Stock clearance refers to an operation that the company undertakes legally to transfer the ownership of its goods to another company, meaning that it no more focuses on the sales of goods offered to the other company.
Companies conduct such clearance sales when they want to get rid of stocks even without making any profit in the process. The reasons for getting rid of stocks could result from excessive stocks, unsold stock or returned goods. The main reason for such sales is to create more shelf space by disposing of surplus or out of date merchandize. To prevent the corporate image of the company from suffering a hit, companies use various marketing techniques, and enter into closed-door deals. Companies may also use such stocks to their advantage and claim tax deductions.
This kind of sale is different from the usual sale in the sense that the latter serves to push up sales by attracting customers and thus adding to your profit. Here, the companies may sell the goods at or even below their cost price.
Common Phenomenon on the High Streets
High streets, the world over, frequently witness such clearance sales. It is usual to come across stores on high streets displaying signboards saying ‘all items must go’ or ‘stock clearance sale.’ This is a typical phenomenon associated towards the end of a season or when the company plans to pull down the shutters for good. Most stores organize “end of the season sales” to liquidate stocks that remained unsold during the season and thus make room for displaying the latest items for the forthcoming season. Shoppers can generally save a substantial amount of money on buying from such sales.
Be Wary of Customer Reaction
When customers hear that the discounts are a result of a clearance sale, they sometimes get apprehensive about the quality of goods. They would have felt more confident if the company had described the sale as a volume discount sale.
Entrusting the Sale to Surrogates
Certain prestigious stores may carry clearance sale of stocks away from their key stores because they consider clearance sale at their own stores promotes a feeling of misgiving among the customers with the product quality, and the entire idea looks sloppy. Therefore, such stores entrust the job to another surrogate company that buys the entire stock from them and sells it to different stores. That way, the corporate reputation of the company remains intact and it gets rid of all unwanted items in one stroke.
Another widespread practice followed during stock clearance is donation. On donating the stuff, the company can seek tax deduction on some fraction of the original price. The company can also enjoy an added benefit of transferring the goods to a place distant from the store, or even to a different country. This helps avoiding the local area getting flooded with items under clearance sale, thereby serving as an impediment to selling items at full price.
When planning to buy products online, it is worth calculating how much you will save on buying through a stock clearance sale. It may need a bit of research on your part to know the factual price of items that you plan to buy. At times, the store may claim to offer discounts of 50%, for a highly exaggerated original or list price. If you really want to enjoy the maximum savings, you need to know the precise price at which the item is available elsewhere.