Damaged stock stays in your sellable count until someone tells the system it is damaged. Until then every channel keeps offering it, and the customer who orders it receives a broken piece, files a return, and costs you the sale, the freight both ways and the goodwill.
Why does damaged stock keep getting sold?
Because the damage is noticed on the shelf but never recorded in the system. The person who spots a cracked box, a torn garment or a leaking bottle fixes it in their head, not in the stock count.
In a store this is a small loss. In a warehouse that feeds the website, Amazon, Flipkart and several stores, it multiplies, because one phantom unit is offered to every channel at once. It usually starts in one of four places:
- Inward receiving: cartons arrive crushed, are counted as received and go straight to the shelf.
- Handling: a unit is dropped during putaway, picking or a store transfer and put back on the rack.
- Storage: damp, heat, pests and stacking weight damage stock that sat untouched for weeks.
- Returns: a returned unit is restocked without anyone opening it. Our post on omnichannel returns processing covers the inspection side.
What does a damaged unit actually cost?
More than the unit itself. The loss is the product cost, the outbound freight, the return freight, the replacement you ship, and a customer who may not order again.
There is also a tax angle. Under Section 17(5)(h) of the CGST Act, input tax credit is not available on goods that are lost, stolen, destroyed, written off or given away as gifts or free samples. The CBIC GST portal carries the Act and the circulars, and your accountant should confirm how it applies to your write-offs. The practical point is that a damaged unit left in stock for months is a loss you have not booked yet, and it surfaces later as a stock difference nobody can explain.
Courier damage is a separate problem with a separate fix, covered in how to recover money on lost and damaged parcels. This post is about damage that happens inside your own four walls.
How to keep damaged stock out of the sellable count
The fix is to record damage at the moment it is found and move the unit out of sellable stock in the same step. Do it in five moves.
- Stop the unit where it is found. Whoever spots damage pulls it off the shelf or out of the tote immediately and does not put it back.
- Log the damage with a photo and a one-line description, the same minute. A photo made later, or reconstructed from memory, is not evidence for a supplier or a courier.
- Record the reason in the stock system, for example receiving, handling, storage or return, so you can see which stage is leaking.
- Move the unit to a marked damaged area and take it out of sellable stock, then decide: claim from the supplier, repair, discount, or write off.
- Review the log every week. If one reason or one person keeps appearing, fix the process, not the unit.
Commmerce, an Omnichannel Retail Operating System for Indian retailers, supports damage logging with a photo and description, and lets each organisation decide whether damaged stock can be written off and whether a photo is compulsory for the write-off. Setting the photo rule on is the simplest control against quiet write-offs.
How do you split damage by cause?
Group every damage entry by where it happened, because each cause has a different owner and a different fix.
| Where found | Likely cause | Who can recover the cost | First fix |
|---|---|---|---|
| At receiving | Poor packing or transit damage | Supplier or transporter | Open and check cartons before signing the delivery |
| During putaway or picking | Handling | Nobody, it is your loss | Retrain and fix rack heights and tote sizes |
| On the rack | Damp, heat, pests, stacking | Nobody, it is your loss | Move slow stock off the floor, check monthly |
| On return | Customer use or courier damage | Customer, courier or marketplace | Inspect and grade before restocking |
Receiving is where you have the most leverage, because it is the only point where the supplier can still be asked to pay. Our guide to warehouse receiving errors shows how a rushed inward check turns into dead stock later.
How do you find damage that was never logged?
Count the stock. A cycle count compares the shelf with the system and raises a difference wherever they disagree, and that difference is where unlogged damage shows up.
When a difference is raised for review in Commmerce, the manager records what happened to the goods, such as damage, shrinkage, a count error or a receiving error. That split matters, because a count error and a real loss need different responses. Read how Indian retail warehouses use cycle counting for a count rhythm that does not stop dispatch.
Which grades work for damaged stock?
Three grades are enough for most Indian retailers, and the grade decides the next step.
- Grade A, repack: the product is fine and only the outer pack is damaged. Repack it and return it to sellable stock.
- Grade B, discount: a small cosmetic flaw. Sell it openly as a second, at a clear discount, in the store or on a separate listing.
- Grade C, write off: unsafe, unusable or beyond repair. Write it off with a photo and a reason, and claim from the supplier if the delivery was recent.
Never let Grade B quietly mix back into full-price stock. That is how a customer receives a flawed piece at the full-price rate, and how marketplace seller ratings fall. Retail bodies such as the Retailers Association of India regularly stress that customer experience drives repeat purchase, and a damaged delivery breaks it at the first order.
What should an owner check this week?
Walk to the corner of your warehouse where broken stock collects, and compare what is physically there with what the system calls damaged.
If the corner holds more than the system shows, you are selling the difference. Pick any ten units from the shelves nearest receiving and check them for damage. If you find any, you have the problem, and the steps above are the fix. For wider context on how stock records drift out of step with the shelf, see our post on putaway delays that hide sellable stock, which is the mirror image of this problem: stock that is sellable but hidden, instead of unsellable but visible. Retail growth data from IBEF shows the sector keeps expanding, which means more units moving through more hands and more chances for damage to go unlogged.
Frequently asked questions
Should damaged stock be deleted from inventory immediately?
No. Move it out of sellable stock first, keep the record with a photo and reason, and write it off only after you decide whether a supplier or courier claim is possible.
Who should be allowed to write off damaged stock?
Only a manager, never the person who handled the unit. Requiring a photo on every write-off keeps the control simple and auditable.
How often should damaged stock be reviewed?
Weekly. A weekly review groups entries by cause, shows which stage leaks most, and keeps the supplier claim window open.
Can damaged returns be resold?
Only after inspection and grading. A repacked, undamaged item can go back to full-price stock, a cosmetic flaw can be sold as a second, and the rest is written off.
