Dead stock is inventory that has not sold for a long stretch, usually 90 days or more, and is unlikely to sell at its normal price. It hurts because the cash you paid for it earns nothing while it keeps taking shelf space. Most shops hold some, and few know what it is worth.
This guide shows how to spot it, what causes it, how to put a number on it, and how to clear and prevent it. The worked example is a boutique in Nairobi, in Kenyan shillings.
What counts as dead stock?
No sale in 90 days is the common cut-off, and a good default for most shop goods. Three kinds of goods need a different test.
| Goods | Treat it as dead when | Why |
|---|---|---|
| Most shop goods: household, hardware, phone accessories | No sale in 90 days | Three months of silence is long past a normal reorder cycle. |
| Seasonal and fashion goods | The season or school term is over and it is still on the shelf | Demand comes back a year later, if at all. |
| Dated goods: food, medicine, cosmetics | You hold more than you will sell before the expiry date | Those units will expire on the shelf, however new they are. |
| Spare parts and other slow lines | No sale in about 180 days | They sell rarely even when healthy. |
Dated goods need arithmetic, not a calendar:
Dead units = stock on hand − (average daily sales × days to expiry)
For example, a chemist in Nairobi holds 120 bottles of a cough syrup and sells 2 a day. The batch expires in 45 days, so about 90 bottles will sell before then. The other 30 bottles, a quarter of the stock, are dead stock today, even though they arrived last month.
Slow-moving stock still sells, only too slowly for the money in it. Obsolete stock is dead stock the market has replaced, such as cases for a phone model nobody carries now. Investopedia treats obsolete, dead and excess inventory as one problem: stock that has to be written down or written off.
What Causes Dead Stock?
Dead stock comes from buying more than customers will take before the goods age. Seven causes account for most of it, and the first three are buying decisions you control.
Over-ordering
Buying by feel, or buying a bigger lot for a discount, is the fastest route to dead stock. Check a product's inventory turnover before you reorder it, and buy slow lines in small lots.
Carton rules make it worse. If a supplier sells only cartons of 48 and the line sells 5 a month, one order is nearly 10 months of stock.
Inaccurate Demand Forecasting
Guessing what will sell leaves the guess on the shelf. Sales for the same weeks last year are a better guide than memory, and inventory forecasting methods shows how to turn them into a quantity.
Poor Sales and Marketing Efforts
A good product that nobody sees can die on a back shelf. Lines out of sight, missing from the online shop or from the price board sell slower than their demand. Move a slow line to eye level for two weeks before you call it dead.
Defective or Low-Quality Products
Goods that arrive damaged, or that customers keep returning, rarely sell again at full price. Check deliveries against the invoice before you sign, and send faulty goods back while the supplier still accepts them.
Backorders and Panic Buying
After a stockout, shops often reorder far more than they need. Once the waiting customers are served, the extra units sit. Buying ahead of a price rise does the same thing, unless the line sells fast.
Order Cancellations
A customer who cancels a special order leaves you holding goods bought for one buyer. Take a deposit on anything you order for a single customer.
Long Lead Times
Goods that take months to arrive can miss the season they were bought for. Stock imported through Mombasa or Dar es Salaam can take weeks to clear and reach your shop. Order seasonal goods early enough to land before the season, or skip them.
Why Dead Stock Hurts Your Business
Dead stock costs money every month it stays, long before you discount it. The losses come in five forms.
Unsold Inventory Means Lost Money
The cash you paid for dead stock cannot buy the goods that sell. The boutique below has KES 78,300 in dead lines, which is KES 78,300 it cannot spend on its best sellers.
Higher Storage Costs
Dead stock fills shelf and store room space you pay rent for. It also goes missing or gets damaged while it waits, and those losses show up as inventory shrinkage at the next count.
Lower Profit Margins
Every month on the shelf adds holding cost: interest on the money, rent, power and risk. Our inventory holding cost example works out at about 40% of stock value a year for a Kampala mini-supermarket. Clearing the stock later usually takes a deeper discount too.
Increased Employee Time and Costs
Staff count it, move it, dust it and re-price it, and none of that time sells anything. Every stock count takes longer when the shelves are full of lines that never move.
Lost Sales Opportunities
The space and cash held by dead stock could carry products customers ask for. When a best seller runs out because the money is tied up elsewhere, the cost is the sale you never make.
How to Calculate Dead Stock Cost
Price dead stock at cost first, because that is the cash stuck on the shelf. The value at selling price shows what you hoped to earn, but no buyer will pay it now.
For example, a boutique in Nairobi runs a list of products with no sale in 90 days and finds three lines. These are example figures, not a real shop's.
| Product | Units | Cost each | Value at cost | Price each | Value at price |
|---|---|---|---|---|---|
| Last season's printed dresses | 35 | 900 | 31,500 | 2,000 | 70,000 |
| Men's shirts in sizes XS and XXXL | 48 | 600 | 28,800 | 1,300 | 62,400 |
| Children's sweaters in last year's colour | 40 | 450 | 18,000 | 1,000 | 40,000 |
| Total | 123 | 78,300 | 172,400 |
Dead Stock Value
Dead stock value is the units you hold multiplied by a price per unit. Work it out both ways:
- At cost: units × cost per unit. The boutique's dead stock is KES 78,300 at cost, the cash that is stuck.
- At selling price: units × selling price. The same stock is KES 172,400 at price, the revenue it was bought to bring.
Then divide the value at cost by all the stock you hold at cost. The boutique holds KES 650,000 of stock, so 12% of its stock money is dead.
Dead Stock Sunk Cost
Sunk cost is everything you paid to get the goods onto your shelf: the supplier's price plus transport, clearing, duty and handling. The boutique paid KES 800 a dress and KES 100 a dress to bring it in, so each dress cost KES 900.
That money is gone whether you sell or wait, so it should not set your clearance price. The only question is what the stock will fetch now against what it will fetch later.
Missed Profit
Missed profit is the margin the stock would have earned at full price: value at selling price minus value at cost. For the boutique, KES 172,400 − KES 78,300 = KES 94,100.
Treat this as the price of the buying mistake, not as money you can still collect. Last season's dresses will not sell at KES 2,000 next year either.
What dead stock costs each month
Multiply the value at cost by your monthly holding rate. At an example rate of 2% a month, the boutique pays about KES 1,566 a month, or KES 18,792 a year, to keep its three dead lines.
That is before any further fall in what the stock will fetch, which is usually the bigger loss.
7 Easy Ways to Get Rid of Dead Stock
Start with the ways that bring back the most cash, and keep donation for stock nobody will buy. Each way suits a different kind of dead stock.
| Way | What you get back | Works best for |
|---|---|---|
| 1. Run clearance sales | Part of the price, often still above cost | Lines that still sell, only slowly |
| 2. Offer free gifts | No cash, but a bigger sale | Cheap items that go with a purchase, such as socks with shoes |
| 3. Donate to charities | Space and goodwill; ask your tax adviser whether it is deductible | Stock nobody will buy at any price |
| 4. Bundle with bestsellers | Most of its price, inside the bundle | Items that go with a fast seller |
| 5. Return to suppliers | Up to the full cost, as a refund or credit | Faulty goods, or lines a distributor agreed to take back |
| 6. Partner with other businesses | A lump sum, below the shop price | Selling the lot to a market trader or another shop |
| 7. Explore new sales channels | Full or near-full price | Another branch, your online shop, or a classifieds site such as Jiji |
For example, the boutique clears its sweaters at KES 600 in a weekend sale. That is KES 150 above cost each, and the 40 sweaters bring in KES 24,000.
It sells the 35 dresses to a market trader at KES 700, KES 200 below cost. The KES 7,000 loss frees KES 24,500 in cash today.
Selling below cost is a real loss. Inventory liquidation shows when to take one, and the lowest price worth accepting.
How to Prevent Dead Stock
Prevention is a buying habit: order what recent sales support, and look at slow lines before you reorder them. Five habits do most of the work.
Forecast Demand Accurately
Base each order on the same weeks last year and the last eight weeks, not on what a sales rep is pushing. Buy new lines in small test quantities first.
Set Reorder Points and Safety Stock Levels
A reorder point tells you when to buy, and an order-up-to level caps how much. Size the safety buffer by product, so slow lines carry little or none, as how to avoid overstocking and stockouts works through.
Track Inventory in Real Time
Record every sale, delivery and return as it happens, so the stock report matches the shelf. A system that updates at the till shows a line slowing down weeks before it stops.
Review and Audit Inventory Regularly
Run the 90-day dead stock list once a month and decide for each line: reprice, move, return or clear. Count slow lines at your regular counts too, because missing stock hides in them.
Work with Reliable Suppliers
A supplier who delivers in days lets you buy small and often. Ask for smaller lots or mixed cartons on slow lines, and agree in writing which unsold goods they will take back.
How to find and clear dead stock in ArmPOS
ArmPOS lists dead stock for you, by warehouse, from the sales and deliveries you already record.
- Find it. Open Reports › Dead Stock Report and pick a Period of 30, 60 or 90 days. It lists products with stock that haven't moved in that time (Stock reports).
- See how long it has sat. The Zero Sales Products Report shows each product with no sale in the period and its last sale. The Stock Aging Report sorts what you hold into up to 30 days, 30 to 60, 60 to 90 and over 90.
- Put a value on it. Inventory Valuation multiplies each product's stock on hand by its cost. Add up the dead lines from it.
- Catch dated goods early. For products tracked by batch, the Expiry Report lists batches near or past expiry. A batch's Write Off takes spoiled stock out (Batches and expiry dates).
- Move it where it sells. A transfer sends stock to another branch once someone with permission approves it (Move stock between warehouses).
- Send it back. A purchase return takes the goods out of stock and records what the supplier owes you (Return goods to a supplier).
- Discount it. On plans with Promotions, make one with Product scope set to Specific products and an end date. The till applies it (Promotions and promo codes).
- Stop it coming back. Set a Stock Alert on each product you reorder, and buy from the Product Quantity Alerts list, not from memory (Reports to check every day).
See what ArmPOS includes for shops in Kenya.
Frequently asked questions
What is the difference between dead stock and slow-moving stock?
Slow-moving stock still sells, only too slowly for the money in it. Dead stock has stopped: no sale in 90 days, or more than you can sell before it expires.
How long before stock counts as dead stock?
Ninety days without a sale is the usual cut-off for shop goods. Use the end of the season for fashion and seasonal lines, the expiry date for dated goods, and about 180 days for spare parts.
Is dead stock still an asset?
Yes, but not at what you paid. Under IFRS for SMEs, stock is carried at the lower of cost and selling price less costs to sell (IFRS Foundation, Module 13). Obsolete stock is written down to that amount, as inventory write-down shows.
What does deadstock mean for sneakers?
Almost the opposite of a shop's problem. In sneaker and streetwear resale, deadstock means new, never worn and still in its original box, and it can sell above the shop price.
Should I throw dead stock away?
Only when nobody will take it, not even as a gift. Return, move, bundle, sell or donate it first, and record what you dispose of so your stock records stay true.
This week, list everything with no sale in 90 days, value it at cost, and choose a way out for each line. To get that list straight from your till's own records, create a free ArmPOS account.
