Development Tools, Product Demand, and More

As mentioned, Robert Diehl works for Wolfi’s, a retail import-export company and retailer that has been in the UAE since 2002. Till Kaletsch works for the bike manufacturer IS:Y, producing 20-inch bikes with small wheels, called compact bikes. “There’s nobody who isn’t able to drive our bikes,” Till says.

Along with Simon Turner, Chief Strategy Officer of Rallyware, Robert and Till theorized that overstock problems started because too much ordered and demand was too high in certain areas and tempered following the pandemic.

Robert commented that retailers can’t simply put their heads in the sand like ostriches. They must identify the issues, know their market, spend time on the floor, hear what people say, speak to their teams, and help work through things together. “We’re lucky we’re not a clothing manufacturer,” he said, “where clothing goes out of style. We cater from the child segment to adults, from low end to high end.” It’s about keeping the team informed, being transparent within the company, and resolving whatever requires resolving. “There’s enough information out there about what caused overstock that you should be informed. Everybody has different issues in one shape or form.”

Till said that “there are overstock issues. Three or four years ago, everything started with Coronavirus. Now, the demand for products is not that large anymore due to the war in Ukraine and the high power costs for people. Therefore, we know there are overstock issues, from a brand perspective we can say this issue isn’t fully our issue yet, but it will be. The retailers won’t order new stock if their stock is so high. We are trying to communicate with retailers, via coaching and learning and development tools like Myagi by Rallyware to help them sell the products.” Many retailers are anxious, he remarked, and IS:Y is doing their best to collaborate and help them sell the merchandise they have.

How Will Overstock Play Out in the Industry?

For their part, IS:Y is optimistic that the overstock issue will be solved in the next year, with the help of learning and development tools, retailer-brand collaboration, and rising consumer demand. “Who knows what will happen, though, or how prices will increase. But we are optimistic that in the next year the level of stock will be much better,” he said.

Robert said that some categories are more affected than others. For instance, consumables will not taper as much in demand. “The health of competition will be an important factor. Price cutting might come into play. If you stock inventory for too long, prices go up because it costs money. Being optimistic is important but working together with brands or retailers is really important, in order to understand what’s happening. A lot of people don’t know what a ten-hour day feels like. You have to take a step back and look at how to support people with learning and development tools and brand advocate creation. How can you support a retailer? As a brand you have to ask yourself that question, even though you aren’t formally working together.” 

Robert mentioned that he speaks often to his suppliers to get a sense of what’s happening with them. “I’ve got friends in manufacturing and so on. You can feel people are nervous. As long as they’re optimistic and trusting their own abilities, there’s a reason to be optimistic and get ahead of it.” 

Actionable Information: Watch the Full Webinar

To get more information on the initiatives Robert and Till are using to propel sales and destock, watch the full webinar.

Then request your demo of Rallyware to see how this all-in-one, AI-guided platform for frontline enablement helps retailers destock at scale.