Relaxed return policies and record online spending are leading to historical amounts of returned goods; and it’s at a huge cost to retailers: this year around $400 billion in merchandise will come back. Holiday returns in particular pack a punch and make the first few months of the year hectic for those in the reverse logistics world (for a funny take on things, check out our Everybody Liquidates: Holiday edition video).
One way retailers are softening the hit is by selling their returned items in private, online-auction liquidation marketplaces like the ones operated by B-Stock.
Through an auction marketplace the retailer is able to sell the goods – across all product categories and conditions – to thousands of approved business buyers. The combo of an online auction dynamic with a large buyer pool creates competition and pushes up pricing. The marketplace platform also allows for scalability: it can handle an uptick in inventory following the holidays without sacrificing the recovery or velocity in which it’s sold (something a liquidator can’t compete with).
Mainstream adoption of this type of online liquidation marketplace is growing too: B-Stock currently operates B2B liquidation marketplaces for nine of the top 10 U.S. retailers. In 2018 alone, we added 19 new marketplaces to our network. Because of the better pricing achieved on the inventory, more of these retailers are opting to push returned goods directly to their liquidation marketplace (versus refurbishing, returning to vendor, or processing back on shelf). This is especially true after the holidays, when return rates spike.
For example, when looking at our data, there is a large uptick in inventory following the holidays; the majority of it being returned merchandise. Historically we see 60% more items listed in Q1 (January-March) versus Q4 (October-December). Sidebar: the most common returned items that end up on our marketplaces post holiday include: women’s trendy apparel, speciality kitchen items, tools, seasonal items, and toys.
Secondary Market Demand
Whether a truckload of hand tools, a pallet of handbags, or a crate of crock pots, chances are there is a buyer interested in purchasing the truckload/pallet/crate for his/her own resale business. These resellers include discount store owners, exporters, flea market sellers, marketplace sellers (eBay, Amazon, Poshmark), and smaller retail chain stores; they contribute to an exploding ecosystem known as the secondary market.
Demand for product from secondary market buyers exists constantly; post holiday and all year round. That said, when looking at three popular categories around the holidays, here’s what we find with respect to buyer behavior:
Seasonal (holiday/winter): Demand peaks in early November will ease through Christmas and into Q1. For example, fewer buyers want to purchase Christmas trees and holiday decorations only to have to store them for a full year.
Toys: Demand peaks in late Oct/Early November and slowly tapers off through Christmas. We see a spike in demand in January when there are more new condition/Grade A items available.
Consumer Electronics: Pricing stays pretty consistent year round with a bit more demand in October, November, and December. Demand typically remains high through January (read: Super Bowl).
The National Retail Federation estimates that 11-13 percent of all holiday purchases will be returned this holiday season. Based on NRF’s holiday sales projection, that means around $90-95 billion in merchandise will be heading back to stores starting December 26. Best to get ahead of the holiday gift-flop backlash.
Watch our video: