Even though no retailer wants to admit it, liquidation is the rule in retail. With skyrocketing return rates (sure to be amplified by the TBYB trend) as well as overstock, there is a lot of merchandise piling up in warehouses across the country - all of it taking up space and costing money. The typical solution to get the inventory off the books? Sell to one or two liquidators at a rock bottom price, take the loss, wipe your hands, and pretend like it never happened. It’s no wonder liquidation has historically been thought of as such a dirty word. But given tight margins, reduced warehouse space, shorter product lifecycles (read: trendy clothing or tech products), and sustainability demands, retailers need to think about liquidation differently. If done right, it’s a viable channel to offset loss and help control how your brand enters the secondary market.
How you liquidate, matters: the first step is to apply technology to the process
Nine of the top 10 U.S. retailers are currently using branded, online auction liquidation marketplaces to sell their liquidation inventory (and by doing so, admitting they liquidate!). These PaaS (platform as a service) marketplaces are customized, integrated, and scaled based on the retailer’s unique needs – think of it like your own storefront to sell returned, excess, or other b-stock inventory. They also allow total control over who is buying the inventory and how it enters the secondary market. Here’s how and why it works:
Higher Pricing: If done right, liquidation can offset substantial loss for returned or excess inventory, even comparable to reprocessing back on shelf or returning to vendor. By setting up an online auction dynamic where specifically targeted buyers compete to buy your merchandise, pricing goes up.
Better Control: Exposure to the right buyers ensures there is no confusion between primary (a-stock) or secondary (b-stock) channels and that your brand remains secure. By marketing to a database of targeted, vetted secondary market buyers you can control who sees your merchandise and who is allowed to buy it.
Velocity: With a larger buyer base, made up of the right buyers, you can move inventory as needed - regardless of volume, time of year, or product category.
Automation/Efficiency: By automating your liquidation process you’ll improve the operational efficiency of your liquidation program. No more spreadsheets. No more faxing. No more negotiating over the phone.
Online Auction Dynamic: Increased competition through auctions means higher pricing; it also drives velocity, creates a sense of urgency and excitement. Auctions also mean no offline negotiating: you’ll be able to extract buyers’ highest willingness to pay and have real data on secondary market prices.
Data is king
In addition to using this type of platform to sell their liquidation inventory, these retailers are also applying data to achieve their goals (be it recovery, velocity, brand control, etc.); the smallest adjustments can drive substantially better results. For example, lot optimization, low start prices, accurate manifests, targeted marketing and other strategies all contribute to better pricing. This is where working with a company that has years of online marketplace experience – and years of compiled data – can make a big difference.
Let’s be real: everybody liquidates. If you’re still ignoring the problem or using an old-school method to get rid of your liquidation inventory, it’s costing you in dollars and efficiency. Nine of the top 10 U.S. retailers are investing in strategic, ongoing liquidation programs and for some, it’s meant the difference between winning and losing.