We’ve all done it: ordered a few sizes or styles of shoes/pants/dresses/etc. from an online retailer with the intention of sending back whatever doesn’t fit. Relaxed return policies and the expectation of free shipping and returns are promoting this type of behavior, and while “free returns” do drive customer loyalty, the trend is leaving e-retailers with billions of dollars of inventory coming back that must be accounted for.
This send-it-back sentiment is particularly a burden for online apparel retailers, as web sales of apparel boast one of the highest return rates around — one in three items are returned. When you consider billions of dollars in apparel purchases are shifting from in-store to online (last year alone web sales of apparel grew 20%), it creates a new urgency for e-retailers to rethink reverse logistics. This includes the remarketing of merchandise that can’t go back on virtual shelves and is slated for liquidation.
When it comes to remarketing apparel on the secondary market, your goals should include: maximizing recovery, hitting velocity requirements, and protecting the brand. If you’ve historically sold your inventory to one or two liquidation partners it’s a safe bet your recovery value is low, as liquidators are experts at negotiating prices down in order to maximize their own profits.
What’s more, time spent negotiating deals for every pallet or truckload of inventory takes time away from core business activities. Remarketing to a liquidator may score well on the velocity goal, but can mean a lack of control over who is eventually buying the inventory and how your items enter the secondary market.
The best solution to tackle all three goals involves bypassing the middleman and assembling a robust base of business buyers who purchase directly from you and then sell directly to end-users. So the question becomes: how can you aggregate thousands of such buyers and how can you possibly managing selling to them all?
A complete, online auction liquidation solution is one way to make this happen. This might include implementing a customized, private liquidation marketplace that can be integrated and scaled based on unique needs or leveraging an established B2B marketplace. Both allow thousands of business buyers to compete for your inventory via a transparent online auction platform.
When done right, this type of remarketing solution can boost recovery by 30% to 80% and sometimes much more. Some of the world’s largest apparel retailers and e-retailers are applying this technology to automate the sales process for their returned and excess merchandise.
Take this example: a large e-retailer 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 e-retailer made its inventory accessible to thousands of new business buyers from across the U.S. who were able to bid directly on it via competitive online auctions; this boosted recovery rates by more than 30% despite a 138% increase in inventory volume. What’s more, this platform allowed the e-retailer to offload almost all of the operational work associated with selling the inventory while accelerating the cash cycle.
While it’s clear that a web-based B2B liquidation program will drive operational efficiency and deliver the highest prices possible, keep in mind that to achieve optimal results proactive management is critical and requires an experienced team to manage it well. Leveraging expert knowledge will provide the most effective outcome. By combining world-class, purpose-built technology with a highly experienced team that understands dynamic pricing, online marketplaces, and demand generation for secondary market apparel buyers, you’ll have a winning formula.
When choosing a partner be sure to look for:
Online marketplace expertise: The sales platform offered must be well designed, flexible and scalable. Make sure your partner has extensive experience in managing marketplaces and developing auction strategies to maximize your results.
Targeted demand generation: A good partner will have a proven track record of growing custom buyer bases across all categories and conditions. This is not only about quantity as buyer quality matters too!
Logistics services and support: Make sure the partner has experience working with a variety of third party service providers to ensure seamless integration. This should include hands-on client support, logistics, inventory handling and warehousing.
The online apparel boom is upon us and as physical shopping bags are being replaced by virtual ones, e-retailers must accommodate for the undeniable rise in returns. Driving the cost out of your returns process and rethinking whatever program you have in place is a must in today’s competitive retail landscape, and can mean the difference between winning and loosing.
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.