Obsolete Inventory: How to Manage It, Get Rid of It, and Prevent It

Posted on December 30, 2017 by

Obsolete inventory is a problem that many businesses struggle to solve. We’ll show you how to get rid of it, and what tools you need to prevent it.

Obsolete inventory is the worst kind of inventory you can have (next to no inventory, of course).

It increases your cost of inventory and is hard to get rid of.

If you have too much inventory on hand that’s not selling, chances are you want to know how to get rid of it.

We’ll show you how to do that.

We’ll also show you the causes of obsolete inventory and how to prevent having any in the future.

At the end of this post, we’ll show you how you can better manage obsolete inventory going forward.

Before we get to all of that, let’s define obsolete inventory.

What is Obsolete Inventory?

Obsolete inventory is often referred to as “obsolete stock,” “dead inventory,” or “excess inventory.” These terms all apply to any items that have reached the end of its “product lifecycle,” which means there is no market demand for the product anymore.

Most businesses determine that its inventory is obsolete once there are no sales after a set amount of time.

Obsolete inventory is a warning sign that you haven’t been following inventory management best practices.

Read on to discover the bad practices you might have engaged in that contributed to your obsolete stock.

What Causes Excess and Obsolete Inventory?

There are many causes of excess and obsolete inventory. Here are a few of the main ones:

Inaccurate Forecasting of Customer Demand

Inaccurate or incorrect forecasting of customer demand can cause you to order more stock than you need – leaving you with obsolete inventory after selling only a portion of what you stocked.

An example of inaccurate forecasting in food inventory management would be if McDonald’s A ordered thousands of McRibs for McRib season – expecting a huge demand for McRibs – but failed to account for McDonald’s B in another part of town who would be supplying the same product – lowering A’s expected sales of McRibs and resulting in excess stock.

Poor Quality Product or Design

Offering a high-quality product should be an obvious step for reducing obsolete inventory, but plenty of retailers, wholesalers, and manufacturers sell shoddy products.

If your product doesn’t meet the standards of consumers, or it fails to offer anything new to compete against existing products, it probably won’t sell.

This happened to Microsoft’s iPod competitor, Zune, between 2006 when it was released, and 2011 when they stopped producing them.

According to Robbie Bach, the former leader of Microsoft’s home entertainment and mobile business, “…we ended up chasing Apple with a product that actually wasn’t a bad product, but it was still a chasing product, and there wasn’t a reason for somebody to say, oh, I have to go out and get that thing.”

The result was that Microsoft had a massive store of unsold Zunes that they had to simply write-off as a loss.

Avoiding Obsolete Inventory

You might realize you have obsolete inventory – or are on your way to holding excess stock – but you’re choosing to do nothing about it.

Worse, you might believe that sometime in the future there will be a new surge in consumer demand and your obsolete inventory will vanish.

Letting obsolete inventory waste away in your warehouse won’t solve the problem, and neither will fantasizing about it disappearing in a stroke of pure luck. Both of these strategies will only increase the amount of dead stock you accumulate.

If you have obsolete inventory, the best thing to do is deal with it right away. Read on to find out how.

How to Get Rid of Obsolete Inventory

Obsolete inventory will continue to hurt your business the longer it sits in your warehouse. Here are a few ways to get rid of it:

Write-Off Obsolete Inventory

Obsolete inventory write-offs are a common practice for reducing excess stock.

Companies often charge obsolete inventory to their cost of goods sold at the end of the year – taking the loss and moving forward.

Donate Obsolete Inventory for Tax Deductions

If you have a surplus of inventory that isn’t going to sell, then donate it to charity and get some tax deductions.

According to Gary C Smith, “businesses can earn a federal income tax deduction under Section 170 ( e )(3) of the U.S. Internal Revenue Code.

The IRS Code says that regular C corporations may deduct the cost of the inventory donated, plus half the difference between cost and fair market value.

If you’re an S corporation, partnership, LLC or sole proprietorship, you qualify for a straight cost deduction.”

Gary’s organization, the National Association for the Exchange of Industrial Resources (NAEIR), can help you get a tax break for donating your obsolete inventory.

Remarket Items

If you need to unload your growing inventory more quickly, then try remarketing the item.

If you’re a retailer, reposition the item in your store. Switch up the shelf arrangements. Freshen your displays.

Try selling your items on different social networks. Social media selling is a great way to gauge what marketing messages are working and what aren’t.

You could also try mobile marketing where you sell directly through mobile phones if you know your customers are using their mobile devices most of the time.

Or better yet, implement an omnichannel ecommerce strategy where you try various marketing tactics and messages across all your sales channels.

Sell at a Discount

An easy and straightforward way to move excess inventory is to offer a discount.

Lowering prices doesn’t feel good, but a rising cost of inventory is much worse.

Start small, 10-20{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} off, and then continue to increase the discount as needed to sell the items.

You could also run a flash sale (which are popular on social media platforms) or a storewide blowout sale event.

The plus side to big liquidation sales is that it can draw in customers you would’ve never reached before.

One thing to keep in mind is to refrain from holding sales events too often. This will train customers to wait for a sale instead of buying at your preferred price.

Bundle Products

Product bundling is another excellent way to get rid of obsolete inventory.

If items aren’t selling individually, bundle them with items that are similar or sometimes bought together.

You could even bundle items AND offer a discount on the bundle if you’re trying to move as much stock out of your warehouse as quickly as possible.

Liquidate Your Items

If your customers refuse to buy your obsolete inventory, no matter how much you market, discount, and bundle it, then you can always sell your excess stock to liquidation organizations.

These are businesses that will buy your products at the lowest minimum price to help you free up warehouse space and capital.

Here’s a good place to get started if you choose this option.

How to Prevent Obsolete Inventory

If you’ve gotten rid of your excess stock and want to make sure you never have to deal with it again, here are a few tips for preventing obsolete inventory.

Forecast Demand

As we pointed out in the “Causes of Obsolete Inventory” section of this post, accurately forecasting demand is a major factor in whether you’ll have obsolete inventory or not.

It might be the biggest factor.

Best practices are to pay attention to sales trends from past years, mostly buy products that have a proven track record for selling consistently well, and pay attention to what your competitors are selling and how well they’re selling it.

Know Your Reorder Point

Using an accurate reorder point formula will help you predict the right time to order more inventory and how much you’ll need to order.

It will also help you understand your current rate of inventory turnover and give you insight into how to increase it.

Here’s a basic formula you can use to get started:

(Average Daily Unit Sales x Average Lead Time in Days) + Safety Stock = Reorder Point

Track Inventory Levels in Real-Time

If you want granular insight into your inventory levels, then you should use something like a cloud-based inventory management system that allows you to know how much inventory you have at all times.

This tool will show you whether you’re carrying excess stock and need to ramp up your sales efforts, or if you’re getting low on certain products and need to reorder.

How to Better Manage Obsolete Inventory

Obsolete inventory management is mostly about understanding your customers and making sure you’re matching their demands.

If you don’t, you’ll inevitably order more than you need or order products your customers don’t want.

So what’s the best tool for forecasting customer demand?

The same tool we mentioned above that tracks inventory levels in real-time – cloud-based inventory management software.

It allows you to track your sales alongside your stock for deeper insight into your customers’ buying patterns and the success of your marketing strategies.

If you want to prevent obsolete inventory from raising your costs and cluttering your warehouse, we can help.

Prevent Obsolete Inventory with This Cloud-Based Solution

Through accurate forecasting reports, you can predict when sales will rise, dip, and plateau. You’ll know what sells the most and what doesn’t sell at all. Using this data, you’ll be able to order just enough to satisfy customer demand without piling up more inventory than you need.

Start your free 14-day trial of DEAR Inventory today!

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9 Tips for Better Retail Inventory Management

Posted on October 14, 2017 by

Effective retail inventory management can save you loss revenue and even your business

Retail inventory management isn’t fun.

You don’t get the thrill of interacting with your customers or the excitement of setting up marketing materials for the new brand you just rolled out.

Instead, you get late nights performing your stocktaking process and sorting piles of purchase orders and sales reports.

Although retail inventory management is the last thing you ever want to do, it can make or break your business…

Walmart lost $3 billion in 2013 because they were constantly out of stock.

If they were anyone but Walmart, they wouldn’t be in business anymore.

If you can’t effectively manage your inventory, then you’ll certainly lose revenue and may actually go out of business.

To help you keep your business and grow your revenue, here are 12 tips you can use to improve your retail inventory management.

9 Tips on Retail Inventory Management

Reduce Your Lead Time

You can prevent the kind of stockouts Walmart suffered from by implementing lead time reduction strategies.

The faster your stock arrives, the less you need to worry about not having enough inventory to fulfill your customers’ orders. Making your customers happier, and giving you a competitive edge in the market.

Decrease Product Range

If you’re carrying too many items that aren’t selling, it’s time to narrow your focus.

An overabundance of inventory dramatically increases the cost of inventory because it leads to holding obsolete products that you’ll have to discount, bundle, or donate later. And all that extra stock takes up valuable storage space for products that people do want to buy.

In contrast, a smaller inventory will dramatically decrease your inventory costs, which will help you avoid holding excess inventory. And, you can now enjoy the flexibility to test a few new products if you want, all while saving the majority of your space for your best-sellers.

Automate Inventory Receiving

Efficient retail inventory management begins the moment your stock arrives.

Your warehouse managers and employees shouldn’t have to think about what to do once they receive a shipment.

Either delegate this process to a small group of people who always handle incoming shipments, or if your business is fairly small, make sure your whole team understands the procedures to follow.

Increase Your Rate of Inventory Turnover

Increasing your rate of inventory turnover will make retail inventory management much easier.

First, the more inventory that leaves your warehouse, the less inventory that you need to manage inside your warehouse.

Second, a high inventory turnover rate means you have a clearer idea of what’s selling and what’s not. With this data, you can focus on only stocking items that you know will sell.

Third, a high rate of inventory turnover helps you prevent holding on to obsolete stock, thereby reducing your total cost of inventory.

Loss Prevention Tags

It doesn’t matter how big or small your store is…

Some people will steal from you.

To prevent significant revenue losses like this, it’s helpful to install theft prevention devices like loss prevention tags.

Using these tags on high-end items or in-demand items can help you stop theft before it happens.

Forecast Future Demand

The better you are at anticipating future demand, the higher your sales will be – making retail inventory management much easier.

Instead of worrying about what will sell, you can look at past sales during different times of year and forecast what will sell, and order more of those items and less of others.

But sales reports are only one way to forecast customer demand.

Here are a few other things you can do:

Conduct customer research
Survey customers
Listen to experts in your industry
Listen to your sales staff or other key people in your company
Pay attention to seasonal trends

Hire the Right Employees

Retailers lost $60 billion in shrinkage in 2015.

What was the biggest cause of their losses?

Their employees.

This statistic comes from the US Retail Fraud Survey. Of all the reasons for shrinkage, 38{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} was cited as “employee theft.”

Any kind of shrinkage will disrupt your retail inventory management, and theft is no exception.

When hiring employees, make sure to check their background, check their references, speak with their previous employers, and foster good relationships with them to avoid creating disgruntled employees.

Set a Consistent Stocktaking Process

Creating a consistent stocktaking process is a huge part of managing your inventory.

It helps you identify problems before they get out of hand, informs your ordering and stocking decisions, and helps you forecast demand.

Unfortunately, many businesses are still using the outdated method of Excel inventory management, which brings us to our final tip…

Use Inventory Management Software

A cloud-based inventory management system will streamline your stocktaking process, automatically update your inventory information based on your purchase orders and sales, and will generate real-time reports you can use for forecasting.

Everything you used to do by hand will be done more efficiently for you.

How can you get this software?

Through our free trial offer below…

Retail Inventory Management Made Easy

From stock levels to order status, you’ll know exactly how much inventory you have and when it’s leaving or arriving your warehouse. All sales will be tracked from your physical store and your ecommerce stores, across all of your locations. We’ll automate your retail inventory management so you can focus more on growing your business and less on maintaining it.

Start your free 14-day trial of DEAR Inventory today!

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10 Fundamental Steps of Every Successful Stocktaking Process

Posted on June 3, 2017 by dearsyst

Performing a complete stocktake once or twice a year is absolutely essential for maintaining healthy inventory levels and minimizing losses in retail and wholesale businesses (not to mention keeping the accountants happy).

But they can definitely be time-consuming, energy-draining, and frustrating.

And without a clear plan for success, you face the risk of serious human errors – like overcounting or undercounting – that could cost you thousands of dollars and lost customers.

So, how do you stay organized and get things done quickly?

By developing a well-structured stocktaking process that employees and managers can follow together, thereby limiting the possibility of your staff making costly mistakes.

A well-structured stocktaking process will include all the steps required to keep your staff working efficiently to uncover discrepancies and inaccuracies while keeping them engaged and focused.

Here’s our list of 10 fundamental steps that you should include in your stocktaking process for maximum effectiveness.

1. Schedule Your Stocktakes to Reduce Impact on Business Operations

Try to find a time that works for you and your staff that won’t hurt your bottom line or create unnecessary distractions. A lengthy stocktake is best taken during a slow sales cycle or outside of normal business operations.

2. Clean and Organize Your Stockroom Before Performing Your Stocktake

A clean and well-organized stockroom will make it easy to find and count your stock to reduce the possibility of miscounting.

Another measure you could take to make the stocktaking process more efficient would be to create well-defined sections by labeling the shelves that stock is and should be stored on, along with using package labels that clearly identify what’s inside the package.

3. Organize Your Stocktaking Tools Ahead of Time

Before you begin the stocktaking process, you’ll want to make sure everyone has the tools they need to get the job done.

Here’s a list of the most common tools used for stocktaking:

– Clipboards

– Stock sheets

– Write-off sheets

– Pens

– Calculators

– Handheld scanners

– Mobile Devices (if you use cloud-based inventory management)

You might need more or fewer tools than the ones listed, but this should give you a general idea of what’s generally required for an effective stocktaking process.

4. Only Use Up-To-Date Inventory Data

The goal of a complete stocktake is to get an accurate count of the inventory you actually have so that you can compare it with your existing inventory data.

So be sure to exclude items that have already been invoiced to customers but haven’t yet shipped, as well as raw materials that have arrived but haven’t yet been entered into your inventory system.

Stock that hasn’t shipped is essentially not yours anymore. Processing materials that haven’t been added into your inventory management system is a separate task that doesn’t need to be done during a stocktake.

5. Give Everyone Clear Goals and Responsibilities

A supervisor should be overseeing the stocktaking process at all times. They should have a list of what needs to be counted and what ought to be in their warehouse so they can double check the work of the stocktakers.

The stocktakers should know what groups they’re in, what tools they need, how they’re going to count the stock, etc.

Also, supervisors should make sure that there are practically zero distractions – that stocktakers aren’t distracting themselves with their phones or with too much conversation.

At the same time, if your stocktake is going to last a long time, it may be wise to schedule breaks to keep everyone’s minds and eyes fresh so that they don’t make too many mistakes.

6. Know What Stock You’re Counting and How You’re Counting it

Whether you have a massive warehouse filled with various types of inventory or a small stockroom with just a few types, let stocktakers know which sections they’ll be counting in what order.

Then, create a clear system for how they should physically count your stock.

Here’s an idea for how to organize the actual counting part of the process:

– Each unit of stocktakers should be in groups of two—one person inspects the stock and calls out the amount, the second person records this and can double check the first.

– If you have multiple units of stocktakers, make sure they all have clear sections to work through that don’t overlap.

– Have your stocktakers to count in the same direction – i.e. top to bottom, left to right.

– Mark stock with a colored marker or pen as a visual reminder of what’s already been counted.

With a similar process, your counting should be well-organized and operate smoothly.

7. Open and Count Absolutely Everything—No Guesswork Allowed

If you have a box that says it contains 10 widgets, don’t just take that label on face value. Open the box and count all of its contents to ensure it does contain that exact amount.

Your stocktaking process should aim to deliver as close to 100{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} accurate readings as possible, which means you shouldn’t estimate or guess on any number.

And be sure to record any discrepancies between the counts listed on your stock sheet and the number of items you counted, as well as any mislabeled/packaged boxes for quality control.

8. Value Your Stock Correctly

Once you’ve counted all your stock, make sure you have the most up-to-date prices for all of it.

The price of your stock should match the market clearing price or the price that consumers are willing to pay for that item.

And be sure to include any depreciation as well.

If you purchased a certain raw material last year for $1,000 but now it is only valued at $750 then you need to change prices to reflect the lower price – the same goes for older products you’re now selling at a discount.

9. Develop Ways to Decrease Stolen, Broken or Slow-Selling Inventory

During your stocktaking process, you may find that items you thought were in your warehouse were actually missing, and that some items that have been damaged or spoiled were never reported.

You might also notice that some items are simply not selling.

With this data in hand, you can begin brainstorming ways to increase security measures to protect against thieves, improve warehouse policies to curb reckless behavior and implement new strategies for selling more stock.

One sure-fire way to help in all these areas is through inventory reduction – creating a plan for optimizing the amount of inventory stored in your warehouse.

10. Continually Improve Your Stocktaking Process

Your stocktaking process shouldn’t be a static set of procedures; it should grow and evolve every time you do it so it becomes more efficient over time.

Encourage your stocktakers and supervisors to suggest improvements, develop new procedures for a more effective workflow, and brainstorm ways to decrease your stock to manageable levels that reduce waste.

But if you really want to improve your process, then consider investing in new technology that can streamline your stocktake and make it easy to track your inventory throughout the year.

Start your free 14-day trial today

Inventory Reduction: Grow Your Bottom Line Through Better Operations

Posted on May 20, 2017 by

Overstocked Warehouse in Need of Inventory Reduction

Large volumes of inventory don’t just lead to more management headaches – they can cut into your profits as well.

Of course, you don’t want to have too little inventory and risk losing sales through stock shortages.

So, in starting your company, you’ve erred on the side of caution and just order more than enough to meet your needs.

But storage space, shifts in demand, and lost/damaged goods are all contributing to the costs that eat into your bottom line.

Most businesses have 20-40{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of their working capital tied up in inventory – so if you’re closer to the 40{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} end, it’s probably time to create an inventory reduction strategy.

The goal is to find your inventory sweet spot – where you have the lowest possible inventory levels without being understocked – in order to maximize growth and profitability for your business.

By following the 3 methods we’ve outlined below, you’ll be able to reduce your inventory while retaining just enough to meet fluctuating customer demands and supply chain availabilities.

Lower Lead Times

Lead time is the amount of time it takes for raw materials to reach you after placing a purchase order. They vary widely depending on your supplier’s location relative to yours, their means of shipping, and the types of products you’re buying.

Lead times from local suppliers might be less than a week, while international purchases can take up to a month or more to reach you.

Keeping inventory on hand is the natural method to gracefully handle these fluctuations, but it’s not the only way.

Here are a few ways you can work with your suppliers to lower lead times and reduce your need to keep inventory:

Track Your Existing Lead Times

Track how long it takes for key raw materials to reach your business after placing your orders. Through this, you’ll be able to identify suppliers with the highest lead times and either ask how you can work together to lower them or begin searching for a replacement vendor.

Share Sales Data With Your Suppliers

Sharing sales data allows your suppliers to understand your average order size and frequency, so they’ll be able to anticipate your regular orders and plan ahead to expedite your shipments.

Reduce Minimum Order Quantities (MOQs)

Reducing MOQs allows you to order more frequently so your inventory levels can more closely match the demands of your business, which get’s you one step closer to the whole grail of modern supply chain management – just-in-time manufacturing.

In addition to tracking and working to lower lead times for your raw materials, eliminating obsolete inventory is another great way to reduce your goods on hand.

Eliminate Obsolete Inventory

Inventory carrying costs are generally between 20-30{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of the cost to purchase inventory, and for most businesses – especially resellers and wholesalers – roughly 20-30{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of inventory is obsolete.

If your company has a carrying cost of 20{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}, and your total inventory value is $500,000, then your spending around $100,000 a year holding that inventory.

And if you can reduce 10{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3} of that inventory by getting rid of obsolete goods, your business could save $10,000 a year.

How do you eliminate your obsolete inventory?

Rework or Modify

If you’re carrying a set of older models of some of your products, can you have them reworked into the updated model?

Or, can you have inventory that’s been worn from sitting too long refurbished to look and function like new?

While this strategy won’t work for many products, if the cost to modify your stock is less than 25{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}, and you’re fairly certain it will sell after it’s modified, then reworking it could save you a lot of money.

Offer a Discount

If you can’t rework your stock into an updated model, then your best bet is to slash the price by at least 25{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}. If you’re still not selling as much as you need to, then keep increasing your discount until you hit the market clearing price or the lowest possible price you can afford to sell at.

While selling at a high discount will negatively impact your revenue in the short-term, over time you’ll lose less money in wasted inventory while clearing more space for higher value inventory that can be sold more quickly at a higher price.

Donate For a Tax Credit

If you can’t modify your products and they’re not selling at discounts you can afford, you might still be able to reduce your losses by donating your excess inventory for a tax credit while saving the cost of waste disposal.

For example, EALgreen is a 501(c)(3) nonpartisan nonprofit that connects companies who have obsolete, outdated, or overstocked goods with Colleges and Universities in need of those goods.

By working with a service like theirs, you’ll get the maximum possible tax write-off and they’ll handle the logistics of delivering your dated goods where they can be put to good use. Win-win!

Improve Inventory Forecasting

By effectively tracking and monitoring your purchasing habits, inventory levels, and sales figures, you’ll be able to more accurately predict the ebb and flow of market demands.

To do this, invest in reliable inventory management software.

This will help you gauge your best-performing products, figure out which times of year you sell the most of your products, and decide where and when you can safely reduce your inventory without risking stock outages.

But what features should you look for in an inventory management software?

Real-Time Tracking and Reporting

Your software should be tracking all purchases, sales, and inventory flows to generate up-to-date reports on all stock sold while automatically updating your inventory levels as raw materials move through your process to the sale.

Integrated Communication

Real-time inventory data is best used by keeping everyone throughout your supply chain is up to date. This helps ensure all your key team members and suppliers are on the same page, your goods will be consistently delivered to your customers, and you can avoid costly stock issues and distribution delays.

Large Volume Inventory Management

Inventory reduction relies on an inventory management system that can effectively track each and every piece of your inventory – especially if the demands of your growing company include ever increasing volumes of raw goods and stock. Your software should help you organize and monitor your entire operation by allowing you to create product families, track thousands of unique SKU’s, and manage multiple warehouses to get a complete picture of all your inventory.

Inventory Reduction FTW

Inventory reduction is absolutely necessary to run a successful wholesale or retail business.

Focusing on reducing lead times from your suppliers, carrying less obsolete stock, and better predicting your future requirements will help you maximize your profits and minimize your losses when it comes to inventory management.

If you want to do all 3 of those steps more effectively…

Reduce Your Inventory with Cloud-Based Management Software

The right inventory software will integrate all your purchasing, inventory, and sales data into easy to use, actionable reports that help you better manage your business by enabling you to make smart decisions – like increasing working capital through inventory reduction.

Start your free 14-day trial of DEAR Inventory today!

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Use Product Bundling to Grow Your Profits

Posted on May 6, 2017 by

Grow your customer base and increase average order size with product bundling!

Growing a business means growing sales, which can be done a few ways. A couple of go-to strategies include finding more customers and increasing your average order size.

Wouldn’t it be nice if you could do both at the same time, all while making your offerings more attractive than the competition’s?

Luckily, there’s 1 simple strategy that does exactly this:

It’s called product bundling.

Product bundling is the process of offering several products for sale as one combined product.

But is it actually an effective way to grow a business?

To test this, researchers in the Netherlands conducted a study to understand the effects of bundles on purchasing decisions.

Their study revealed that product bundling does, in fact, create an incentive for consumers to not only choose to buy from a particular brand (hard enough in and of itself), but even go so far as to switch from one brand to another (even harder).

So if the shop across the street offers a single slice of pizza, but you offer a slice paired with chips and a soda, customers are more likely to choose you over them.

But it’s not as easy as just throwing 2 or 3 products together and putting them on your digital or physical shelves… there a few things you need to know to make product bundling successful.

Read on to check out our 5 tips to start profiting from the power of product bundling quickly and easily.

1. Offer “Mixed Bundling” not “Pure Bundling”

When it comes to marketing, there are two types of bundles:

“Pure bundling” is when you ONLY offer a bundle, without offering those same products as standalone items.
“Mixed bundling” is when you offer standalone products AND a bundle of those products. It’s also the best type of bundle if you want more cash and customers.

2 researchers, Vineet Kumar and Timothy Derdenger, studied the sales of Nintendo’s Game Boy Advance and Game Boy Advance SP consoles, along with the games for both devices, between 2001 and 2005.

Essentially, they found that even though consumers may perceive the value a bundle (the Game Boy + a game) less than the individual components, they still bought MORE units of the bundle than of the individual products.

A driving factor behind this, though, was that consumers had a choice – they could either buy the bundle or buy the game and system separately; a “mixed bundle.”

When Nintendo offered a “pure bundle,” revenues decreased by 20{cb377218d5687e54e8ee9149518f87201a393a7c1db5e8076e9d750029ec0dc3}, meaning hardware sales fell by millions, and software sales fell by over 10. Ouch!

If you want to maximize your ROI from product bundling, make sure you clearly present both standalone and bundle options to your customers.

2. Offer Bundles That Make Sense

The key to great bundles is pairing related items together.

For example, a Christmas tree cookie cutter + box of cookie mix + frosting is a festive baking bundle. These products logically belong together and complement each other.

Some producers accidentally find themselves offering a “multi-pack” instead of a bundle.

In this example, a multi-pack would be a star cookie cutter + a tree cookie cutter + an ornament cookie cutter sold together. Since they’re variations on the same product, this isn’t the kind of “bundle” we’re talking about.

You also want to be careful not to offer totally unrelated items, like a 6-plate set + a mop.

Sure, they’re both “household items,” and you might use both in the kitchen, but they don’t match the “buyer’s intent.” When someone is thinking of buying plates, they’re thinking about how they’ll look when they serve dinner guests and if they’ll match their silverware, not how they’re going to clean their floors after everyone’s left.

If you want a quick way to find bundle ideas, search for products related to yours on Amazon, then look at the “frequently purchased together” section under a particular product’s listing.

With all the data Amazon has at its disposal, it’s a safe bet that they’re offering the items that are most likely to sell together, signaling to you which products you’ll be able to successfully sell in a bundle.

Learn more about crafting unique bundles to sell on Amazon here.

3. Create a “Bundle Brand”

An often overlooked value of product bundling is that it allows you to create a totally unique product, with a unique SKU, that your competition will find much harder to replicate.

Think about it this way:

There could be 20 sellers of selling plates that look like some you’re offering.

But fewer sellers could offer a bundle pack of plates and silverware that both look similar to those you could offer.

And if you create a special brand, a trademarked “collection” of dinnerware, copying you will be near impossible.

The more products you have in a category, the more possibilities you have to mix and match to create totally unique listings.

And the more likely your bundles will help you stand out from the crowd.

4. Sell on Bundle-Friendly Platforms

Recognizing the value of product bundling, the major internet retailers are very friendly toward product bundling and will gladly help you set up new bundles. But any well-established marketplace is great for testing different bundles to find a winning package.

So if you’re business’s ecommerce site is already generating a good amount of sales, the right plugins will help you test out new ideas quickly.

Here’s a bit more information on bundling using top ecommerce platforms:

Amazon

Amazon has a straightforward list of rules and recommendations for product bundling. Learn more about their policies and recommendations here.

Shopify

The Shopify app store includes an app that makes it easy to offer bundles just like Amazon’s “frequently purchased together” section, as well as discounts when customers buy them. Check out the app here.

Woocommerce

The Woocommerce Extension Store also features product bundling app similar to the one offered for Shopify, check it out here.

5. Track Bundle Sales and Adjust Accordingly

Wouldn’t it be nice to be able to read your customers’ minds and create product bundles you know they’ll buy?

Then be sure to collect data on their buying patterns!

To create effective bundles, you’ll want to collect customer data around:

What they buy separately
What they buy together
How often they’re buying
How much they’re willing to spend

Once you know all this, you can create bundles tailored specifically for your existing customers to grow your repeat business, as well as grow your average order size for new and existing business.

And don’t stop collecting that data!

Continue to track the success and failures of your product bundles and adjust them accordingly.

But how do you effectively track your sales and customer data?

With inventory management software that centralizes all your stock management and tracking under one hub, seamlessly integrates with multiple ecommerce platforms (including the ones we listed above), and gives you up-to-the-minute reports about your customers’ buying habits.

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