(An international article but very apt for Indian e-sellers too.)
As retailers pull out all the stops to ring in the last-minute holiday sales, what will greet them post-Christmas isn’t just how they perform, but also how many gifts consumers send back.
With record online sales and generous free returns policies, returned goods have become a big cost center for retailers. One way the industry has been trying to minimize that hit is by selling returned items—and other liquidation goods—in eBay-like private online auction marketplaces to eligible business buyers.
Traditionally, retailers may have had a list of three to five liquidators they would reach out to and see who would give them the best bid. But with these marketplaces, they can take bids from a much more expanded buyer pool, and get 30% to 80% more on their liquidation merchandise compared with what they might have gotten before, according to Howard Rosenberg, CEO and co-founder of B-Stock Solutions, which operates liquidation marketplaces for major retailers including Amazon, Walmart, The Home Depot and Costco.
Retailers now tend to push more goods toward liquidation rather than refurbishing and reselling themselves, Rosenberg added. “The huge amounts of returns are becoming expensive aspects of retailers’ propositions,” he said. “There’s a lot of expenses that go into setting up a refurbishing operation. Now that they are getting higher [liquidation] prices, it becomes a lot more attractive.”
For instance, online-only home furnishings retailer Wayfair has seen a 31% increase in recovery rate through the marketplace model as it unloads truckload-size quantities to more than 1,000 new business buyers. The marketplace model “enables scale for our liquidation inventory while driving recovery prices higher,” Kate Fratar, senior manager of Wayfair’s global inventory planning, said in a B-Stock case study.
B-Stock said around 300 million items have been sold across its various retail and brand marketplaces, more than triple the level from 2016. The auction is often measured in pallets and truckloads. On Walmart’s auction site, a buyer bid $2,350 to beat 23 others in winning a truckload of furniture unloaded by the company. The original retail value? $16,415.
B-Stock also uses data analytics to help retailers figure out how to best group their unloaded merchandise for different auctions so they can attract the highest bids.
And in another telling sign that the industry is shifting to a new liquidation model, Rosenberg said the number of clients has increased from 4, when it started, to 50 this year. In fact, this year alone, Best Buy and Lowe’s signed up to introduce their own liquidation marketplaces, among 17 new ones. On any given day, there are 1,200 auctions open for bidding across B-Stock customers’ marketplaces.
Overall, retailers expect 11% of purchases to be returned this year, according to the National Retail Federation (NRF). For holiday purchases, NRF expects the rate to go up to 13%. That translates to up to $89 billion in holiday returns alone, based on NRF’s forecast of holiday sales, which it expects to rise to as much as $682 billion.