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What Is Stock Clearance?

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  • Written By: M. McGee
  • Edited By: Lauren Fritsky
  • Last Modified Date: 20 November 2016
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    Conjecture Corporation
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A stock clearance is when a company sells or disposes of items to get rid of them rather than make a profit. These items could be overstock, leftovers or returned merchandise. For whatever reason, the company puts more value on the space the items are using than it does on the items themselves. A company will often use marketing tactics and closed-door deals to ensure that the devaluing of the stock does not affect its corporate image. Companies will also use this stock as leverage via tax deductions and for targeted sales.

What makes a stock clearance different from a normal sale is the mindset of the company. In a normal sale, the object is to bring in customers and make a profit. With stock clearance, the merchandise is generally sold at or below cost, and it rarely ties in with any other sale.

Even selling below cost, a stock clearance is normally a boon for the company. When a company possesses a large amount of stock that it is unable to sell, it has already invested in that stock. When it simply sits there, the company has both lost the initial investment and the space necessary for new items. By selling the items at clearance, the company will recoup a portion of the initial investment and have room for additional merchandise.

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Some companies attempt to perform stock clearance away from the main stores. For instance, some high-profile department stores feel that carrying clearance items in-store looks tacky and implies a lack of quality. In these cases, a secondary company typically performs the stock clearance. This company will buy the entirety of the stock from the original owner and resell it in a different store. This will preserve the corporate image and quickly liquidate the troublesome items.

Another common tactic used during a stock clearance is donation. By donating the goods, a percentage of the original cost can be applied as a tax deduction to the company. This has the added benefit of moving the goods far away from the store, possibly even to another country. This prevents the local area from becoming saturated with the clearance items and preventing the full-priced items from selling.

The other common use of a stock clearance it as a targeted sale campaign. For example, an item that is currently selling well through television and Internet sales may drop off quickly. This will leave the original holder with a wealth of items no one is buying. When the next big item comes up, the company will give the surplus item along with it as a ‘free gift.’ This tactic is very common in infomercial sales.

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