Holiday returns are a lot like the Grinch: out to steal your Christmas cheer. Considering 13% of holiday purchases are returned each year, there’s no denying their inevitable arrival in the weeks following December 25. This season in particular is going to bring higher return rates as more consumers than ever are expected to shop online (ecommerce return rates are double that of brick and mortar). Good old buyer’s remorse, the expectation of free and easy return policies, and gift-recipient dislike will also play a big role in the reason-for-return (check out last year’s Top Five Gift Flops).
Whether an ugly sweater, problematic consumer electronic, or an ill-fitting pair of shoes, close to $95 billion worth of merchandise once purchased/gifted/unwrapped, will be heading back to U.S. retailers this holiday season. That’s up 35% from 2016. Accordingly, it’s essential that retailers account for and have a plan in place for the flow of inventory coming back.
Though much of it will be in functional and cosmetically perfect condition, putting it back on store shelves is logistically inefficient (consider this: it costs twice as much to process an online return back on shelf as it does to sell it). Plus, packing up and storing seasonal items for a year can compromise space in – what’s most likely – an already packed warehouse.
Here’s where a recovery-generating secondary market solution can come in handy. Chances are you already have a process in place for your merchandise slated for the secondary market (post holiday or otherwise). If that plan involves selling to one or two big buyers, you may want to reassess for a couple reasons: 1) your recovery is likely much lower than it could be; and 2) offline negotiation is most likely taking you away from core business activities.
A better option is to eliminate your dependence on a few middlemen or liquidators and set up a dynamic that enables many buyers to push prices up rather than one or two to negotiate them down. Most likely there is already a robust secondary market and buyer base for your product(s); in every major city around the globe there are businesses that purchase excess and returned inventory for resale. The secret to success is the ability to gain access to this buyer base.
A B2B marketplace solution is one way to make this happen; think of it like your own storefront to auction off bulk quantities of returned, excess, or other liquidation inventory to the highest bidder. Nine of the top 10 U.S. retailers are currently using this approach to achieve higher pricing, a faster sales cycle, and real data on secondary market prices. These marketplaces are customized, integrated, and scaled based on the retailer’s unique needs. For example, they can handle the uptick in inventory following the holidays without sacrificing the recovery or velocity in which it’s sold. They also allow total control over who is buying the inventory and how it enters the secondary market. Here’s how and why it works:
If done right, liquidation can offset substantial loss for returned or excess inventory, even comparable to reprocessing back on shelf or returning to vendor. By setting up an online auction dynamic where specifically targeted buyers compete to buy your merchandise, pricing goes up.
Exposure to the right buyers ensures there is no confusion between primary (a-stock) or secondary (b-stock) channels and that your brand remains secure. By marketing to a database of targeted, vetted secondary market buyers you can control who sees your merchandise and who is allowed to buy it.
With a larger buyer base, made up of the right buyers, you can move inventory as needed - regardless of volume, time of year, or product category.
Automation/Efficiency: By automating your liquidation process you’ll improve the operational efficiency of your liquidation program. No more spreadsheets. No more faxing. No more negotiating over the phone.
Online Auction Dynamic:
Increased competition through auctions means higher pricing; it also drives velocity, creates a sense of urgency and excitement. Auctions also mean no offline negotiating: you’ll be able to extract buyers’ highest willingness to pay and have real data on secondary market prices.
In addition to using this type of platform to sell their returned and excess inventory, these retailers are also applying data to achieve their goals (be it recovery, velocity, brand control, etc.); the smallest adjustments can drive substantially better results. For example, lot optimization, low start prices, accurate manifests, targeted marketing and other strategies all contribute to better pricing. This is where working with a company that has years of online marketplace experience – and years of compiled data – can make a big difference.
Unless you have a zero-returns policy – which in today’s retail environment is unlikely – there is no hiding from holiday returns. By facing them head on and applying fresh thinking to the remarketing process, your returns can become a strategic asset rather than a dreaded post-holiday afterthought.
Howard Rosenberg is CEO and co-founder of B-Stock Solutions, the world’s leading auction platform for returned, excess, and other liquidation inventory. Our platform sets up an online auction dynamic where retailers and manufacturers can sell directly to a diverse base of approved business buyers; this drives greater demand, higher pricing and a faster sales cycle, while maintaining the control you need. By applying our auction strategy and data, nine of the top 10 U.S. retailers, along with hundreds of other businesses, are attaining the highest pricing possible for secondary-market merchandise across all categories, conditions, and quantities. To become a part of the world’s largest network of liquidation marketplaces, please visit: bstock.com.