Fashion Dead Stock Case Study

✓$8.5M fashion brand: 15% dead stock ($180K) costing $36K-54K/year in carrying costs

✓System 1: AI forecasting (Nextail) — accuracy 65% → 82% in 4 weeks

✓System 2: SKU rationalization — 1,400 → 920 active SKUs (34% simplification)

✓System 3: Tiered markdown — average discount 55% → 22% (33% margin improvement)

✓Results: 30% dead stock reduction, $54K recovered, 18% inventory turnover improvement, 36% warehouse space freed

The $180K Problem Hiding in the Warehouse

In Q2 2024, a mid-market apparel brand with $8.5M annual revenue was hemorrhaging cash. Their warehouse held $1.2M in seasonal inventory. Of that, roughly $180K—15% of total stock—was deadstock: slow-moving colors, broken size runs, and trend misses from 90 days prior that were eating away at margins through carrying costs.

Their situation wasn't unusual. The global fashion industry writes off $120 billion in deadstock annually, accounting for 15% of all textiles produced. Even retail giants suffer. Nike reported markdown pressure on 44% of its assortment in 2024—double the previous year—after excess inventory piled up. H&M's 2018 inventory glut was $4.3 billion in unsold goods.

But this brand didn't accept it.

In 90 days, they cut dead stock from 15% to 10.5% of inventory—a 30% reduction.

$54,000

immediate cash recovered

800 sq ft

warehouse space freed

18%

inventory turnover improvement

Here's exactly how they did it, and the three systems that made it possible.

The Problem: Why Fashion Brands Drown in Dead Stock

Before we explain the fix, understand the mechanics of how dead stock happens.

1. Demand Forecasting Is a Guess

A merchandiser sees a trend—say, oversized cardigans—and places orders 90–120 days before the season. They order 500 units across colors: beige (150), black (150), cream (100), olive (100).

Sales come in:

→ Beige sells like crazy: 180 units in 6 weeks

→ Black is steady: 120 units

→ Cream? 40 units

→ Olive? 12 units

By week 8, you've got 88 units of cream and 88 units of olive sitting in your warehouse. They'll never sell at full price.

You either mark them down 40–60% (destroying margin), bundle them with bestsellers (diluting value), or write them off as inventory loss.

Scale this across 1,200 SKUs and multiple seasonal cycles, and you're looking at $180K–$600K of cash tied up in stuff nobody wants.

2. The Carrying Cost Is Vicious

Every dollar in dead inventory doesn't just sit there. It costs you 20–30% per year just to store, insure, and handle it.

Your $180K dead stock is costing you:

$36,000–$54,000 annually

in carrying costs alone—before you write it off

3. Manual Decision-Making Creates Guesswork

Most fashion brands manage dead stock through spreadsheets. Merchandisers review inventory aged >60 days, debate whether to markdown, and take weeks to decide.

By then, the window for clearing seasonal items has passed. You end up with a "clearance disaster"—marking everything down 60–70% just to get it out the door.

The Brand We Studied Had All Three Problems:

→ Demand forecasting based on last year's sales (which don't account for trend shifts)

→ Zero SKU rationalization—they carried 12 colors of the same item even though 3 colors drove 80% of sales

→ Clearance strategy was reactive and too late

The 90-Day Turnaround: Three Systems That Worked

They implemented three systems in parallel over 90 days. Each one targeted a different lever: forecast accuracy, SKU simplification, and dynamic markdown strategy.

System 1: AI-Powered Demand Forecasting (Weeks 1–4)

Their first move was painful but essential: they audited their historical sales data. Every SKU, every season, going back 24 months. They looked for patterns:

→ Which colors sell better in Q2 vs. Q3?

→ Which sizes are orphaned (sold out before the season ends)?

→ What's the typical sell-through curve for seasonal items?

This audit revealed the core problem: their demand forecasts were off by 35–45%. They'd forecast a winter parka would sell 300 units, but it actually sold 450 (stockout). They'd forecast 200 summer shorts but got 80 (dead stock).

Solution: Nextail (AI-powered demand forecasting platform)

Nextail ingests historical sales, seasonal patterns, pricing, promotions, and competitor data to predict SKU-level demand by store and channel.

Week 1: Data cleaning (removing returns, canceled orders, outliers)

Week 2: Model training on 24 months of historical data

Week 3: Backtesting (running the model on past seasons to verify accuracy)

Week 4: Live forecasting

Forecast accuracy improved from:

65% → 82%

a 27% boost within 2 months

System 2: Structured SKU Rationalization (Weeks 3–8)

While forecasting was being set up, they tackled SKU complexity. They had 1,400 SKUs across 4 categories. Analysis showed that 80% of revenue came from just 280 SKUs—20% of their catalog. The remaining 1,120 SKUs were noise.

Metric	Benchmark	Action
Annual sales velocity	<$500	Sunset
Inventory turnover	<2x/year	Review/bundle
Holding cost vs. profit	>30%	Rationalize
Size completion	<85% of run	Retire slow sizes
Color duplicates	>3 per silhouette	Reduce palette

Example: T-Shirt Color Analysis

They found 12 color variations of a basic T-shirt. Only 3 colors drove 82% of sales. The other 9 colors:

→ Generated 18% of revenue

→ Required separate dye lots (higher manufacturing cost)

→ Took up 35% of the picking time

→ Sat in inventory 40% longer

Decision: Retire 6 colors, consolidate 3, use bundling for slow sellers.

Result: Simplified catalog from

1,400 → 920 active SKUs

Discontinued 240 dead SKUs outright. Flagged 240 "review" SKUs for bundling/clearance.

System 3: Dynamic Markdown & Clearance Optimization (Weeks 5–12)

Traditional fashion clearance is a disaster: retailers wait until the end of the season, then slash 60–70% off and hope it sells. This brand did the opposite.

They implemented a tiered markdown ladder:

Timing	Markdown %	Target	Goal
Week 2–4	No markdown	Full-price customers	Maximize margin
Week 5–8	15%	Trend-aware buyers	Accelerate slow items
Week 9–12	30%	Price-sensitive buyers	Clear 70% of stock
Week 13+	50%+	Final clearance	Empty warehouse

The Insight:

Don't wait until week 13 to start moving slow stock. Start week 5 with a smaller, targeted discount to price-sensitive customers. This keeps margins higher than a 60% fire-sale at the end.

By week 8, they'd cleared 68% of flagged inventory at an average:

22% discount

(vs. the historical 55% clearance discount)

The Results: 30% Dead Stock Reduction in 90 Days

Metric	Before	After	Improvement
Dead stock % of inventory	15%	10.5%	30% reduction
Dead stock value	$180K	$126K	$54K recovered
Forecast accuracy	65%	82%	27% improvement
Active SKUs	1,400	920	34% simplification
Inventory turnover	3.2x/year	3.8x/year	18% improvement
Warehouse space used	2,200 sq ft	1,400 sq ft	36% reduction
Average clearance markdown	55%	22%	33% margin improvement
Cash recovered	—	—	$54K immediate

The Longer-Term Benefits:

→ Lower forecasting errors meant fewer future dead stock problems

→ Simpler SKU counts meant faster picking, fewer inventory errors, and easier demand planning

→ Better markdown strategy meant protecting margins on seasonal items

What This Tells You: The Three Levers

This case study isn't special because the brand is special. It's special because they pulled three levers simultaneously:

Lever 1: Better Forecasts

Prevent future dead stock. If you can predict demand within ±10% instead of ±40%, you order the right quantities.

Highest-ROI intervention. Prevents the problem before it happens.

Lever 2: Simpler Assortments

Reduce carrying cost. Not every color needs to exist. When you rationalize SKUs, you reduce the surface area for dead stock to accumulate.

Improves inventory turnover by only stocking what actually sells.

Lever 3: Faster Clearance

Preserve margin. The moment you know something won't sell at full price, start the markdown ladder early.

A 15% discount on week 5 that clears 40% is far better than a 60% discount on week 13.

All three together compound: Better forecasts → fewer slow-moving SKUs → less need for aggressive markdowns → higher margins → more cash available for next season's inventory.

The Tools They Used (And Why)

Tool	Purpose	Cost	Results
Nextail	Demand Forecasting	$3,000–6,000/month	30% inventory reduction, 60% fewer stockouts, 3%+ sales lift
Centric PLM	SKU Rationalization	$2,500–4,000/month	Clear decision framework, documents rationale for each SKU action
Stylumia/o9	Markdown Optimization	$1,500–3,000/month	35–50% improvement in clearance profitability

Total Tool Cost: $7,000–$13,000/month = $21K–$39K over 90 days

Payback from Dead Stock Recovery:

$54,000 (immediate)

ROI: 139–257% in the first 90 days

After the pilot, they kept the tools running (annual cost: $84K–$156K) because the operational improvements justify the cost 4–5x over.

Common Pitfalls That Slow Down Dead Stock Reduction

Pitfall #1: Treating dead stock as a disposal problem, not a forecasting problem

Most brands try to "solve" dead stock by liquidating it faster. They miss the real lever: preventing future dead stock through better demand planning. Liquidation is a temporary fix. Better forecasts are permanent. Start with forecasting. It prevents the problem.

Pitfall #2: Refusing to retire SKUs because "a customer might want it"

This is emotional decision-making. If a color has sold 3 units in 18 months, a customer probably doesn't want it. The carrying cost of holding it ($3–5/year on a $20 item) exceeds its contribution margin. Document the decision, retire it, and monitor if demand resurfaces. (It won't.)

Pitfall #3: Markdown too late

The moment you see an SKU won't hit its sales target, start the markdown. Week 5 of the season, not week 13. A 15% discount early beats a 60% discount late every time.

Pitfall #4: Not integrating forecasting into buying decisions

You implement AI forecasting, get 80% accuracy, then your buyers ignore it and order based on "gut feel" anyway. Forecasting only works if it's wired into the PO process. New orders should be generated from the forecast, not overridden by hunches.

Pitfall #5: Treating this as a one-time cleanup

Dead stock reduction requires continuous discipline. You rationalize SKUs once. Then every quarter, you review new ones. You monitor forecast accuracy monthly and retrain models seasonally. It's an operating rhythm, not a project.

The Real Lesson

This fashion brand didn't have a magic solution. They had discipline.

→ They measured dead stock

→ They understood the financial impact (carrying costs, margin loss, opportunity cost)

→ They invested in systems that prevented future dead stock

→ They executed a clearance strategy that minimized the damage from past mistakes

Most brands have 12–15% dead stock sitting in their warehouses right now. They're bleeding $20K–$200K+ annually in carrying costs. And they're doing nothing about it because it feels hard.

This brand proved it's not hard. It's systematic.

If your fashion brand has more than 10% dead stock, that's a

$20K–$100K+ profit leak

AI-powered demand forecasting, structured SKU rationalization, and dynamic markdown strategies can recover 30% of that in 90 days.

Ready to cut dead stock without slashing margins?

Schedule Your Free 30-Minute Dead Stock Assessment

Braincuber's Fashion Inventory Audit reveals exactly how much dead stock is hiding in your warehouse, what it's costing you annually, and the precise sequence to clear it in 90 days while protecting brand value. Most fashion brands doing $3–20M ARR can recover $30K–$150K in the first quarter alone.

We'll analyze your current SKU performance, forecast accuracy, and clearance strategy—and show you the exact systems that will turn dead inventory into cash. No pitch, just hard numbers on what's costing you.

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