B-Stock, a business-to-business marketplace, announced on Tuesday that private equity firm Spectrum Equity has invested $65 million to help drive expansion. Additional financial terms were not disclosed.
In the past 18 months, B-Stock has launched 18 new client marketplaces for several large retailers, including Best Buy, Macy’s, Lowe’s, GE and Office Depot, according to a company press release emailed to Retail Dive. The marketplace said it works with nine of the top 10 U.S. retailers, among hundreds of other companies.
B-Stock’s marketplace platform leverages an online auction process where retailers and manufacturers can sell returned, excess and other liquidation inventory directly to a global base of approved business buyers, according to the release.
E-commerce is driving a lot of retail growth, but it’s also helping upend the supply chain, the result of intense fulfillment demand and growing returns.
More than 40% of retailers have seen an increase in "intentional returns" in the past year, according to omnichannel retail management firm Brightpearl. That's exacerbating the already margin-crushing costs of fulfillment and delivery for orders that customers actually keep: 44% of retailers say margins are being strongly impacted by handling and packaging returns, with 70% saying they expect to be squeezed further as the practice intensifies.
And it's intensifying. The value of retail returns last year rose 53% from 2015 to $400 billion and the growth of e-commerce is stoking that, according to B-Stock's research. Returns of brick-and-mortar purchases tend to hover at 8%, while e-commerce returns can reach as high as 15% to 30%, according to CBRE, which reports that likely value of online returns during the 2017 holiday season was $32 billion, up from 2016's estimated $28 billion.
That's expensive and something of a logistical nightmare. "As e-commerce continues to grow and return rates continue to rise, the cost associated with processing returns is becoming a major pain point," B-Stock co-founder and CEO Howard Rosenberg said in a statement. "Given today’s competitive retail climate, the ability to minimize any loss on returned and other excess inventory has become a competitive advantage for our clients."
The company launched its first liquidation marketplace for a Fortune 500 retailer in 2009, and since then has sold billions of dollars worth of inventory, achieving a compound annual growth rate of over 100%, according to a statement. The mobile business alone has seen a compound annual growth rate over 400% since launching in 2012, the company said. This year, across its network of marketplaces, B-Stock is on track to sell over 70 million returned or excess items to hundreds of thousands of business buyers in 130 countries.
B-Stock, which claims to have been profitable for a decade, will use Spectrum's investment to continue expansion. "As more retailers and manufacturers increasingly focus on reverse logistics and liquidation of excess inventory, the company is well positioned for continued growth, and we are eager to partner with them to help in that process," Spectrum Managing Director Pete Jensen said in a statement.