This is when a product is no longer useful or desirable to a consumer, even if it is still functional. Purchasing a replacement product is generally preferred by the consumer, and this can be due to changing technology, fashion, or the consumer’s individual needs. Obsolescence is particularly important for determining the cost of holding excess inventory, for a retailer, manufacturer or distributor. This is because the obsolescence determines how quickly the value of inventory declines relative to a fixed acquisition cost. A retailer holding products facing rapid obsolescence will have little hope of recovering a reasonable profit and may choose to liquidate the inventory.

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