Dead stock refers to inventory that has not sold for an extended period and is unlikely to sell at full price. For Pakistani businesses—whether retail shops, wholesalers, or distributors—dead stock represents trapped cash, wasted storage space, and potential losses.
This guide covers how to identify dead stock, strategies to clear it, and most importantly, how to prevent it from accumulating in the first place.
What is Dead Stock?
Dead stock (also called obsolete inventory or stale stock) is merchandise that has not sold for 6-12 months and is unlikely to sell at regular price. It ties up capital that could be used elsewhere and may become outdated, seasonal, or damaged over time.
The True Cost of Dead Stock
Many Pakistani business owners underestimate how much dead stock actually costs:
1. Capital Locked Up
Money spent on dead stock could have been used for fast-selling inventory, business expansion, cash flow needs, or debt repayment.
2. Storage Costs
Dead stock occupies valuable warehouse or shelf space. In cities like Karachi and Lahore where rent is expensive, this cost adds up quickly.
3. Depreciation
The longer stock sits, the less it is worth—especially for fashion items (seasonal), electronics (new models), and perishables (expiry dates).
Cost Calculation Example
| Cost Component | Percentage | Amount (on PKR 500,000 stock) |
|---|---|---|
| Storage | 5% | PKR 25,000 |
| Insurance | 2% | PKR 10,000 |
| Handling | 3% | PKR 15,000 |
| Capital opportunity cost | 12% | PKR 60,000 |
| Obsolescence/damage | 5% | PKR 25,000 |
| Total Annual Cost | 27% | PKR 135,000 |
How to Identify Dead Stock
1. Inventory Aging Analysis
Review how long each item has been in stock using your inventory management system:
| Age Bracket | Status | Action |
|---|---|---|
| 0-30 days | Fresh | Normal selling |
| 31-90 days | Active | Monitor |
| 91-180 days | Slow-moving | Promote/discount |
| 181-365 days | At-risk | Clear urgently |
| 365+ days | Dead stock | Liquidate or write-off |
2. ABC Analysis
Categorize inventory by sales contribution—most dead stock comes from C items that have stopped selling entirely.
3. Physical Inspection
During your physical stock audit, flag dusty packaging, outdated styles, items pushed to back corners, and products near expiry.
Strategies to Clear Dead Stock
1. Discount Sales
Start with 20-30% discount, increase if needed. Bundle with popular items. Create a clearance section. Time sales around Eid or seasonal events.
2. Bundle Deals
Combine dead stock with fast-moving items: “Buy 2 Get 1 Free” (free item is dead stock), gift with purchase promotions, or value packs.
3. Return to Supplier
Check original purchase agreements for return clauses. Negotiate exchange for faster-moving products or credit for future purchases.
4. Sell to Liquidators
Lot buyers purchase dead stock in bulk at 10-30% of retail. Options include wholesale lot buyers, export markets, and discount retail chains.
5. Online Marketplaces
Sell on OLX Pakistan, Facebook Marketplace, Daraz clearance section, or industry-specific B2B platforms.
6. Donate for Tax Benefits
Donate to registered charities and claim tax deduction. Works well for clothing, non-perishable food, and office supplies.
Preventing Dead Stock
- Better demand forecasting: Analyze historical sales data and trends
- Implement reorder points: Maintain optimal stock levels
- Smaller, frequent orders: Test new products with minimal initial stock
- FIFO method: Always sell oldest stock first
- Regular reviews: Weekly slow-mover review, monthly aging analysis
- Supplier agreements: Negotiate sale-or-return arrangements
Dead Stock by Industry
| Industry | Main Risk | Prevention Strategy |
|---|---|---|
| Fashion/Clothing | Seasonal items after season | End-of-season sales, smaller orders |
| Electronics | Model obsolescence | Order close to launch, track new models |
| Grocery/FMCG | Expiry dates | Strict FIFO, short-dated alerts |
| Pharmacy | Drug expiry | Small orders, return to distributor |
Frequently Asked Questions
How much dead stock is acceptable?
Should I discount dead stock or write it off?
How do I account for dead stock write-offs?
When is the best time to clear dead stock?
Can software help prevent dead stock?
Conclusion
Dead stock drains cash, occupies space, and reduces profitability. By implementing proper inventory controls, monitoring aging regularly, and acting quickly on slow-moving items, you can minimize dead stock and keep your capital working for your business.
Need better inventory visibility? HysabOne provides real-time inventory tracking, aging reports, and turnover analysis to help you identify and prevent dead stock. Contact us on WhatsApp for a demo.
Last Updated: December 2024