Question

Aside from heavy markdowns, what additional risks are found with excessive inventory? Please discuss a retailer that seems to believe in this philosophy...."You Can't Be a Merchant Without Merchandise."

Answer 1

Answer :

Excess inventory is when a business carries more stock than is necessary to meet its forecast demand. This can trigger a variety of organizational problems and financial constraints. Excess inventory occurs when a company inaccurately orders inventory and is left with more than consumer demands or customer demand decreases drastically after inventory is ordered. Getting excess inventory is usually considered bad for business because of what it means for inventory turnover and the costs associated with handling it. Developing a reliable inventory database and method of forecasting will help the company purchase and store appropriate inventory rates. Let us discuss the problems associated with excessive inventory.

Space Issues
One issue with surplus inventory is that it takes up floor space and prevents you from selling customer-friendly newer items. Shelf space turnover per foot is a common metric used by retailers to assess how effectively they sell goods which are provided space on the sales floor.

Reduced Profits
For certain cases, over-inventory inevitably contributes to decreased profit margins. Usually, companies wind up putting excess items on clearance to induce buyers to buy them at a lower cost. Some companies also end up selling extra inventory at rates below what they charged. The risk of goods declining in value throughout stockpiling, diminishing and the risk of becoming redundant.

Can result in low-quality goods
If you have high excess stock rates, you 're likely to have poor inventory turnover, which means that you don't turn the entire stock regularly. Unfortunately, the excess stock on the shelves of the warehouse can begin to deteriorate and die. Thus, businesses frequently sell perishable or under-standard stock at lower prices to avoid having to throw it away and lose their value altogether. While a quality issue remains undetected, the vendor supplying the material can continue to manufacture and ship the defecting product.

Costs of Storage
The big issue is the various expenses involved with bringing an excess inventory. Many businesses have extra storage space, where excess inventory is held until the commodity is clear on the floor. More storage space means less floor space for sale.

Reduced Versatility
Storing surplus inventory increases the amount of time it takes a company to turn to new ones. It diminishes the versatility that a company has when adapting to business and consumer demand shifts. Of example, the company that ties up funds to sell to the public in a commodity does not have the funds available to purchase an item that is likely to sell quicker.

Merchant is whoever is interested in industry or trading. In the sixteenth century, merchants included specified community such as bakers, grocers, store owners and others who fabricated and shipped goods over great distances and offered value-added services including such credit and finance.. Since merchant is the connection between the customer and the organisation. It is said that - You Can't Be a Merchant Without Merchandise. Without buying and selling products and services you can not make the income. Merchant benefits the community by fulfilling the customer's needs as well as making some profit. The retailer and the merchandise are interrelated. A merchant can be a person who sells the commodities for profit. The only determining factor is that a profit sells the product or service for sale. By selling the merchandise. In economics, Merchant contributes to capital and contribute to the economy.