CLEARANCE meaning and definition

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What Does "Clearance" Mean?

In the world of retail, inventory management, and supply chain logistics, the term "clearance" is a common phrase used to describe a process that involves getting rid of excess or unwanted products. But what exactly does it mean?

Definition:

Clearance refers to the process of selling off or removing unsold, obsolete, or defective products from a company's inventory at discounted prices. This can be done through various channels, such as online marketplaces, brick-and-mortar stores, or special clearance events.

Reasons for Clearance:

There are several reasons why companies may need to clear out their inventory:

Overstocking: When a company orders more products than they actually need, they may end up with excess stock that doesn't sell well.
Discontinuation of Products: If a product is no longer in production or has been discontinued due to poor sales or quality issues, it needs to be cleared out to make room for new products.
Seasonal Overstocking: Certain products may only be popular during specific seasons (e.g., winter coats or summer shorts). When the season ends, these products become excess inventory that needs to be cleared.

Benefits of Clearance:

Clearance can bring several benefits to a company:

Reduces Inventory Costs: By selling off excess inventory, companies can avoid holding onto unsold products and the associated costs (storage, maintenance, etc.).
Makes Room for New Products: Clearance allows companies to make room in their warehouses or stores for new products, keeping inventory fresh and relevant.
Increases Cash Flow: Selling off clearance items can generate cash flow, helping businesses fund future operations or investments.

Types of Clearance:

There are several types of clearance:

Liquidation Sales: Companies may hold special sales to clear out excess inventory quickly, often at deeply discounted prices.
Online Clearance: E-commerce companies may list their clearance items online, allowing customers to shop for deals from the comfort of their own homes.
Storewide Clearance: Brick-and-mortar stores may offer storewide clearance events, featuring discounts on entire sections or categories of products.

Conclusion:

In conclusion, clearance is a vital process in inventory management and supply chain logistics that helps companies get rid of excess or unwanted products. By understanding the reasons for clearance and the benefits it brings, businesses can optimize their operations, reduce costs, and increase cash flow. Whether online or offline, clearance sales offer customers the opportunity to snag great deals on products they might not have considered otherwise.

References:

[1] Investopedia - "What is a Clearance Sale?"
[2] Harvard Business Review - "How to Run a Successful Clearance Sale"
[3] Statista - "Global online clearance sales 2020"

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