The explosive growth of ecommerce sales is bringing a subsequent spike in ecommerce returns. To put it in perspective: Returns are projected to grow at a 15% annual rate, and 30% of online purchases were returned last year, according to research from commercial real estate firm CBRE.
Buyer’s remorse from consumers not being able to touch or try on products plays a large role, as does the propensity to order 2-3 sizes or styles and send back the ones that don’t work. No matter the reason, this trend is costing retailers billions, a pretty big dollar amount that can’t be ignored.
This trend, and the growing cost associated with it, creates a new urgency for retailers to put an efficient reverse logistics process in place. This includes what happens to the merchandise that can’t be returned to virtual shelves and is slated for the secondary market. It has never been more important for retailers to implement a world-class liquidation solution that captures maximum value for this inventory.
If you still answer the question, “How do you liquidate excess inventory?” by saying something like, “We have a couple of guys we sell to,” you are doing a disservice to your company and your shareholders as you are undoubtedly leaving huge amounts of money on the table. The days of that being an adequate and responsible approach are long gone.
When it comes to customer returned inventory slated for the secondary market, it’s extremely important for retailers to understand its true value and reassess whatever liquidation program they have in place. Often there is an opportunity to recoup more simply by ditching traditional, manual methods and instead applying technology to the process. Consider this:
- If you’ve historically sold your inventory to one or two liquidators, your recovery value is probably low as the liquidators, who know they are not being forced to compete and are really good at negotiating prices down in order to maximize their own profits.
- Time spent negotiating deals for every lot of merchandise takes away from core, strategic business activities. This can equate to millions of dollars lost over time, quite a hit to companies with already skinny margins.
- By eliminating dependence on a small group of buyers and applying technology to your liquidation program you can increase return, in some cases by triple digits.
Let’s expand on this last bullet a bit. The most effective technology-driven program comes in the form of a web-based solution. It allows thousands of buyers to compete for inventory, pushing prices up vs. a handful of buyers negotiating them down.
Most likely there is already a robust secondary market and buyer base for your products; in every major city around the globe there are businesses that purchase excess and returned inventory for resale.
So how do you go about gaining access to this buyer base? A customized, private business-to-business, online auction marketplace platform is one way to make this happen. The best platforms can be configured, integrated and scaled to meet your unique needs. This type of technology will not only deliver the highest possible price in the market at the moment, but it will also automate the sale process, deliver a faster sales cycle and generate proprietary market intelligence in the form of real data on market prices.
Take this example: One of the world’s largest home furnishings and décor e-retailers was experiencing higher volumes of customer returns due to explosive growth in primary sales. The inventory was being sold to a small group of buyers for a pre-negotiated price but as the amount of merchandise grew, so did the need for more buyers.
By launching a branded B2B online liquidation marketplace the company made its inventory accessible to thousands of new business buyers from across the U.S. who could bid directly via competitive online auctions. This boosted recovery rates by more than 30% despite a 138% increase in inventory volume. The platform allowed the company to offload most of the operational work associated with selling the inventory while accelerating the cash cycle.
While applying technology to the liquidation process will have a big impact on the bottom line, leveraging expert knowledge can also provide the most effective outcome. Combining technology with an experienced team that understands dynamic pricing, online marketplaces and demand generation can provide a winning formula.
In today’s return-happy landscape, it literally pays to rethink whatever program you have in place for handling and remarketing merchandise. Every dollar increase in recovery value, or reduction in expense, equals another dollar of profit.
Howard Rosenberg is CEO and co-founder of B-Stock Solutions