Considering 15 percent of all goods are either returned or never sold to begin with, and that retailers and manufacturers end up selling more than 95 percent of their excess inventory on the secondary market, it's essential for them to understand the real value of this merchandise and rethink the program(s) they have in place. An important first step to improving the process is implementing a solid remarketing plan.
The primary objectives of most remarketing plans should include: maximizing recovery, hitting velocity requirements and protecting the brand. Most likely, there is already a robust secondary market for your product; in every major city across North America, and around the globe for that matter, there are businesses that purchase customer returns, excess inventory and discontinued goods for resale. That said, 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. Not to mention, time spent negotiating deals for every pallet or truckload of inventory takes time away from core business activities. While this solution may score well on the velocity goal, remarketing to a liquidator can mean a lack of control over who is eventually buying the inventory and how your brand enters the secondary market.
The best solution to tackle all three objectives involves bypassing the middleman and assembling a robust base of business buyers who sell directly to consumers. So the question becomes: how can you aggregate thousands of such buyers and how can you possibly managing selling to them all? While it seems like you would need an army of sales people hitting the phones, this isn’t the case.
A complete, online liquidation auction solution is one way to make this happen.The best solutions available can be customized, integrated and scaled based on your unique needs.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 percent to 80 percent 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: 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 percent despite a 138 percent 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.
While demand typically exists for products across all conditions, certain products are better suited to be sold as refurbished or remanufactured. This means you can invest dollars in repairs, cleaning and repackaging to gain a recovery that is much higher, even after those costs. Keep in mind that refurbishing takes longer to realize recovery and requires more oversight but should certainly be considered if product value is prioritized over expediency. If bandwidth to handle such repairs doesn’t exist in-house, consider leveraging a trusted partner to handle the process.
Finally, even if your product itself is not in demand in the secondary market there are options for recovery through parts harvesting, as there is a buyer base that exists solely to facilitate repurposing or recycling. To realize the highest value for this salvage inventory you need a thorough understanding of all materials contained in each product. Be sure to compare the price per pound you’re getting from the whole unit versus doing a partial breakdown so you can market components separately. That said it might be worth giving up a few dollars of value to let the buyer deal with breaking the product down.
A major benefit of establishing an effective remarketing plan is realized once the merchandise ends up back in your warehouse. Once your strategy is in place you should set up rules for how the product is handled upon receipt and move it quickly through the designated process: liquidation, refurbishment, sell for parts, etc. Ideally this is done at the SKU level; there should be enough detail in the SOP that any receiving clerk can make proper decisions on disposition. This will reduce the number of steps and, more importantly, shorten the amount of time that returned inventory sits in your warehouse. Be sure to closely track all costs involved and the ultimate recovery achieved in order to monitor progress and establish key performance indicators. This will enable you to report accurately on your reverse logistics process and tweak the model to improve recovery or reduce expenses.
Investing resources to better understand your remarketing channel will have a direct and meaningful impact on the bottom line. If in-house bandwidth is tight, sometimes the best choice is to work with a trusted partner whose primary business is providing remarketing solutions for returned and overstock merchandise. The best partners will have a low cost structure, a great reputation among clients, extensive knowledge of the secondary market, and a data-driven, analytical and transparent approach. 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 product categories and conditions. This is not only about quantity as buyer quality matters too!
In today’s competitive landscape, driving cost out of the returns process and taking the time to analyze the real value of your returned, excess and obsolete merchandise on the secondary market can mean the difference between winning and losing. Every dollar increase in recovery value, or reduction in expense, equals another dollar of profit.
Source: B-Stock Solutions
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