At what price should I clear slow-moving stock?

You have 80 units that nobody wants at the current price. They are taking up space and cash. A clearance sale feels right, but how low can you go before it hurts?

Start with what you paid

Say each unit cost you Rs 150, and it is listed at Rs 400. You have 80 units left.

The total cost of that stock is 80 times Rs 150, which is Rs 12,000. That Rs 12,000 is already spent. The question now is how to get it back, with as much extra as possible.

A first look at a clearance price

Suppose you reduce the price to Rs 200 and clear all 80 units. Revenue is 80 times Rs 200, which is Rs 16,000. Against Rs 12,000 cost, that looks like Rs 4,000 profit.

Not so fast. This is the profit before shipping and packing. Each order still has to be packed and sent.

Add the costs that come with each sale

Say packing and shipping come to Rs 60 for every unit sold. Over 80 units, that is Rs 4,800.

Rs 4,000 minus Rs 4,800 leaves a loss of Rs 800. The clearance at Rs 200 loses money after all, even though the price is above the Rs 150 cost.

So the lowest price that avoids a loss per unit is cost plus shipping and packing, Rs 150 plus Rs 60, which is Rs 210. Below that, every sale makes your problem bigger, not smaller.

If shipping is paid by the customer, your own per-unit cost may be only the packing. Use your own figures.

Why sometimes you sell below break-even anyway

Selling below Rs 210 is not always wrong. Consider what the alternative costs. If these units will sit for six months and carry a holding cost, the cash locked up and the space they take can exceed the loss on each sale. If the stock is seasonal and will be worthless after a festival, a small loss now beats a total loss later. The post on the monthly cost of keeping stock on the shelf helps you put a number on this.

Make it a conscious decision. Write down: I am willing to lose up to Rs X on this lot to free Rs Y of cash and some shelf space.

Ways to clear without cutting deep

• Bundle the slow item with a fast seller so the customer takes both at a combined price.
• Use it as a gift on orders above a certain value. You pay only the cost, and the gift lifts the cart size.
• Sell in lots to a reseller or at a stall. See bulk orders and lot pricing.
• Run a short, honest sale with a clear end date. Do not announce a permanent discount, or customers will wait for it next time.
• Rewrite the listing and reshoot the photo. Sometimes the product is fine and the page is the problem.

Decide in four steps

1. Add up cost, packing and shipping per unit. That is your floor price.
2. Estimate what the stock will cost to keep for the next few months.
3. Pick a price at or slightly above the floor and try it for a limited time.
4. If it does not move, go to bundles or lots, and stop reordering the item.

For how to set the original price in the first place, see price from a target margin. For reducing the risk of piles in future, read the case for a smaller catalogue.