What are the hidden costs of retaining non-sellable goods? Unlike a payroll expense, the dollars and cents of not disposing of non-sellable goods quickly is not as easy to see. But, I believe you’ll quickly see there is a very real and tangible cost as demonstrated by the three drivers identified below.
The age old saying “one bad apple spoils the whole bunch” cannot be more true when it comes to thrift. We have seen literally a whole warehouse of sellable textiles be ruined by a few bags of clothes that were wet and covered over. By the time the pile was uncovered, everything in the pile was mildewed and had a odor which made them all non-sellable. Product loss is a real cost.
Besides product loss, there is the cost of inefficiencies. When piles clog aisle ways and product is being moved constantly to make room for more product, then the overall efficiency of the operation is dramatically effected. Unless that product has been pre-sorted and non-sellable items removed, a reasonable percentage of what is impeding movement around the warehouse could be removed and free access gained. These bottlenecks can become a lot more costly, measured in a higher-than-needed payroll and fewer items delivered to the store floor, than realized and can be eliminated by one simple step.
The last driver of cost is “the guilt by association” effect. If your product has been pre-sorted and the pricing team is only looking at the best product, they tend to give items an appropriately higher value. If they must sort the trash as well as the high-value items, the result tends to be a 10% to 20% reduction in pricing for every item. This effect is found in pricing hard goods as well as textiles. It’s easy to imagine how this cost is more impactful than most would believe.
As we wrap up this series on The Art of Disposal, I am reminded of a story regarding Walt Disney’s obsession with cleanliness in his theme parks.
When I started on Disneyland, my wife used to say, “But why do you want to build an amusement park? They’re so dirty.” I told her that was just the point – mine wouldn’t be. – Walt Disney
It is not that other theme parks do not know how to keep their parks clean, it is that Disney simply does it.
Disposing of product that has no value quickly is not hard to do, it just takes an organizational commitment to do it. Rest assured, when the investment is made to take these actions, the benefits will be realized.