LIQUIDATION: Out with the overstocks

Feb 01, 2000 10:30 PM  By

B-to-b mailers have differing strategies for unloading unsold products

Business-to-business catalog products, unlike many consumer catalog products, are not typically impulse-driven purchases for buyers. The business catalog customer usually buys based on need – which means that common consumer catalog merchandise liquidation techniques, such as sale books and jobbers (liquidators), may not be as effective for b-to-bers.

“None of the products we sell are used as widely as consumer products,” explains Bob Dunn, vice president of marketing for Transcat, a b-to-b catalog of calibration and test instruments. “And because of their specialized nature, the message has to reach someone who has a current need, or there is no response. Moreover, our items are in the hundred or even thousands of dollars.”

With this in mind, many business mailers have found that one of the best liquidation techniques is to try to cut deals with product vendors to sell back unsold goods in exchange for credit on newer merchandise. “Our purchasing department tries to negotiate deals with our vendors for all our catalogs,” says Paul DeMartinis, director of sales for Cornerstone Direct, a healthcare and safety supplies cataloger that produces the Masune, Medco Safety Co., Turnkey, ReadyMade, and TimeWise titles. “We usually work out in a contract up front that we can sell the unsold goods back for credits on new merchandise. We may negotiate down to about half of what we originally paid, but it’s worth taking a little bath rather than having the merchandise sit in the warehouse taking up space.”

The Tonawanda, NY-based Cornerstone sells about 80% of its unsold merchandise – which totals around 1% of its SKU count – back to its vendors. For the other 20%, it turns to outbound telemarketing, DeMartinis says. “We call on customers who have bought a particular product in the past from us and make them offers on discontinued merchandise that’s similar to it. The discount varies with the situation, but if I have to sell it at cost just to get it out of here, it’s still revenue coming in while I’m freeing up pick areas in the warehouse.”

Transcat also tries to negotiate return deals with its vendors, according to Bob Dunn. Beyond that, the mailer offers unsold inventory at cut rates on its Website or tries to sell them via package stuffers in outgoing orders or on a catalog supplement “bargain page.” The cataloger also uses overstocks as incentives that its inside telephone sales force promotes and upsells on the phone, Dunn says.

Of course, there are some unsold products, such as dated printed items, that marketers can’t return or give away, and those wind up in the trash or as recycling material. “What can you do with outdated forms and publications? It’s printed paper, so we recycle it,” says Terry Jukes, president of Sunrise, FL-based G. Neil, which sells business forms and publications to human resource professionals.

The trick is to avoid having overstocks in the first place, Jukes says. “So we must have good inventory management and do short-run printings. We have to balance the economics of printing with the risk of obsolete inventory,” basing print runs on past sales of similar items. G. Neil typically has to liquidate around 1% of its merchandise.

Even for nondated items that don’t sell, “my philosophy is to take your pain early and get rid of it quickly if it’s not selling,” Jukes says. G. Neil tries to unload obsolete inventory through special online offers or targeted e-mail sales.

Timing liquidation decisions

When is it time to liquidate a product or a line? Unlike G. Neil, which must do something to move its dated products within a few months, some business catalogers have broader liquidation time frames. For instance, “we probably give unsold products 12 months to two years,” says Cornerstone Direct’s DeMartinis. “We want to give the product a couple of good catalog runs and see what happens.”

Transcat times its liquidation decisions on the product’s value and the company’s supply of the item. “If we have more than a year’s supply of the merchandise on hand,” Dunn says, “we begin to consider taking a loss via liquidation strategies, especially for high-value goods.”