By Howard Rosenberg, CEO of BStock Solutions.
Relaxed return policies create a competitive advantage for retailers with consumers but can wreak havoc on reverse logistics. Hundreds of billions of dollars in merchandise is returned to retailers each year, most of which can’t go back on the shelf; this could be due to diminished item condition, damaged packaging or product obsolescence. No matter the reason, that’s a significant amount of idle inventory taking up backroom or warehouse space and subsequently costing money.
However, by getting smart about the secondary market and looking beyond traditional liquidation methods, you can create a more sophisticated, scalable solution that optimises the cash coming back into the business from customer returns and other excess stock.
Conventional methods for dealing with customer returns and excess stock are – like the stock itself – obsolete. Reactive approaches and traditional liquidation programs are among the problems and have resulted in billions of pounds lost by retailers and brands. To achieve maximum efficiency and return, there are some key elements to consider, they are:
A web-based auction solution makes it easier to have thousands of buyers compete for your inventory than it is to negotiate prices with three or four buyers, offline. What’s more, operating your own liquidation marketplace means building your own strategic asset that will benefit you for years to come.
Target the Right Buyers
More buyers result in increased competition and higher prices, but having the “right buyers” can increase prices by triple figures.
Consider segmenting buyers by product category, condition code and ability to participate (financial ability, geographic location, etc.).
Retaining control over who is able to buy your returned and excess inventory and how your brand enters the secondary market is a must. By selling to a liquidator you lose control of downstream sales since there is little immediate action you can take against your one or two buyers without jeopardising your business.
Establish a Direct Channel to Buyers While returned and excess stock might have little value inside your company, it has substantial value to secondary market buyers. Selling directly to business buyers who compete for inventory will help drive liquidation prices up versus having a single buyer negotiate them down.
A few points of margin really can mean the difference between competing effectively and losing money. By taking the first step to look beyond traditional methods and approaching this obsolete merchandise as an opportunity (versus a headache), you can meaningfully impact your overall business margin.
Howard Rosenberg is CEO of BStock Solutions, the largest network of private-label B2B liquidation marketplaces. Hundreds of retailers, including some of the top global retailers, have leveraged B-Stock Solutions’ technology and service offerings to sell billions in consumer returned and excess inventory.