Strong holiday sales and more online selling mean more returns
to offload at discounts
By Erica E. Phillips
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (February 17, 2018).
Retailers still celebrating their strongest holiday sales in
years now face the less-pleasant task of disposing of billions of
dollars in returned merchandise.
Often, retailers offload rejected clothes, appliances and toys
for pennies on the dollar through a vast ecosystem of resellers,
ranging from outlet stores and online auctions to flea markets and
salvage dealers.
On one online auction site Monday, 49 washing machines and
dryers that had recently been returned to Best Buy Co. sold at a
68% discount for $13,300. Sears Holding Corp. recouped even less
the same day when it accepted a 93% markdown on four pallets of
sportswear, intimate apparel and accessories, selling them for
$5,825. A spokesman for Sears declined to comment. Best Buy didn't
respond to a request for comment.
Retailing's secondary market saw volume surge this year,
reflecting both the strongest growth in holiday sales since 2011
and the rise of online shopping, where purchases are more likely to
be returned.
These post-retail sales, including both returns and overstocked
items, totaled $554 billion in 2016, and have been growing at about
7.5% a year, according to Zac Rogers, an operations and
supply-chain professor at Colorado State University's business
school.
January and February are the busiest months for resellers and
the so-called reverse supply chain, said Howard Rosenberg, chief
executive of B-Stock Solutions, which runs online liquidation sites
for major retailers, including sites of the Best Buy and Sears
sales, as well as similar auction sites for Costco Wholesale Corp.,
Macy's Inc., J.C. Penney Co. Inc., Lowe's Cos., Home Depot Inc.,
Walmart Inc. and others.
"It's just mayhem during this period," Mr. Rosenberg said.
The National Retail Federation said holiday sales reached nearly
$692 billion in November and December. About 13%, or $90 billion,
is expected to be returned through the end of February, according
to a forecast by Optoro Inc., a logistics provider that helps
companies like Target Corp., Staples Inc. and BJ's Wholesale Club
Inc. take back and resell returned merchandise.
The most common returns are clothing and apparel, followed by
electronics, beauty products and sports or outdoor gear, said
Larisa Summers, head of e-commerce for Optoro.
Roughly half of holiday-season returns go back on the shelf,
much of it to be sold again at a discount, said Tony Sciarrotta,
executive director of the Reverse Logistics Association and the
former head of returns management for electronics company Philips.
The other half winds its way through various secondary channels
over the next several months, depending on the goods' resale value
and seasonality, he said.
"The good retailers have been through this for many years and
they've improved their processing," handling hundreds of thousands
of items a day in some facilities, Mr. Sciarrotta said. Many of
those processing centers add a second shift this time of year to
handle the higher volume. "They're trying to clear the barn as fast
as possible," he said.
How much a retailer recovers through secondary channels can
range widely. An item restocked on store shelves might sell at a
30% discount, said Dale Rogers, a logistics and supply-chain
professor at Arizona State University. But markdowns escalate
quickly if goods or packaging are damaged. Retailers' steepest
discounts come from selling returns in bulk.
Sometimes retailers find it is cheaper to just throw returned
merchandise away. Optoro estimates five billion pounds of returned
merchandise ends up in landfills each year.
But as the volume of returns has grown, so have online
liquidators, primarily business-to-business services like B-Stock,
Liquidity Services Inc.'s Liquidation.com and Optoro's Bulq.com
(Optoro's Blinq.com is for shoppers). Since 2008, online auction
sales have grown 66%, and combined sales through factory outlets,
dollar stores and value retailers have more than doubled.
Also in the mix are bargain hunters and small online sellers,
who say January and February are the best time to stock up.
"Everything is at a discount," said Heather Hooks, a 38-year-old
mother of three in Trenton, Ill., who runs a small business selling
discounted items on eBay and Amazon. She usually buys her inventory
through online auctions or from sales racks at big box stores.
"This time of year is really good as far as sourcing items."
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Write to Erica E. Phillips at erica.phillips@wsj.com
(END) Dow Jones Newswires
February 17, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
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