Why the Trade Wars May Lead to Excess Inventory (and what to do about it)

The ongoing trade war with China and the threat of increased tariffs coming down the pike has many retailers buying increased amounts of inventory now to avoid higher pricing later. While at first blush this sounds like a good strategy—buy low and sell high—other factors are at play that could have a significant impact on this tactic: 1. Sales for Q1 & Q2 are down; 2. Warehouses are already near capacity; 3. Consumers are pulling sales forward in anticipation of increased prices (but not enough); 4. When increased pricing and the Holidays collide, and with consumers already having made their purchases, inventory levels will only further increase.

Overbuying inventory now will lead to sharp markdowns later

Many retailers are increasing their Holiday 2019 purchases now to avoid severe tariff impacts; they’d rather buy large quantities now even if that means more overstock later. Retailers are already stating that promotions/markdowns will be the name of the game, while others are getting into the rental business or recommerce channels. Dana Telsey, chief research officer of Telsey Advisory Group told WWD magazine, “Traditional retail businesses are now beginning to figure out ways to incorporate consignment/resale into their business models.” The rise in value-conscious shoppers, as well as the growing importance of being more environmentally friendly, is supporting growth in the secondary retail market.

Look to the secondary retail market as a viable, growing sales channel

It’s important to note that the secondary retail market continues to grow and is resistant to global, macroeconomic issues, as reported in WWD. This is where a modern approach to the remarketing of excess and returned merchandise comes into play. Many retailers are opting to build their own B2B marketplaces in order to auction bulk quantities of returned and excess merchandise to business buyers around the country. From salvage and discount store owners to online sellers to mom-and-pop shops, refurbishers and exporters, a robust buyer base exists for just about every product regardless of condition. What’s nice about an online auction channel is that it makes it just as easy to sell to a thousand business buyers as it does to five jobbers. More buyers generate more demand: this pushes prices up and allows for a faster sales cycle.

A marketplace also enables a consistent auction cadence: you can list every week (versus letting inventory pile up in your warehouse until the end of the season).

Every retailer needs a plan for excess merchandise

In today’s climate, it’s a fact that every retailer has excess and returned product that needs to be sorted out. And, with retailers stocking up now to avoid increased tariffs, there is the likelihood of larger amounts of excess merchandise, later. Given this – and tight margins – every retailer needs a secondary market plan in place for how to offset the maximum amount of loss for this merchandise. This is where a B2B online marketplace platform like the one B-Stock offers comes into play. Nine of the top 10 U.S. retailers are currently using B-Stock’s online auction platform to sell excess merchandise directly to an approved secondary market buyer base. 

Read more on how B-Stock works. Ready to sell? Contact us today to learn more on how B-Stock can help you increase margins.