Dead Stock (2024)

Offloading dead stock is essential to maintaining healthy profit margins, but ecommerce brands are often challenged withinventory optimizationas they grow their business. It’s often due to a lack ofinventory managementsystems and processes that cause dead stock to accumulate over time.

  • What causes dead stock?
  • How to get rid of it and maintain profits?
  • How to calculate the cost of dead stock
  • And more importantly, how to avoid dead stock inventory with proper inventory management?

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What is dead stock?

Dead stock isecommerce inventory, usually stored in a warehouse, that is no longer sellable and will likely never sell in the future, oftentimes because it’s expired, obsolete, low quality, or out of season. Dead stock only refersto inventory that has never been sold, which excludes returns.

What causes dead stock?

To avoid dead stock, it’s important to understand what causes it to accumulate in the first place. By figuring out what’s contributing to dead stock pile-ups, you’ll be better equipped to move it out and prevent it from piling up in the future. Here are some of the most common causes of dead stock.


Ordering excess inventory without understanding how much you’ll sell in a given period is the quickest way to accumulate dead stock and increasecarrying costs.

It can be a challenge to understand just how muchstockyou need to fulfill future orders. There is a fine line in having excess stock, but by taking the time to implement aninventory controlsystem and tracking importantdistribution metrics, such asinventory turnover ratio, you can make better decisions oninventory restocking, on what is a good order quantity number before making a purchase, and when to purchase it.

Another way retail businesses can avoid over-ordering is by buying less stock more often.For instance, you can reduce the risk of accumulating dead stock by purchasing inventory to meet a month’s demand, rather than the whole year’s.

Inaccurate demand forecasting

Miscalculating future demand happens when the right data isn’t being tracked. This causes ecommerce businesses to be misinformed on what products are in demand and how quickly they will sell. By pulling accurate historical order data, you can betterforecast demandinstead of buying slow-moving products that consume valuable warehouse space and your bottom line. With accurate demand forecasting, you can make informed decisions on how much inventory to purchase to fulfill future orders.

Poor sales or marketing efforts

If you’re selling ahigh-demand product, yet inventory isn’t moving out as quickly as you’d hope, there’s a high chance that it could be a lack of marketing and sales efforts; this is a big opportunity cost. Poor communication between you and your marketing and sales team on how to sell products, product messaging that misses the mark, poor web experience, and low customer awareness can all lead to high-quality, high-demand products to be left unsold.

Lack of quality control = defective products

Even if inventory is new, it doesn’t mean it’s of high quality. Defective products are usually returned to the seller, and cannot be resold to another consumer, meaning they’ll sit on shelves forever unless you find a different way to move them out of your warehouse.


A business can run out of a particular SKU in its inventory before all orders for that item have been fulfilled. That item is then put on backorder, meaning it will be delivered to the customers that ordered it once it is back in stock.

Once you realize you have backorders to fill, it can be tempting to panic and order more of the item than you actually need to resolve the issue. After the backorders are filled, you’ll be left with excess inventory that could be difficult to sell (or a customer gets fed up after having to wait for so long).

Order cancellations

Canceled orders aren’t just lost revenue — they also prevent you from moving products through your supply chain and out the door. Regardless of why a customer cancels their order, your business will be left holding any inventory that you fail to sell. This can easily lead to dead stock, especially if the canceled order contained perishable or out-of-season items.

Long lead times

Trends change quickly, so it can be difficult to ensure you have what customers want, when they want it. If lead times are long, in the time it takes inventory from your supplier to arrive at your warehouse, demand for that inventory could already have subsided. As a result, lengthy transit times can easily leave you stuck with freight shipments of inventory that no consumer wants to buy anymore.

Why is dead stock bad for your business?

Just by sitting on awarehouse rack, dead stock sucks your business’s profit and hurts your bottom line. Here are a few subtle ways that dead stock costs companies money.

Unsold inventory

Dead stock was initially inventory purchased with the intent to sell it. So if a business is not selling products it’s already invested in, it’s failing to make a profit on that investment — or, at the very least, failing to recoup the cost.

Higher inventory storage fees

Whileinventory storagecosts come in many forms,the outcome is always the same: the more inventory you have, the more it will cost to store it. Dead stock takes up valuable space that could house more popular, newer products. It’s always important to do aninventory auditand act quickly to remove inventory that is unsellable or unlikely to sell.

Lower profit margins

Dead stock chips away at profit and can make a sizeable impact if it sticks around long enough. The increased time and effort it takes to market dead stock, the sunk cost of purchasing stock from the manufacturer, and higher inventory costs all shrink a business’s profit margin.

Increased employee costs

The more inventory you have, the more billable employee hours it will take to sort, move, and organize it. A business has to pay its employees for the time it takes workers to identify dead stock and physically get rid of it — so if you accumulate dead stock consistently, your employee costs could increase significantly.

There is also an opportunity cost to dead stock, as the time your employees devote to managing dead stock could be allocated to activities that drive revenue.

Reduced inventory space

With dead stock taking up space on your shelves, your business has less room to stock items that customers do want. For example, if your business can only store and sell 75 units of a particular product due to crowded shelves, but customer demand could have produced 100 orders, then dead stock has caused you to miss out on 25 orders’ worth of revenue.

How to calculate the cost of dead stock

Calculating precisely how much dead stock has cost you is not as easy as you might think, but it comes down to figuring out the money lost from the inventory that you cannot sell. Here are a few different approaches to getting a dead stock calculation.

Dead stock value

First, you can calculate the value of dead stock as you would calculate the value of sellable inventory using this formula:

Dead stock value = Total units in stock x Unit price

For example, if you had 50 units of dead stock, and each piece of dead stock would have been sold at $10, then you would calculate the value like so:

Dead stock value = 50 units x $10 per unit

Dead stock value = $500

Dead stock sunk cost

You can also calculate how much it cost you to acquire the dead stock in the first place. This amount is considered a sunk cost, as you will not earn or recoup any of your initial investment in the dead stock from sales.

There is no one formula to calculate the sunk cost of dead stock, as different companies incur different kinds of costs when acquiring inventory.

To calculate sunk cost for your inventory, add together all direct costs incurred to create the dead stock, such as:

  • Raw materials
  • Labor costs
  • Any overhead allocated to the dead stock
  • Transportation costs to move the product

Dead stock profit & opportunity cost

Dead stock not only costs money to obtain, but also costs you the profit from its sale that you were counting on.

To calculate the opportunity cost of profit from your dead stock, use this formula:

Missed Profit = (Total dead stock units x Price per unit) — Sunk cost

For example, if your business invested in 50 units of what is now dead stock, each of which cost you $6 to make, and you planned to sell each unit for $10, you would calculate missed profit like so:

Missed Profit = (50 units x $10 per unit) — (50 units x $6 each to make)

Missed Profit = $500 — $300

Missed Profit = $200

7 ways to profitably get rid of dead stock

Offloading dead stock can seem challenging, but there are plenty of ways to get rid of dead stock that are both practical and lucrative. Resurrect the value of your dead stock and make room for new inventory using the following best practices.

1. Put dead items on sale

Dead stock presents a unique opportunity to appeal to bargain shoppers. Hold clearance sales or create a discount section of your store where you offer dead stock for a lower price.

2. Offer them as a free gift

Delight customers and enhance theunboxing experienceby offering dead stock as a freebie. It’s a great way to boost customer satisfaction and incentivize them to purchase from your business in the future. The gesture means everything, and if you can move out dead stock while doing it, it’s a win-win.

3. Donate them

If all else fails, your business can alwaysdonate unsellable inventoryand use it as aninventory write-off. While it doesn’t offer the immediate payout that other strategies do, charitable donations are an excellent way to give back to communities, and customers often appreciate a business’s humanitarian efforts.

4. Offer product bundles

Bundling your dead stock with a fast-selling item might help you recoup some of your initial investment — especially if you offer free shipping on the bundle.

5. Try to return them to supplier

Whether the product batch is defective to the point of being unsellable or in pristine condition, it never hurts to check if you can send it back to the manufacturer or supplier you got it from. While this can be a long shot, it could save you the hassle of offloading the dead stock yourself.

6. Build brand partnerships

Even if a SKU is dead for your business, it could be useful to another. Donating or selling sead stock to another company that wants it is a great tool for forging brand partnerships, and could even lead to free or discounted inventory for you down the road.

7. Open new sales channels

Try offering your dead stock on a different channel, or market it to a different audience. What isn’t appealing in your online store could catch shoppers’ eyes at a retail location, or vice versa. Consider adding new channels to your business (such as social media stores, B2B, or online marketplaces like Etsy or Amazon) to give you more sales avenues for dead stock, and to help you avoid it in the first place.

How to stop dead stock before it starts

The best way to deal with dead stock is to prevent it from piling up in the first place. Here are a few of the best practices for preventing dead stock accumulation.

Accurately forecast demand

Demand forecasting helps to predict future sales so you can make better decisions on how much inventory to purchase, as well as futurewarehousingneeds, when torun aflash sale, and creating an effectivepricing strategy.If you store your inventory with athird-party logistics(3PL) company like ShipBob, you can get insights into future demand with ShipBob’sanalytics and reporting toolthat provides answers to questions such as:

  • How quickly products are selling
  • Which items are slow-moving
  • How many days of inventory you have until you are expected to run out (based on SKU velocity)
  • Daily order status and performance
  • How your current demand compares to previous time periods
  • How your sales are affected by different seasons and months
  • And much more
Dead Stock (1)

Set reorder points and safety stock

Reorder quantity refers to the total number of product units you request from a manufacturer or supplier on aninventory replenishmentpurchase order. The exact amount should not be so high that you have too much capital tied up in inventory and risk accumulating dead stock. But you also want to make sure that you have enoughsafety stockand you’re not at risk of selling out before you can get the next batch of inventory.

Dead Stock (2)

With ShipBob, you can easily checkinventory countsat each fulfillment center andset reorder pointsat the SKU level, so you are notified when stock is running low.

“ShipBob’s analytics tool is also really cool. It helps us a lot with planning inventory reorders, seeing when SKUs are going to run out, and we can even set up email notifications so that we’re alerted when a SKU has less than a certain quantity left. There is a lot of value in their technology.”

Oded Harth, CEO & Co-Founder ofMDacne

Upgrade your inventory management software

Choosing aninventory management softwarethat’s intuitive and easy to use is absolutely crucial. ShipBob’sorder fulfillmentsolution offers built-in inventory management tools, data, and reporting thatoffers insights into demand forecasting,order management, and more to help you make better decisions on how to manage your inventory.

“We have access to live inventory management, knowing exactly how many units we have in Texas vs. Chicago vs. New York. It not only helps with our overall process in managing and making sure ourinventory levelsare balanced but also for tax purposes at the end of the year. ShipBob made that entire process very simplified for our accountants and us.”

Matt Dryfhout, Founder & CEO ofBAKblade

Partner with ShipBob to reduce dead stock

Offloading dead stock quickly and finding ways to avoid it is critical to the long-term profitability of your business. To prevent dead stock, proactivity is key — taking time now to put an inventory management process in place will help your business save money, meet customer demand, and optimize your supply chain.

ShipBob’s dashboard comes with inventory management capabilities that help you keep track of your inventory at all times, and keep fulfillment running smoothly. Using ShipBob’s technology, you can:

  • Monitor inventory levels at any of our dozens of fulfillment centers.
  • Set up automatic reorder notifications to time replenishment perfectly.
  • Track valuable sales data over time and forecast demand more accurately, so that you can avoid dead stock whenever possible.

To learn more about ShipBob, click the button below to request pricing and learn more about what we offer.

Dead stock FAQs

Dead stock is a surefire way to cut into profit margins. Here are answers to some of the most frequently asked questions about dead stock so you know how to manage it and prevent it from piling up.

Why is it called dead stock?

Dead Stock (3)

Dead stock refers to ecommerce inventory that isn’t selling now and likely won’t sell in the future. Because demand for these products has dwindled (e.g., low quality, a dip in demand, seasonality), they have no more vitality in the market and therefore cuts into profit margins.

What happens to dead stock?

Dead Stock (4)

Dead stock usually sits unsold in a warehouse or a 3PL’s fulfillment center until it is moved out. While there, it quickly increases carrying costs and can occupy warehousing space needed for new, sellable inventory. When dead stock fails to sell, it can cut into profit margins and impact a company’s bottom line. Dead stock is often due to a change in market demand and it can be considered as an inventory write off.

How do I get rid of dead stock?

Dead Stock (5)

In offloading dead stock, some options are more profitable than others. There are a few ways to get rid of dead stock, such as bundling a dead stock item with a high-demand product for free, returning it to the manufacturer or supplier, or donating it to a non-profit organization. It’s important to have a plan in place to remove dead stock from storage as it can quickly increase warehousing costs.

Dead Stock (2024)


How do you calculate dead stock? ›

This comprises the cost of the products or items themselves, as well as any other expenses such as shipping, storage, and handling. Divide the entire cost of unsold inventory by the total inventory value for that time period. This will give you a proportion of dead stock.

What is a dead stock example? ›

For example, if your business can only store and sell 75 units of a particular product due to crowded shelves, but customer demand could have produced 100 orders, then dead stock has caused you to miss out on 25 orders' worth of revenue.

How to get rid of inventory that won't sell? ›

Let's find out how to turn slow-moving stock into cash.
  1. Offer customers a free gift. ...
  2. Bundle products. ...
  3. Clearance sales. ...
  4. Return items to a supplier. ...
  5. Donate dead stock items. ...
  6. Seek out partnership opportunities. ...
  7. Sell items on marketplaces. ...
  8. Refresh or re-merchandise.

What does the idiom dead stock mean? ›

Inventory that doesn't turn over—i.e., that doesn't sell—is often referred to as dead stock. For businesses that don't use inventory management software, dead stock can remain on warehouse shelves, forgotten and useless. Dead stock costs businesses money.

How do I calculate my stock? ›

You can calculate the return on your investment by subtracting the initial amount of money that you put in from the final value of your financial investment. Then you would divide this total by the cost of the investment and multiply that by 100.

How do you get dead stock? ›

A business may find itself with dead stock because it ordered or manufactured too many items and then found they didn't sell as anticipated. Dead stock can also include damaged items, incorrect deliveries, leftover seasonal products or expired raw materials.

What is the average dead stock? ›

Typically, a healthy business has 15% dead stock (or less) in its active inventory. But for direct-to-consumer(DTC) brands, that number typically creeps up toward 33%. This ties up capital and radically drives up operational costs. So, let's break down how your company can get rid of dead stock.

Why is deadstock bad? ›

What makes dead stock bad is that it grows unintentionally, becoming a stagnant investment that takes up valuable inventory space and incurring additional holding costs. As you accumulate dead stock, you also tie up more of your resources in products that are unlikely to ever give a return on your investment.

What is another word for dead stock? ›

Dead stock is known by many other names. It can be referred to as deadstock (one word), dead inventory, excess stock or inventory, and obsolete stock or inventory. They all refer to the same thing, or close enough to it that it doesn't make a difference.

How do you write-off inventory that won't sell? ›

Set up an inventory write-off expense account to record the value of the damaged inventory. Every time you make an entry in the inventory write-off expense account, you reduce the amount of inventory carried on the books. Debit the cost of goods sold (COGS) account and credit the inventory write-off expense account.

How to ensure minimal dead stock? ›

Identify cause of dead stock

Begin by prioritizing inventory by investment value, shelf life, and turnover to identify surplus inventory. Next, determine the quantity you need through the practice of product forecasting. Also, consider short-term supply needed to satisfy unexpected orders.

What is the difference between dead stock and obsolete stock? ›

Dead stock, also known as obsolete inventory or dead inventory, is stock that's reached the end of its product lifecycle and is unlikely to sell. Carrying this unsellable and obsolete inventory can affect your bottom line, reduce profit margins, tie up cash in stock, and increase warehouse storage and staff costs.

What is an example of a dead stock? ›

What is the example of dead stock? Dead stock is any unsold merchandise or inventory that has not been sold or used in a certain amount of time. Examples include unsold clothing items, excess electronics, or leftover food items.

Does deadstock mean fake? ›

The pieces were deadstock because finding them from retailers was nearly impossible. The meaning eventually shifted to refer to footwear that was, essentially, in brand-new condition and preserved its packaging. Deadstock refers to authentic, unworn sneakers that are usually no longer available from direct retailers.

What does pass as dead stock mean? ›

PADS: “Pass as deadstock sneakers” are a pair of shoes that can no longer be sold as brand-new because they have been worn before. Even though the pair is not deadstock, it's still valuable because it's rare, unavailable at the retailer's store, and in good condition.

How do you calculate how much a stock has fallen? ›

You'll need the original purchase price and the current value of your stock in order to make the calculation. Subtract the total purchase price from the current price of the stock then divide that by the original purchase price and multiply that figure by 100. This gives you the total percentage change.

How do you account for dead stock? ›

Dead stock inventory accounting is the process of identifying your obsolete inventory and the items that are no longer sellable. It can include damaged goods, leftover seasonal items, or expired raw materials. Dead stock in accounting tracks and records the cost of your unsold inventory.

How do you calculate stock value on death date? ›

The fair market value (FMV) for securities is calculated using the average of the high/low price on the DOD. If the DOD occurs on a weekend or holiday, the FMV is calculated using the average of the high/low price on the trading day prior to and after the DOD.

How do you show dead stock on a balance sheet? ›

An unfortunate effect of dead stock is that it will stay in the debit column of the balance sheet. This is unlike regular inventory which turns over regularly and will leave the debit column when sold. Dead stock must be accounted in physical counts of inventory each month it sits until it is gone.


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