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How surplus stock is being wasted

Feb 23rd 2015 at 2:22 AM

Moderation is a fatal thing; nothing succeeds like excess – Oscar Wilde

I am sure Mr. Wilde had no idea what those words could mean to business and marketing, especially in the surplus stock sector.

Every industry produces products in excess, some for safety reasons and some due to the chances of faulty products in the arsenal of things sold. However, the question is what happens to the entire set of products that are not sold through the conventional channels.

So company A (say a textile MNC) producing apparels, has produced 70,000 pieces of shirts for a year and out of that seventy thousand only 40,000 are sold in that year. The remaining 30,000 is moved to the side as stocklots.

Ideally company A would connect to a specified buyer, who would probably need 10,000 of the lot and pay a certain amount for the same. Even then, 20,000 units are back in the storage gathering dust – in other words, their shelf life is soon to end. Sometimes these 20,000 pieces are sold and sometimes they don’t and they go to waste, depending on the demand-supply chain.

The biggest problem the surplus sector, especially the textile industry, is facing the issue of limited visibility the suppliers & buyers have of each other. As this industry is not regulated in any form, suppliers have very limited information of buyers and vice versa. Either they don’t want to or unable to reach out to all buyers in the country. So a supplier from Mumbai would not know about a buyer from Chennai who wants the same apparels that the supplier has. To add cherry to the top, the buyer from Chennai might even be willing to pay more for that set anybody else. But unfortunately, the supplier would not figure that out.

Another problem this sector deals with is price discovery. Due to the organized format of this sector, neither the suppliers nor the buyers are aware of the proper prices of how much a stocklot of fabric, yarn, apparel, etc would cost. A market with an unregulated price for its products would be more like a warzone than being a transactional arena.

In conclusion, surplus stock is part of all industry, but very few of them understand how lucrative the market can actually be. With respect to the textile industry, a new website has just pre-launched that promises to take care of the surplus stock section with an e-auction format, dubbed XSTOK. It has recently pre-launched its platform and has been getting quite the traction.

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