Your goal is to buy a last-generation smartphone, ideally at a nice discount. You visit the brick-and-mortar store of an electronics retailer and there they are, displayed even more prominently than the shiny, just-launched phones. What you’ve encountered is one form of stock rotation in action—something that many retail stores use for maximizing sales and managing inventory.
What is stock rotation?
In inventory control, stock rotation is the practice of circulating the goods in your storefront to prioritize the sale of certain products over others.
The most common form of stock rotation is the first in, first out method (or FIFO), in which retailers display older goods more prominently than newer goods. The goal with the FIFO strategy is to sell the older items as soon as possible to make room for new stock. FIFO stock rotation is especially common for businesses that sell perishable products with expiration dates, like food stores or restaurants. It also is an important practice in retail stores with short demand cycles, such as the technology industry, where older stock quickly becomes outdated or obsolete.
In retail stores with nonperishable goods, stock rotation often takes the form of seasonal offerings (like phasing out winter coats to make way for summer fashions). Seasonal rotation often makes more use of storage solutions, tucking unseasonal products back into the storeroom rather than trying to sell them as quickly as possible, with the plan to offer them again once the appropriate season returns.
Why is rotating stock important?
Rotating stock is important for inventory management. Rotation can:
- Make room for newer items. In FIFO stock rotation, you put older stock on the shelf ahead of newer stock, selling the old faster to make space for the new, keeping your storefront fresh and relevant to customers. This is especially important in industries with rapidly evolving trends, such as fashion or technology, because it helps you to clear out old stock and prioritize the latest designs and innovations.
- Maintain seasonal relevance. For shops that sell goods based on the weather (like clothing retailers), stock rotation allows you to keep your storefront relevant to shoppers as the seasons change. Otherwise, you may find yourself trying to sell swimsuits in the middle of winter or racking up storage costs as you hold them until spring—and by then, they might be out of fashion.
- Minimize loss from obsolescence or deterioration. Although clothing and tech gadgets aren’t perishable products with sell-by dates, the fashion and technology industries are subject to rapid and significant shifts in tastes and trends—what sold like hotcakes a year ago may not be popular today. Consistent rotation helps with stock loss mitigation, reducing the chances of product quality deteriorating in storage or obsolescence and paving the way for higher profits. (Of course, rotation isn’t the only tool for minimizing stock loss—it goes hand-in-hand with a number of other important principles, including demand forecasting and inventory management.)
4 steps to implement stock rotation
- Determine which products to prioritize
- Identify the most prominent locations in your store
- Track sales and adjust accordingly
- Implement discounts for clearance when needed
Here are four measures to take when implementing stock rotation in your retail business.
1. Determine which products to prioritize
The key to successful stock rotation is to figure out which products are most important to sell and when. In industries where products and trends change quickly, it’s essential to sell the oldest products first because they’re at the highest risk of obsolescence. In some industries, such as apparel, you’ll want to factor in seasonal demand when choosing the most important products for each time of year.
2. Identify the most prominent locations in your store
To rotate your stock effectively, you’ll need to identify the prime real estate in your store layout. In brick-and-mortar shops, this can be in a display window or in a central spot on the sales floor. On an ecommerce website, this can be a large featured banner or at the top of your products list. For booths at fairs or festivals, this can be the spot closest to foot traffic or in the middle of your display table.
3. Track sales and adjust accordingly
Track sales to determine if your stock rotation strategy is effective. If the products you're trying to sell first do, in fact, sell first, then you can feel confident your approach is working. Pair these insights with demand forecasting strategies, and you’ll have a better grasp on determining the optimal size for your purchase orders and managing your inventory year-round. As your sales performance changes, you can adjust the placement of products in your store and rethink your strategy.
4. Implement discounts and clearance when needed
Many companies use discounts to help push out old inventory faster. If you find yourself with too much inventory at the end of a particular season or cycle, use discounts or clearance sections in your store to sell these products faster.
Stock rotation FAQ
How often should stock be rotated?
There’s no set schedule for when to rotate stock—every industry is unique, and every store has different needs. In general, consider the length of the demand cycle in your industry, and sell within that time frame. If the demand cycle is moderately long, and products and trends turn over every few years, try to rotate your stock every year to keep your offerings fresh. If your shop has seasonal offerings, such as apparel, you’ll want to rotate your stock before each change of season, or every three months.
Can stock rotation help reduce waste?
Yes, first in, first out stock rotation reduces waste by selling older products first and newer stock later. It also encourages clearance sales and discounts to help move stock faster and make way for fresh products. This ensures that the oldest products don’t deteriorate or become obsolete before they are sold—which means less waste for your business.
What are the risks of not rotating stock?
If you don’t rotate your stock, you may find yourself trying to sell seasonally irrelevant items or paying for extra storage space when demand for your products is low. In the worst case, you may not be able to sell old or outdated products, incurring a loss.
How can businesses determine which products to rotate first?
It should be relatively straightforward to determine which products to prioritize during stock rotation. In industries with a short demand cycle, where products and trends shift quickly, it’s usually the oldest products that are most important to sell first because they’re closest to obsolescence. In industries with seasonal offerings, like the clothing industry, you’ll want to factor in seasonal demand when choosing the most important products for each time of year.
