Though most organizations would rather not admit it, when it comes to the handling of returned, excess, and otherwise obsolete merchandise, liquidation—the quick disposition of assets for a fraction of their original price—is the rule in retail. Around 95 percent of returned and unsold merchandise will end up slated for the secondary market (a post-retail channel where unwanted and liquidated goods can be bought and sold). Although this is the most common way to handle returned and unsold goods, many companies fail to get as much value from their liquidation process as they could.

Given how competitive retailing is today, the ability to squeeze margin out of every area of the business—including merchandise slated for liquidation—is crucial. Yet many retailers still manage their liquidation programs the same way they did decades ago: They let excess inventory pile up in a warehouse, and then, only after the chief financial officer (CFO) says, “we need to get this off our books by the end of the quarter,” they sell it to one or two liquidators at a rock-bottom price. This can result in billions of dollars lost over time—a huge hit to companies with already skinny margins.

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