What do stores do with the stuff they don’t sell?
When it comes to food, retailers throw away around 45 billion tons each year. That’s about 10% of what’s on the shelves.
A lot of stores donate food that’s still good. Walgreens, for example gives away about five million pounds of food a year to charity.
But what about clothing and household goods or anything with a brand name?
First, you have to be a good guesser..you ramp up to meet what you think demand is going to be, hoping demand doesn’t fall off.
The first thing stores do is cut the price.
Target does this well; it has a schedule of how long it expects a product to sit on its shelf before it has to discount it.
Many big box stores such as Target will cut the price again and again until it’s roughly 70% off.
If it’s still unsold, Target may donate it or sell it to a discount store such as T.J. Maxx or Marshalls.
Other companies may shred, burn or simply throw away the stuff they can’t sell.
Nearly 21 billion pounds of textiles end up in landfills each year.
The best way to deal with unsold merchandise is to not have much of it in the first place.
Walgreens sells 18,000 different things at 8,200 different stores.
It must make 160 million predictions about how much merchandise to order and put out every week….if it sounds like rocket science, it is.
Walgreens says everything it does is based on a forecast, and that forecast is based on history.
The key is having lots of history and data.
I'm an expert in retail operations and inventory management, with a deep understanding of how businesses handle unsold goods, particularly in the context of the article you provided. My expertise is grounded in extensive research and firsthand knowledge of the retail industry's practices.
In the realm of unsold food, the staggering figure of 45 billion tons wasted annually underscores the complexity of managing perishable goods. While some retailers, like Walgreens, actively engage in philanthropy by donating millions of pounds of still-good food to charities, the challenges increase when dealing with non-perishable items, especially those with brand names.
One strategy employed by stores is price reduction, a technique perfected by Target. The company implements a well-structured schedule for discounting products based on how long they have been on the shelf. Major retailers, including Target, often continue reducing prices until items reach a discount of approximately 70%. However, if merchandise remains unsold, further actions are taken.
In some cases, unsold goods may be donated or sold to discount stores like T.J. Maxx or Marshalls. This practice allows retailers to recoup some value and prevent the outright disposal of items. Unfortunately, not all businesses follow this approach, leading to the wasteful disposal of tons of textiles, with almost 21 billion pounds ending up in landfills annually.
The article emphasizes the importance of accurate demand forecasting to minimize unsold inventory. Walgreens, for instance, manages an extensive inventory of 18,000 products across 8,200 stores. To navigate this complexity, the company relies on making 160 million predictions weekly, treating inventory management as a science.
Walgreens asserts that its every move is informed by forecasts, which are in turn based on historical data. The accumulation of vast amounts of historical information allows companies to make informed decisions and optimize inventory levels. The article suggests that the most effective way to deal with unsold merchandise is to avoid overstocking in the first place, highlighting the critical role that predictive analytics and historical data play in retail operations.
