Tag: liquidation

The Right Message

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The problem started about two years ago, when ShoppersChoice.com LLC began cranking up production of product demonstration videos. The online retailer couldn’t stuff most of the items used for videos back into boxes and sell them as new. When it came to barbecue grills, for instance, cooking on them not only meant they couldn’t be sold as new, but often left scratches or dents.

So the retailer, which began in 2000 as TheGrillStoreandMore.com and now operates 29 retail sites, had to figure out the best method to get rid of the used inventory. “We have a warehouse of stuff we have made videos for,” says Corey Tisdale, the retailer’s COO. “Dead inventory means we are paying rent for nothing.”

ShoppersChoice has to sell the inventory in a way that would return as much profit as possible—5% to 10% above cost would be nice, Tisdale says—without diluting brand and product reputation. Offering wildly reduced prices on an online marketplace, for instance, ran the risk of persuading shoppers that the products were overpriced duds or that consumers should wait for better deals than offered through the retailer’s e-commerce sites.

“We don’t like the message we convey if we list a product for too much off the retail price,” Tisdale says. For now, the retailer sells its excess and used stock on its own site, with consumers able to see the price cuts and the reasons for them.

When it comes to selling excess or used inventory online, retailers must weigh getting the maximum financial return against the potential for harming how they are viewed by consumers, [a]nd they have to consider relations with suppliers, who may have rules against disposing of excess goods on outlet sites. Even if a supplier doesn’t prohibit sales of its goods on sites like eBay, it may still be concerned about damage to its brand if a retailer exiles too many products to digital bargain bins.

At the same time, retailers, online liquidators and observers say consumers are becoming better at shopping for bargains, including through closeout and liquidation sites, which tend to buy items in bulk after retailers determine what products cannot be sent back to vendors—[a]nd all this is happening against the backdrop of a dim economy, with retailers trying to maintain the tightest slack possible between consumer demand and inventory, either by carrying less inventory or getting rid of excess items as quickly as they can.

“Two years into a challenging economy, most retailers and manufacturers are a lot smarter about inventory quantities,” says Bob Auray, who oversees [the] reverse logistics and product liquidation business units for Genco Marketplace, an online business-to-business liquidator that is a subsidiary of Genco Supply Chain Solutions.

Strong demand

Estimates from observers and liquidators say overall sales in what is commonly called the secondary market reach up to $500 billion annually. And customers of the closeout and liquidation sites show loyalty. Marc Joseph, President of DollarDays, says 40% of his business comes from customers such as brick-and-mortar stores, nonprofit groups and home businesses that have made at least four purchases on the site.

The closeout and liquidation market could get a boost from the leftovers from the holiday shopping season. The National Retail Federation and Hacket Associates, a maritime consulting firm, have projected that retail container traffic to the United States would increase 16% year over year in September, following a 17% increase in August and 25% in July.

“Retailers have stocked up early on much of their holiday merchandise in order to avoid some of the supply chain disruptions seen earlier in the year,” says Jonathon Gold, the trade association’s Vice President for Supply Chain and Customs Policy. “Cargo is still coming in, but the key question for sales will be what happens with employment and other factors that affect consumer confidence this fall. Retailers are hoping they’ve hit the right balance of supply and demand.”

Joseph, however, is skeptical that the retailers’ optimism will be rewarded. “The products just sitting out there in the warehouse—that is the next wave of closeout,” he says.

Ways to sell

Back at ShoppersChoice, Tisdale was more focused in early September on getting rid of grills and other warm-weather products as the summer ended than on holiday goods. Company officials, in fact, recently have started to talk to online liquidation companies about what kinds of deals could be struck to help the retailer sell its surplus inventory.

“You can use your own network of wholesale liquidators, you can sell through your own secondary channels, you might have a wholesale outlet, you might have your own online liquidation portal tied to your brand,” says Michael Blumberg, President and CEO of Blumberg Advisory Group, a consulting firm that focuses on liquidation, in describing some of the common options for retailers. Generally, retailers can expect to recoup 20% to 40% of wholesale costs on liquidation and closeout merchandise, says Blumberg.

One approach to handling excess inventory is to go with a company such as Genco. Its software can analyze the bar codes of excess goods and separate the products that can be returned to vendors from the merchandise that must be liquidated, Auray says. The company will sort products according to category—such as apparel or consumer electronics—to further evaluate which items will bring the best financial returns.

The company can decide that products stand a better chance on an online marketplace or through an online outlet store for the retailer with the customer service outsourced to Genco, [a]nd products can be bundled together in mixed pallets for export or sale to small wholesalers.

Retailers also can sell excess inventory on an online marketplace such as eBay, [b]ut eBay presents some challenges for a retailer, Tisdale says.

Weird message

Pricing a product very low on eBay can lead consumers to conclude they should not shop at the retailer’s primary site, [a]nd, while vendors’ minimum pricing rules don’t generally apply to damaged products, he says, offering items cheaply on eBay could make suppliers wonder if ShoppersChoice is trying to get around those rules. Tisdale says he would rather offer the items as contest prizes than to sell them at a price he considers too low.

But disposing of excess goods on eBay may be preferable to offering the same goods on a retailer’s own site, says Scot Wingo, CEO of ChannelAdvisor Corp., a company that helps merchants sell through online marketplaces and comparison shopping sites.

Selling inventory through a clearance section of a retailer’s site risks encouraging existing customers to make purchases that produce lower profit margins. “You might cannibalize your retail sales and not gain new customers,” Wingo says. But with eBay, retailers can sell items and potentially gain a new customer who has not visited the retail site. “We call it the ‘eBay outlet concept.’”

Retailers also can sell surplus goods through the Amazon.com marketplace, [b]ut there, they face a lack of control that gives some retailers pause. “If you have five guys selling the same product, Amazon will choose one description to blanket that same product,” says Richard Sexton, President of Carolina Rustica, an online, catalog and store retailer of home furnishings.

Selling in-house

Carolina Rustica could have put its excess inventory, which includes floor samples, up for sale on a site such as Overstock.com, Sexton says, but those sites are designed for sellers that have many pieces of a particular item to sell. “Almost all our clearance items are one of a kind,” he says. “So it was not cost as much as the business model was incompatible.”

Carolina Rustica even wondered if it could conduct clearance sales through a daily deal and coupon site such as Groupon.com. “But we don’t offer massage therapy and we are not a restaurant. We are not an impulse purchase,” Sexton says. “They said, ‘Thanks, but no thanks.’”

The furnishings retailer eventually decided to handle its clearance sales in-house through its own clearance section on its e-commerce site. “We didn’t want to siphon traffic from our own site,” he says. “And we can link to other products that customers might like, which gives us a good opportunity to cross-sell other products at normal price points.”

Sexton says the clearance section is among the most visited areas of the site and that clearance shoppers convert at a rate that is twice as high as non-clearance shoppers. Between 5% and 8% of Carolina Rustica’s sales are from clearance, Sexton says, with the number up over the last few years.

With the holidays approaching and the economy still hurting, retailers will face continued pressure to explore the options for online liquidations and closeouts—and the message, as well as the dollars, is likely to play a role in the paths they take.

Original article here:
https://www.digitalcommerce360.com/2010/10/01/right-message/

Wholesaling 2.0

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For retailers, it’s never been easier or cheaper to find products to sell.

Retailers used to have to go to one trade show after another to find merchandise, [o]r they’d schedule countless appointments with salespeople hawking a wholesaler’s wares. Now all they have to do is go online to shop around for the best deal.

A retailer selling school supplies, for instance, can type “wholesale school supplies” on Google or Bing to bring up millions of results, as well as targeted paid search ads, [o]r they can visit e-commerce marketplaces like Liquidation.com, where they bid on products in an auction format.

For wholesalers, too, it’s never been easier to make a sale. “In the past, you had to find customers,” says Marc Joseph, President of DollarDays and America’s Suppliers. “On the Internet, customers find you. There’s efficiency there.”

Acting like retailers

In order to be found, wholesalers have begun acting like retailers, focusing on marketing strategies like search engine optimization, paid search ads and using social networks like Twitter to promote their products. For instance, DollarDays has put a lot of effort into making sure that when a retailer searches for “wholesale school supplies,” it is at the top of the search results page.

But just as quickly as a retailer can find one wholesaler, that retailer can find another wholesaler, perhaps one offering cheaper products, better terms or more favorable conditions. That transparency brought by the Web means tighter profit margins for wholesalers. To cut costs, many wholesalers are forgoing the personal touch that was long a hallmark of the industry. As a result, some retailers find it harder to get the information they seek about quality or price.

Some wholesalers have gone a step further to create their own retail websites, selling merchandise, often the most attractive goods they have in stock, directly to consumers. In doing so, they’re walking a fine line, says Frank Hurtte, founder of River Heights Consulting, which specializes in wholesale sales and distribution. “There’s a clear tension when your supplier becomes your competition,” he says.

There are also new partnerships emerging. Peter Gonzalez, owner of retail sites PoolBoy.com and RelaxingDecor.com, provides customer service for his [wholesaler] clients and gains new business as a result. Each company does what it does best.

“It allows the wholesaler to bring in products, fight to keep prices steady and deal with inventory,” Gonzalez says, “and it allows me to do the things I’m good at—customer service and selling.”

Finding the best deal

For retailers less tied to particular wholesalers, comparison shopping is the name of the game. As long as a retailer enters its business license and tax identification number on most wholesalers’ sites, it can find prices, [b]ut as wholesalers increasingly turn to marketing strategies popularized by retailers, they’re aiming to make it so retailers don’t have to jump from site to site to compare prices.

Instead, they can turn to Twitter. There, businesses like closeout computer and electronics wholesaler Evertek offer up sales, special events or a particularly large shipment. “It’s a way to reinforce our marketing campaigns and also to try to prospect new customers,” says Peter Green, Director of Marketing and Operations for Evertek, which also sends out promotional e-mails.

Those deals feature baseline pricing for retailers looking to buy small quantities, rather than looking to negotiate prices. Highlighting those offers on Evertek’s website, which also features a constantly updating inventory list and lets visitors place and track orders, aims at helping customers be more self-sufficient, says Green.

Hands off

DollarDays similarly tries to automate its service in order to cut out the traditional retailer-wholesaler negotiation and contain costs, says Joseph.

“We want to make everything as electronically sound as possible so there is as little involvement with people as possible,” he says. “Everything is done through the Internet. Retailers place the orders they want, [and] in a week to 10 days, it shows up. It’s like buying on Amazon. If everything runs smoothly, nobody needs to touch it.”

The process works, he says, because DollarDays tries to keep its prices consistent with its competition.

“From a retailer’s perspective, the good thing about the Internet is it’s so transparent,” he says. “For instance, if a retailer has a Universal Product Code, which identifies a particular item, it can quickly find the best rate, but we know that retailers are doing that, and we don’t want to be embarrassed if the guy down the virtual street is 10¢ cheaper, so we look it up, too, so that we’re competitive.”

For small retailers like Island Video Games, which sells new and used video games and accessories on eBay and on its own e-commerce site, wholesale auctions provide the best means to find inventory, says owner Michael Dimone. “I don’t have the capital to buy large loads,” he says. “With an auction, I can buy smaller lots.”

He primarily shops for products at Liquidation.com because of the site’s wide range of inventory. The site has more than 1.3 million registered buyers, and, in its 2009 fiscal year, the value of goods sold through its online marketplace totaled $365 million. The site features various-sized lots ranging from a single Washburn acoustic guitar to 13,357 assorted pieces of out-of-season swimwear.

Before making a bid, Dimone does a thorough analysis. First, he looks at his historical sales data to see what price particular games or accessories sold at and how long they took to sell. He then estimates his costs for shipping, credit card fees and the wholesaler’s fees—Liquidation.com charges buyers 5% of the value of a purchase. Finally, he comparison shops at sites like Half.com and Amazon.com to see how the games are priced.

“Before I bid, I want to know that I have to sell an item at this price or higher to make a profit,” he says.

Dimone also searches for particular sellers he has bought from in the past. Liquidation.com lets retailers filter each category by sellers, as well as by condition, lot size and other criteria. Although retailers can search the site by seller name, Liquidation.com works to give buyers confidence in all sellers by physically inspecting the products that flow through its marketplace, says Bill Angrick, Liquidation Services’ CEO. The company analyzes those items, including the condition of the merchandise, in an auction manifest that describes the natures and type of goods.

The site also provides buyers a range of information about its sellers. “We want everything to be as transparent as possible,” says Angrick. “So in our auction view, we have a rating of how that seller has performed. The site shows buyers the average days to ship, the buyer dispute rate, repeat buyer rate and seller cancellation rate for 30-, 60-, 90- and 365-day periods.”

Those data points are essential to quickly determine whether to make a bid, says Dimone. “I like to know who I’m buying from,” he says.

Partners, not competitors

Others came to online wholesaling through their experiences as retailers.

When John Olson founded pond-and-water-garden online retailer GrayStone Creations in 2000, he found it hard to find wholesalers selling supplies. He quickly realized that few wholesalers sold those products—and the ones that he could find weren’t presenting them effectively online. So he had to seek out and develop relationships with a wide range of manufacturers and wholesalers.

He soon found that other pond-and-water-garden retailers, like PondBoy.com, were contacting him to see if they could buy supplies from him. That led Olson to add a wholesaling channel. “We realized that if we bought in bulk, we’d get better pricing,” he says.

Rather than compete with the retailers he sells to, Olson works with client retailers to develop search engine optimization and paid search marketing tactics. For instance, he cultivates and passes on thousands of long-tail keywords for his customers’ pay-per-click campaigns. His thinking is the more they sell, the more he sells.

“With more than 30,000 terms applicable to our business, it would be inefficient and tedious for us to compete on every single one,” he says. “This way, if some sellers concentrate on terms applicable to their business and others to a segment applicable to their business, everyone sees better results.”

With some of GrayStone’s bigger customers, he forms deeper partnerships. For instance, PondBoy.com’s Gonzalez answers GrayStone’s customer service and technical calls. In return, Gonzalez, rather than Olson, receives the proceeds from any sales that result from those calls.

“I realize I might lose a little profit,” says Olson, “but I’m gaining it back because I sell to him at wholesale, so it is not a complete loss. And, since I’m not on the phone all day, every day, I can work on things like SEO that bring money to all of us.”

Gonzalez says the partnership boosts his sales 20% to 25%. It also keeps him from shopping around for cheaper supplies.

Competing with the supplier

But not all retailers are as content with the way their suppliers have adapted to the Web.

Take Ann Garrity, president of online organic cosmetics retailer Organic Divas LLC. When she launched her company in 2008, she aimed for the site to be one of the few places on the Web to find natural and organic cosmetics free of cancer-causing or hormone-disrupting ingredients.

But, since then, each of the wholesalers she buys from has opened up a direct-to-consumer online store.

“They realized they could make more money selling direct to consumers rather than selling to us,” she says. “Some of the suppliers even put stickers advertising their online sites on the products they ship to Organic Divas. To use my distribution network to undercut me bothers me.”

Garrity says it is hard to gauge exactly how much wholesalers’ direct sales have impacted her business, [b]ut she has had several customers ask if her site can meet a wholesaler’s prices. Often, she cannot. To compete with those deals, Garrity has had to expand her offers of percentage discounts and free shipping.

The competition has also led her to seek new suppliers. “We want to work with people who are working with us and have our best interests in mind,” she says.

Where does she find those suppliers? The Internet, of course.

Original article here:
https://www.digitalcommerce360.com/2010/03/31/wholesaling-2-0/

The New Liquidators

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Overstocked, returned and outdated products have long been thorns in the sides of retailers. They take up valuable warehouse or shelf space that could be better used to stockpile current inventory. And, perhaps more importantly, they represent lost revenue.

In the past, retailers would call local liquidators to bid on excess, returned and out-of-date products, a method that leaves a lot to be desired, says Bill Angrick, CEO of Liquidity Services Inc., operator of online auction site Liquidation.com. “You’re not maximizing the competition for the assets, and so you’re not getting the best value for the assets,” he says. “And you’re taking on the direct burden of identifying the liquidator, negotiating a transaction, documenting the process, making sure you get the money, etc. It pulls your management away from your core business.”

Creating a market

But that’s changing as more liquidation operations are going online. Web-based liquidation services offer a nationwide pool of potential buyers, opening new markets for retailers’ and manufacturers’ excess inventory. “With 400,000 professional buyers, we’re able to create a market for virtually any quantity or condition of returned merchandise,” Angrick says. “Liquidation.com’s buyer base is growing about 50% per year.”

“Internet-based liquidation sites also give manufacturers new retail outlets—mom-and-pop stores—for their surplus goods,” says Ivan Ramirez, Vice President of Bulk Goods, Buys and Business Supplies at Overstock.com. “Imagine having to send sales reps to contact 100 small mom-and-pops that are going to buy a case pack of each product. It’s just not economical. […] There’s not a company out there that has the ability to reach millions of small mom-and-pops.”

The ability to reach a larger group of buyers is one reason that NewCorp.com switched to […] Liquidation.com after using a traditional liquidator for most of its 22-year history, says Steven Miller, Senior Director of Service Operations. NewCorp.com, operated by N.E.W. Customer Service Cos. Inc., runs extended warranty programs for major retailers, including Best Buy, Lowe’s, Walmart, Sam’s Club and Kmart. Over the course of a year, it accumulates about 200,000 products returned by consumers under the warranty plans. “The traditional salvagers have partners and buyers they go to over and over again,” Miller says. “Internet salvagers touch an audience you can’t even put your hands around. Anybody can shop on the Internet.”

High return

For example, a buyer who might want to purchase 30 laptop computers to salvage the parts would never buy from a traditional salvager, but that buyer has access to an online liquidation site. “The bottom line is my return is 14 times higher through LSI than through our previous traditional liquidator,” Miller says.

Online liquidation also benefits buyers, particularly small, independent retailers, by giving them access to a wider variety of products at lower prices. Instead of traveling to trade shows or liquidators’ warehouses in search of inventory, these retailers simply go online.

Randall Pinson, owner of Rocket Auctions Inc., an eBay Power Seller, started buying merchandise from Overstock.com in 2001. “I hadn’t had much experience when I started selling,” he says. “I didn’t know that many liquidators. For me, Overstock.com was the first resource I stumbled onto.”

Rocket Auctions sells a wide variety of products, although Pinson recently began focusing on fashion and accessories. Pinson says he researches products on eBay before going to Overstock.com to purchase merchandise. He buys on average $10,000 of merchandise per month from the site.

“It’s worked out pretty well,” he says. “Their system is just as easy as buying from their retail site. The only thing I had to do differently was submit sales tax forms.”

“In today’s fast-paced and highly competitive market, retailers need to be able to unload excess or out-of-date inventory quickly and efficiently,” Angrick says. That’s particularly important in areas, such as consumer electronics, where a product can become obsolete shortly after landing on the retailer’s shelf. “Whether they’re MP3 players or iPods—all of those things in the consumer electronics realm are constantly turning over,” he says. “Products have a three- to six-month cycle now. It’s very important that the retailer have a strategy for what to do once the item is less than current technology.”

The increasingly liberal return policies of retailers also have contributed to the demand for liquidation services. Liquidation.com estimates the return-merchandise business alone totals about $60 billion. “Most customers have been trained to expect a no-questions-asked return policy,” Angrick says. “That’s allowed all the big-box guys to build market share. But one of the costs of that strategy is they have got to handle the returned merchandise.”

For online merchants, return rates can be as high as 25% because customers can’t try on apparel or examine merchandise before making a purchase, he adds.

This increasing demand for online liquidation is reflected in Liquidation.com’s growth. When Liquidity Services Inc. launched the online auction platform in 2000, it primarily sold goods for small commercial sellers and government agencies. Six years later, Liquidation.com sells everything from general merchandise and apparel to consumer electronics and technology hardware. The site holds about 200,000 auctions annually and sold about $100 million in merchandise last year. Over the past three years, it has auctioned merchandise with the gross value of $264 million.

“Because of the efficiency of the Internet-based model, we’ve been able to attract the right buyers for all these categories,” Angrick says.

Small lots

The amount of inventory being sold varies among the online liquidation sites. Liquidation.com typically sells large quantities of products—for example, 10,000 items for a retailer eliminating a SKU.

Other liquidation sites deal in smaller quantities. Wholesaler DollarDays—which specializes in manufacturers’ closeout items—typically will sell a truckload or less of products. “A true closeout is not a lot of product,” says Marc Joseph, CEO.

About one-third of [the] 30,000 goods listed on DollarDays.com are closeout goods. DollarDays, whose customer base primarily is independent merchants, also sells basic goods such as batteries and candles, and seasonal goods, such as holiday greeting cards.

The model for selling surplus goods changes from site to site. Liquidation.com uses an auction format. “Auctions last about two to three days, attracting on average six bidders,” Angrick says. Liquidation.com handles the logistics, including customer support, and shipping from the retailer’s distribution center to the Liquidation.com facility.

In addition, Liquidation.com captures the information on the items and takes photos and writes descriptions to be posted for the auction. The site uses software developed in-house to pull information from retailers’ asset- or inventory-management systems. Retailers need no special software.

Liquidation.com also confirms the item count and measures and weighs the lots so buyers can obtain real-time shipping quotes. “We give the buyers more certainty about what they’re buying so they’ll pay the most for those items,” Angrick says. “On returned items, Liquidation.com has consistently doubled and tripled the rate of return to the retailer.”

The online liquidation site also can cut shipping costs for sellers by nearly 50% due to economies of scales, Angrick says. Liquidation.com ships two million products each month through carriers nationwide. The site also handles the collection of funds from the buyer, answers any questions buyers have about the merchandise, and sends the seller the net proceeds.

Financial integration

Because the service is Internet-based, sellers and buyers can integrate their financial system with Liquidation’s back end, enabling them to check the progress of each in-process transaction. “They can get a full dashboard of all the items they are selling, what the status of the bids are, the prices of items, where items that have been closed have been shipped to, and the status of the money that is due to them all in one place,” Angrick says.

Liquidation.com charges sellers 15% to 25% of the completed transaction, depending upon the level of value-added services provided, Angrick says. “The way we price our services is to align our interests with the seller. If we don’t complete the sale, we don’t get paid. And we get paid on the gross sale value so our incentive is to maximize the value.”

Search engines play a major role in Liquidation.com’s operation, because 62% of wholesale buyers use a search engine before any other media to find products, Angrick says. “We have a very active keyword advertising strategy and a very active level of organic search tied to our marketplace, because we’ve indexed all of the auction content to the keywords that are searched on,” he says. “We get 4 million searches a month on our marketplaces from people looking to buy products.”

Buyers who log onto Liquidation.com can search for items based on product category, condition type, geographic location, purchase price per unit and other features. Liquidation also will send out e-mail alerts to buyers who want to know when specific items are being auctioned.

At Overstock.com, B2B-liquidated items are sold at fixed prices. “Overstock is leveraging its B2C site by setting up a ‘Bulk Buys and Business Supplies’ tab on the home page navigation bar,” Ramirez says. In some cases, Overstock approaches its existing fulfillment partners and manufacturers seeking products in case-pack quantities. Overstock then buys the products outright and sells items individually to consumers or in bulk quantities to businesses, Ramirez says.

“In other instances, Overstock will give manufacturers an interface to a commerce platform that enables them to load products and drop-ship them directly to Overstock business customers. For that access, Overstock negotiates a fee that typically ranges between 10% and 15% of the transaction,” he says.

Multiple segments

Overstock also sells directly to discount retailers such as Costco and Big Lots, Ramirez says. This approach gives manufacturers three market segments through a single site. […] “We tell manufacturers we can sell their product directly to the consumer, in case-pack quantities directly to small mom-and-pop shops, and in truckload quantities to brick-and-mortar discount retailers,” he says. Buyers can navigate the site using either the search box or category tabs.

Overstock focuses on housewares, small appliances, and apparel and accessories in the B2B area but plans to add electronics, jewelry and watches, Ramirez says.

At DollarDays, buyers also pay a fixed price on liquidated items. The wholesaler sets the price by adding a margin to the bottom line price set by the manufacturer, Joseph says. “Everybody who works here is an ex-retailer. We look at each individual item, we know what the true retail value is, and we know what the closeout price needs to be based on that.”

Case packs with between 60 and 72 pieces generally sell for under $1 per item, while cases with between six and 12 pieces may sell for $5 or $10 per item, Joseph says. Some [pallets] have assorted items numbering in the thousands.

Buyers search the site by category, brand, price, closeouts, hot sellers and other characteristics. DollarDays’ customer base includes independent gift shops, drugstores, convenience stores, dollar stores, discount stores and apparel stores.

The number of retailers, manufacturers and distributors using online liquidation sites is likely to grow because it allows retailers to try out new products with minimal risk, Angrick says. Retailers have to continually take risks and anticipate consumers’ tastes and preferences. “We’re a solution that gives retailers comfort that even if they do make mistakes—and everyone will—we can handle those mistakes.”

The higher returns promised by online liquidators also attract retailers. “If a traditional liquidator is buying things from me for 10 cents on the cost dollar, and then (an online liquidator) will either buy it for more or in some way enable me to sell it for more, that’s pretty appealing,” says Scott Wingo, CEO of ChannelAdvisor Corp., which sells technology and services to retailers selling through third-party platforms. “That’s found money that drops right to the bottom line.”

“Online liquidators also create a level playing field for retailers and manufacturers looking to sell overstock and discontinued items,” says Michael Blumberg, CEO of D.F. Blumberg & Associates Inc., a research and consulting firm. “With the traditional liquidation model, the liquidator is in control.”

Changing the value proposition

They had insight into who was buying the stuff from them and where the sellers were, Blumberg says. But with the online liquidator, it takes the mystery out of it.

Many online liquidation sites—like Liquidation.com—also provide professional services, such as branding and marketing, that aren’t offered by most traditional liquidators. “Some of them are getting into reverse logistics, like handling warranty and repair,” Blumberg says. “Traditional liquidators are basically brokers.”

The additional services offered by Liquidation.com was a major reason N.E.W. switched to the company, Miller says. “Our traditional partners collected the salvage and then sold it off. In contrast, Liquidity Services grouped like items together before auctioning them off. That changed the value proposition for the buyer. Now a buyer is buying a [pallet] or two [pallets] of similar products—boomboxes, TVs or laptop computers—versus a mixed bag.”

Just which method of liquidation a retailer chooses depends on many factors. “Everyone has a different need to solve the same problem—the problem being excess inventory,” Wingo says. “What really changes how they operate is channel conflict, how fast they want to sell things, and other complexities around the logistics.”

ChannelAdvisor operates Direct2Wholesale, a network of business-to-business auction sites that connect manufacturers and retailers with qualified buyers of surplus. “We help retailers and manufacturers figure out what the right fit is for them,” Wingo says. “Should they be doing eBay? Should they be doing a private marketplace? Is Liquidation.com, where you’re moving it to smaller people, the way to go?”

Retailers who can’t ship single units might turn to online liquidators such as Liquidation.com or Overstock, while those who can ship individual units might use eBay to sell off excess stock, he says. “If they’re only going to sell a truckload, that limits what they can do. You’re not going to put a truckload on eBay.”

Despite the advantages offered by online liquidation sites, it’s unlikely that they will replace traditional liquidators any time soon, observers say. “They represent only about $1 billion of what is estimated to be an $80 billion market,” Wingo says.

Liquidators selling to liquidators

Most traditional liquidators have a depth of knowledge and long-term relationships—for example, contacts for selling out-of-stock and discontinued items outside the [United States]—that online liquidation sites don’t have, Blumberg says.

“Surplus Sourcing [Group Inc., a traditional liquidator based in Chatsworth, California,] has been buying excess inventory from large companies we have had contracts with for many, many years,” says Frank Jadhavji, President of Surplus Sourcing.

Because SSGI deals in what Jadhavji terms “mega-volumes of merchandise”—tens of thousands of a single item—-he doesn’t consider online liquidation sites a threat. “We can’t go online ourselves and sell at that kind of volume,” he says. “As a matter of fact, most of these guys are our customers.”

Surplus Sourcing also refurbishes non-working items and sells them in bulk to retailers and distributors, a service that most online liquidation sites don’t offer, he says.

But while traditional liquidators will continue to dominate the liquidation industry, online operations will play an increasingly important role, observers say. “These online liquidators make a very efficient marketplace,” Blumberg says.

Original article here: https://www.digitalcommerce360.com/2006/04/28/the-new-liquidators/