Every company has liquidation inventory: returned, excess, obsolete or damaged merchandise that can’t go back on store shelves

Every company has liquidation inventory: returned, excess, obsolete or damaged merchandise that can’t go back on store shelves

Driving the cost out of your returns process and rethinking whatever programme you have in place is a must in today's highly competitive retail landscape, and can mean the difference between winning and losing.

Everyone's done it: ordered a few sizes or styles of clothing from an online retailer with the intention of sending back the items that don't fit. The expectation of free returns prompts this behaviour while buyer's remorse stemming from the customer not being able to touch or try on the product also plays a role.

This send-it-back sentiment is particularly a burden for online apparel retailers – one in three items are returned – and last year alone web sales of apparel grew 20% (which means returns will follow suit).

While relaxed return policies do drive customer loyalty, they are having a major impact on online retailers; leaving them with billions of pounds of inventory coming back that must be sorted out behind the scenes. This trend, and the growing cost associated with it, creates a new urgency for e-retailers to put an efficient reverse logistics solution in place.

When it comes to apparel that cannot be returned to virtual shelves and is slated for the secondary market, a liquidation solution that maximises recovery is key. If you've historically sold your inventory to one or two jobbers it's likely your recovery value is low as jobbers are pros at negotiating prices down in order to maximise their own profits. What's more, time spent negotiating one-off deals for every lot of merchandise takes time away from core business activities.

A better solution involves bypassing the jobber middleman and assembling a base of business buyers who purchase directly from you and then sell directly to end-users. So how can you aggregate thousands of such buyers and how can you possibly manage selling to them all?

Online liquidation auction solution

A complete, online liquidation auction solution is one way to make this happen. This can include implementing a customised, private liquidation marketplace that can be integrated and scaled based on unique needs, or leveraging an already established B2B marketplace. They will also come with thousands of active, interested buyers who will compete for your inventory via online auctions.

When done right, this type of remarketing solution can boost recovery by 30-80% and sometimes much more. It also automates the sales process, delivers a faster sales cycle, and generates proprietary market intelligence in the form of real data on market prices.

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 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 whilst web-based B2B liquidation programmes will drive operational efficiency and deliver the highest prices possible, proactive management is critical and requires an experienced team to achieve optimal results.

Leveraging expert knowledge will provide the most effective outcome. By combining world-class, purpose-built technology with a highly skilled 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 there are three key features you must look for:

  • Online marketplace expertise: The sales platform offered must be well designed, scalable, and flexible to meet your specific and changing needs. Make sure your partner has extensive experience in managing marketplaces and developing auction strategies to maximise your results.
  • Targeted demand generation: A good partner will have a proven track record of growing custom buyer bases across all categories and conditions. It's not just about quantity as buyer quality matters too!
  • Logistics services and support: Ensure the partner has experience working with a variety of third party service providers and can ensure seamless integration. This should include hands-on client support, logistics, warehousing and inventory handling.

We are currently in the middle of an online apparel boom, and as physical shopping bags are being replaced by virtual ones e-retailers must accommodate for the inevitable rise in returns. Driving the cost out of your returns process and rethinking whatever programme you have in place is a must in today's highly competitive retail landscape, and can mean the difference between winning and losing.

About the author: Howard Rosenberg is CEO and co-founder of B-Stock Solutions, a technology company powering one of the largest networks of private-label B2B liquidation marketplaces. Hundreds of retailers, including seven of the top 10 US retailers, have leveraged its technology and service offerings to sell billions of dollars in consumer returned and excess inventory.