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.