Consumer behavior is continuing to shift: online spending is rising while brick-and-mortar foot traffic is declining. What’s more, many stores are playing catch-up when it comes to their e-Commerce operations or are struggling to compete in a very demanding online environment teeming with competition.
All this is forcing many retailers to close physical stores (we’ve seen some big names in the news lately), leaving them with millions of dollars in excess inventory to sort out behind the scenes. Instead of sending the merchandise to another store or marking individual items for closeout, the majority of it will be slated for liquidation and sold into the secondary market.
When it comes to excess merchandise challenges — due to store closures or high rates of excess inventory in general — it’s essential for retailers to understand the true value of the merchandise and be smart about whatever liquidation program(s) they have in place.
Traditional methods, including selling this distressed inventory to a single liquidator or negotiating offline with a handful of buyers, always leaves money on the table. Not to mention that 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, which is quite a hit to companies with already skinny margins.
So what makes for a successful plan, and how can a retailer quickly turn this “risk inventory” into the maximum amount of cash? The answer is really quite simple: 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.
The most effective program comes in the form of a web-based solution. This type of solution allows thousands of buyers to compete for the inventory, pushing prices up, versus a handful of buyers negotiating 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 customized, private business-to-business online auction marketplace platform is one way to make this happen. The best platforms available 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.
Keep in mind that having the technology is the first step, but achieving optimal results requires a deep understanding of how to use it. Knowing how to best assemble inventory as well as how to target, drive and sustain the right buyers will substantially increase recovery. Some tips:
By segmenting buyers by product category, condition code and lot size you can better drive demand;
More bidder competition among the right buyers will mean higher prices every time, so investing in attracting new buyers is critical;
Repeat buyers create the foundation and can result in a triple digit increase in recovery prices; and
How auction lots are assembled is extremely important, so consider segmenting by product type, original MSRP per item or overall auction lot size.
Investing resources to better understand your remarketing channel will have a direct and meaningful impact on the bottom line. If in-house bandwidth is tight, sometimes the best choice is to work with a partner whose primary business is providing solutions for returned and overstock merchandise.
The best partners will have a great reputation among clients, extensive knowledge of the secondary market, and a data-driven, analytical and transparent approach. Be sure to look for online marketplace expertise and a proven track record of growing custom buyer bases across all product categories and conditions.
As brick-and-mortar retailers continue to struggle with reduced foot traffic and being overshadowed by established web merchants, more store closures and excess inventory woes are on the horizon for 2016. Having a solid re-commerce strategy in place for maximizing recovery on this excess and overstock merchandise can play a large role in helping offset loss: every dollar increase in recovery value, or reduction in expense, falls 100% to the bottom line.
Howard Rosenberg is CEO and co-founder of B-Stock Solutions, a technology company powering the largest network of private-label B2B liquidation marketplaces. Hundreds of retailers, including six of the top 10 U.S. retailers, have leveraged B-Stock Solutions’ technology and service offerings to sell billions of dollars in consumer returned and excess inventory.