Australian retailers are overstocked right now and holding on average $248,685 in additional product or ingredients as they’re yet to course-correct from the supply and transport issues caused by Covid delays, according to research from inventory management software provider, Unleashed.
“Whether it’s a furniture maker or a clothing line, you can’t blame Australian retail businesses for taking on extra stock while supply chains were lagging behind. Thankfully, we are now in a place where we can safely define what ‘too much’ stock is, and where businesses can afford to free up cash-flow as economic conditions tighten,” Unleashed head of product, Jarrod Adam said.
The $248,685 figure from the report represents an average ‘overstock position’ for clothing, footwear and accessory companies in Australia: the difference in value between ideal stock levels for each product, versus actuals. Ideal levels were found using industry-standard formulas that consider both the rate of sale and delivery lead times.
For leading Australian photographic lighting retailer, Hypop, 2023 has meant moving away from the ‘Just in Case’ model used during the Covid years, and back into the ‘just in time’ model that the businesses had previously worked under.
“During the pandemic our stock literally doubled as we tried to manage all of the delays from equipment purchased around the world — and sometimes that meant holding too much of the wrong thing,” Hypop owner, Rob Ranoa said.
“This year we decided to start cutting down this excess inventory in order to move to a more stable operating model. That’s meant some sales and promotions, which can hurt in the short term, but leaves us in a far better position in the long run.”
Furniture, fixtures, home furnishing($296,524)and clothing, footwear, accessories($248,685) had the highest overstock position of Australian retail SMEs, while Personal Care ($115,165) was the lowest overall.
BDO senior manager, Josh Ambler said that understanding how badly a business is overstocked can mean extra cash in pocket with clever inventory control, but these benefits won’t be felt for all.
“Some businesses will have a far easier time moving off of excess stock than others. For an FMCG, some relatively simple adjustments in re-supply orders can quickly mean more cash in the back pocket,” he said.
“For businesses with a slow cash flow cycle, ordering will take place at set times, or in higher volume to secure a good price. These companies may instead need to consider how they can move off excess stock before it comes obsolete.”