Discount Retail Chains’ Struggles Highlight Need for Diversified Secondary Market Strategies

Within the last few months, Big Lots, Channel Control Merchants, and American Freight have each announced bankruptcy. The immediate future looks different for each of these organizations, and while these developments were somewhat expected to those in the know, they’re alarming nonetheless for businesses in the consumer goods resale, bargain & discount outlet space. The same is true for any retailer or brand that depends on off-price retailers to purchase bulk quantities of returned and excess merchandise.

Big Lots, Channel Control Merchants, and American Freight All Announce Bankruptcy 

In early September, Big Lots—a nationwide chain of over 1,000 discount stores across the US—publicly announced its bankruptcy and sale to a private equity firm. While many locations that profitably resell closeouts and overstock will remain open, a financial restructuring will result in the closure of over 300 stores nationwide with additional closures possible in the future.

Channel Control Merchants, the parent company of stores Dirt Cheap and Treasure Hunt, is a secondary market retailer that sells overstock, customer returns, liquidation goods, and out-of-season items across eight southern states. Following a period of unprofitability, company leadership announced bankruptcy in mid-October and will close all stores immediately to satisfy debts to creditors including many well-known nationwide retail giants.

Finally, American Freight—a chain of 370 stores selling discounted furniture, mattresses, and appliances across 40 US states—announced in early November that it will also cease operations following the bankruptcy of its parent organization Franchise Group (aka FRG). Under a deal reached in recent weeks, creditors’ debts will convert to equity, allowing them to restructure the business. While operations will continue for now, the future is uncertain for American Freight and its sibling companies, Pet Supplies Plus, The Vitamin Shoppe, Buddy’s Home Furnishings.

What’s Behind These Off-Price Struggles?

Though inflation is cooling,  it’s still been a tough few years for American consumers, with continued economic uncertainty affecting many. And there’s plenty of evidence that it’s discretionary low-cost goods that they’re opting to cut out of their budgets.

Analysts note that in the case of Big Lots, a “jumbled and muddled product mix” hurts the shopping experience, and doesn’t always provide significant savings over more closely managed stores like Walmart. Further, the company itself has noted that its core customers have been developing new habits and spending less on home and seasonal products—a major source of sales for the chain.

Similarly, FRG explained in a press release on American Freight’s troubles that it has “struggled due to sustained inflation and macroeconomic challenges facing the large durable goods sector.” Moving forward, FRG plans to lean on its chains that offer more focused selections such as vitamins and pet supplies, possibly indicating that the traditional appeal of discount stores—a wide and unpredictable variety of mixed inventory—may no longer be a benefit.

Retailers and Brands Should Look to Diversify Their Resale Strategy

While it’s tough to pinpoint exact causes or determine whether there’s a broader, longer-term trend at play here, retail leaders would be wise to monitor headlines like these and think seriously about whether their traditional inventory reduction channels will be sufficient in the event of ongoing economic downturn, business interruptions, or a liquidation partners closing its doors. 

News stories and business concerns like these highlight the importance of developing resilient, diversified, and carefully managed B2B resale  strategies for moving out returned, unsold, and slow-moving merchandise. 

This is where an online B2B resale platform – one that is backed by technology and data, and offers multiple channels to sell inventory – can help solve the returns, excess, and overstock pile up. Some of today’s biggest retailers and brands are leveraging a B2B resale platform to act as a centralized hub for all their secondary market resale needs. By moving everything onto a single online platform, these companies have a single system of record and are able to tackle what’s historically been a fragmented and extremely manual process (ex: selling to an off-price retailer or liquidator). They are also able to provide: 

Confidence in Pricing

Whether selling to a single buyer or to thousands, it’s critical to know the fair market value of the merchandise and the factors that affect it, including condition, inventory type, and sales channel. A B2B resale platform that holds years of pricing data against these many variables presents a more accurate view of pricing.The best platforms  provide a variety of ways to move merchandise into the secondary market (resale via an open marketplace, time-bound contracts, or private one-to-one transactions) and can compare resale performance across these channels. 

Access to Motivated Buyers 

There is a thriving and ever-growing secondary market of buyers for returned merchandise of all categories, quantities, and conditions. The ideal B2B resale platform will have a network of thousands of such buyers (including, online resellers, bin store owners, off-price stores, exporters, and refurbishers) providing constant demand and competitive pricing. It can also easily onboard any existing buyers or do targeted marketing to a particular type of buyer.   

Velocity & Scalability in Inventory Reduction

A B2B resale platform that provides multiple channels to sell surplus goods will enable you to scale up resale operations easily. With different sales channels and efficiency-oriented features at your service, you can sell as much inventory as you have, whenever you have it. 

Brand Control

Control over where and how inventory is resold is key for brand-conscious companies. Through an online B2B resale platform, it’s up to you to determine how your inventory is remarketed and who can view and purchase it. Setting these kinds of restrictions—including geographic limitations, delabeling requirements, marking for in-store or online sales only, etc.—helps to avoid conflict with your primary sales channels and to guard your company’s carefully built image.

Automated Sales & Performance Tracking

An established, technology-based B2B resale solution can manage the resale process from start to finish. This includes setting up an online resale storefront, providing listing recommendations, pre-setting auction launch times, handling in-platform payment, and sending invoices automatically. Further, it will keep granular records critical for accurate bookkeeping, tax reporting, compliance, and ensuring buyers have met resale requirements. 

Proven, Data-backed Strategic Advice

Whether your goal is recovery, velocity, brand control, etc, a company with years’ worth of B2B resale data at its fingertips can be a game changer. You can achieve significantly better results by carefully analyzing data and adjusting strategy accordingly.  For example, grouping your inventory by category or SKU to make it more appealing, targeting marketing at specific buyer profiles, or improving manifest accuracy.

B-Stock: Your Go-to Recommerce Partner

As the world’s largest B2B recommerce platform with over a decade of secondary market and resale data, B-Stock has delivered these exact benefits to our customers – which include today’s largest retailers and brands – for years.

To learn more about why leading global brands and retailers trust us to help them move out billions in returned and overstock inventory, visit our site. Or if you’re ready to get started today, you can contact us for a live platform demo today.