Tech Guest Viewpoint: Using Technology to Tackle Your Liquidation Program
Between buyer’s remorse, relaxed return policies and the substantial increase in online purchases (which come with an average return rate of 12%-15%), 3.5 billion items are returned to retailers each year. This adds up to around $260 billion of merchandise.
A large portion of this merchandise can’t go back on store or virtual shelves – due to diminished item condition, damaged packaging or product obsolescence – and is slated for liquidation. Luckily the ‘L word’ (in this case) doesn’t have to be a term of frustration or thought of as a lost cause; in fact there is huge opportunity to recoup value for this inventory simply by applying technology and sound strategy.
Remember when you swapped out your rolodex for a virtual contact list in your smartphone? Or when your Outlook calendar replaced that leather-bound version? These technological advances brought efficiency to an antiquated process. The same can be said about the way companies approach liquidation: ditching manual methods and automating the process can bring efficiency and create a strategic business advantage. Consider this:
• If you’ve historically sold your inventory to one or two liquidators your recovery value is probably low as liquidators – who know they are not being forced to compete — are really good at negotiating prices down in order to maximize their own profits.
• Time spent negotiating deals for every lot of merchandise you have to sell (phone, fax, email), takes you away from core business activities.
• A Web-based 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.
Let’s expand on this last bullet a bit. A Web-based solution could entail launching an online auction marketplace platform that can be customized, integrated and scaled based on your unique inventory needs or leveraging an established business-to-business marketplace that caters directly to thousands of liquidation buyers. Regardless of the platform, an automated, technology-driven sales process delivers a faster sales cycle and generates proprietary market intelligence in the form of real data on market prices.
Take this example: one of the world’s largest home furnishings and décor e-retailers 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 most all of the operational work associated with selling the inventory while accelerating the cash cycle.
Keep in mind that having the technology is a first step, but really understanding how to use it will deliver optimal results. When it comes to an online auction platform for your customer returns and excess inventory, knowing how to best assemble inventory as well as how to target, drive and sustain the right buyers will substantially increase recovery and efficiency. 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 can result in a triple digit increase in recovery prices.
• How auction lots are assembled is extremely important so consider segmenting by product type or original MSRP per item.
In today’s competitive business climate, organizations can’t afford to utilize old-school, manual methods for their returned and excess inventory. When you can assume a 30-50% improvement in pricing is available and easily attainable, it’s definitely time to welcome liquidation to the 21st century.
Howard Rosenberg is CEO and co-founder of B-Stock Solutions.
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