It’s Time For Manufacturers To Prioritize Returned And Excess Inventory

Considering 15 percent of all goods are either returned or never sold to begin with, and that a large portion of these products end up back with the manufacturer, it’s essential to understand the real value of this merchandise and rethink the program(s) put in place for the remarketing of it.

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Howard RosenbergHoward Rosenberg

Every manufacturer has surplus: returned, excess or overstock inventory that sits in a warehouse, taking up space. Lack of innovation over the past few decades around how organizations approach disposing of their surplus inventory has resulted in billions of dollars lost and can no longer be left to inefficient, reactive or outdated methods. Considering 15 percent of all goods are either returned or never sold to begin with, and that a large portion of these products end up back with the manufacturer, it’s essential to understand the real value of this merchandise and rethink the program(s) put in place for the remarketing of it.

Traditional methods, including selling this distressed inventory to one or two liquidators, always leaves money on the table. What’s more, remarketing to a liquidator can mean a lack of control over who is eventually buying the inventory and how your brand enters the secondary market.  

So the question becomes: how can an organization update its remarketing program in order to achieve: No. 1 - maximum recovery for merchandise; No. 2 - hit velocity requirements; and No. 3 - protect the brand? The answer is really quite simple (and likely involves something you are already doing in your forward supply chain): by applying technology and data-driven analytics to your remarketing program you can tackle all three of these objectives.

Over the past few years a shift has taken place in how organizations manage their returned and overstock inventory: many are bypassing layers of middlemen and incorporating technology-based liquidation programs into their overall business strategy. This type of solution allows thousands of buyers to compete for the inventory, pushing prices up (versus a broker negotiating them down). Most likely there is already a robust secondary market and buyer base for your product(s); in every major city around the globe there are businesses that purchase excess and returned inventory for resale. The secret to success is the ability to gain access to this buyer base. A web-based solution is one way to make this happen. This could entail launching an online auction liquidation marketplace that can be customized, integrated, and marketed based on your unique inventory needs or leveraging an established B2B liquidation marketplace. Either way, you are automating the process, ensuring a faster sales cycle and proprietary market intelligence in the form of real data on market prices. What’s more, you can recover substantially more with less work, which will positively impact your bottom line. 

Many of the world’s top manufacturers, including one of America’s largest manufacturers of home appliances, are using a web-based, automated auction approach and increasing recovery for their returned and excess merchandise by 30 to 80 percent and sometimes much more.

While demand typically exists for products across all conditions, certain products are better suited to be sold as refurbished or remanufactured. This means you can invest dollars in repairs, cleaning and repackaging to gain a recovery that is much higher, even after those costs. Keep in mind that refurbishing takes longer to realize recovery and requires more oversight but should certainly be considered if product value is prioritized over expediency. If bandwidth to handle such repairs doesn’t exist in-house, consider leveraging a trusted partner to handle the process.

Finally, even if the product itself is beyond repair there are options for recovery through parts harvesting, as there is a buyer base that exists solely to facilitate repurposing or recycling of salvage/Grade D inventory. To realize the highest value for this salvage inventory you need a thorough understanding of all materials contained in each product. Be sure to compare the price per pound you’re getting from the whole unit versus doing a partial breakdown so you can market components separately. That said it might be worth giving up a few dollars of value to let the buyer deal with breaking the product down.

Investing resources to revamp your remarketing channel will have a direct and meaningful impact on the bottom line. If in-house bandwidth is tight, sometimes the best choice is to work with a trusted partner whose primary business is providing remarketing solutions for returned and excess merchandise. The best partners will have a low cost structure, a great reputation among clients, extensive knowledge of the secondary market, and a data-driven, analytical and transparent approach. Be sure to look for:

Online marketplace expertise: The sales platform offered must be well designed, flexible and scalable. Make sure your partner has extensive experience in managing marketplaces and developing auction strategies to maximize your results.

Targeted demand generation: A good partner will have a proven track record of growing custom buyer bases across all product categories and conditions. This is not only about quantity as buyer quality matters too.

In today’s competitive landscape taking the time to analyze the real value of your returned, excess and obsolete merchandise on the secondary market can mean the difference between winning and losing. Every dollar increase in recovery value, or reduction in expense, equals another dollar of profit.

Howard Rosenberg is CEO and co-founder of B-Stock Solutions.

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