While retailers are still celebrating one of the strongest holiday buying seasons in recent years, the secondary retail market is now enjoying its own successful season. Once consumers take their unwanted items back to retailers, resellers and reverse logistics groups acquire those items to turn their own profits, according to an article in The Wall Street Journal.
The National Retail Federation reports that holiday sales totalled nearly $692 billion in the last two months of 2017. Reverse logistics provider Optoro estimates that about 13 percent, or $90 billion, of that merchandise, will be returned by the end of this month. The most commonly returned items include clothing and apparel, electronics, beauty products, and sports and outdoor gear.
About half of this returned merchandise is restocked on the retailers’ shelves and often resold at a discount. Some 5 billion pounds of merchandise is just thrown away because this option is cheaper than restocking and reselling the items. The remainder is picked up and sold by the secondary retail market. Retailers have actually improved their reverse logistics processes in the past few years, with many being able to process hundreds or thousands of items a day, noted Tony Sciarrotta, executive director of the Reverse Logistics Association. Some retailers even add a second logistics shift to help manage the returned items and move them to the next selling point as quickly as possible, he said.
As a result of these return trends, January and February tend to be the busiest months for resellers and the reverse supply chain, explained Howard Rosenberg, chief executive of B-Stock Solutions. B-Stock Solutions manages liquidation sites for Best Buy and Sears, among other major retailers, and auction sites for retailers such as Costco, Macy’s, JCPenney and Lowe’s. “It’s just mayhem during this period,” Rosenberg said.
Resellers acquire the returned items through liquidation sites at a deep discount, enabling them to turn a profit. For example, last week, Best Buy sold 49 returned washing machines and dryers on one online auction site for $13,300 — a 68 percent discount. Similarly, on the same day, Sears resold four pallets of sportswear, intimate apparel and accessories for only $5,825 — a 93 percent discount. Damaged or bulk items usually have the greatest discounts.
Because of the strong holiday selling and returning seasons in the past few years, the resale market is stronger than ever. Post-retail sales of returned and overstocked items totalled $554.2 billion in 2016 — only $137.8 billion less than 2017’s November and December sales — and have been growing at approximately 7.5 percent a year, reported Zac Rogers, an operations and supply chain professor at Colorado State University. Nearly half of those 2016 sales were collected by salvage dealers and online auction houses, the remaining half collected by smaller vendors like dollar stores, factory outlets, pawn shops and flea markets.
The secondary retail market also received a volume surge this year following the rise in online purchases, which are more likely to be returned than items purchased in a physical store.
In conjunction, online liquidators like B-Stock, Liquidation.com and Optoro’s Bulq.com have grown their businesses. Online auction sales have increased 66 percent in the past 10 years, and combined sales through factory outlets, dollar stores and value retailers have more than doubled.
Be a part of the action
These retail trends are fueling the growth of the reverse supply chain, which the APICS Dictionary defines as, “The planning and controlling of the processes of moving goods from the point of consumption back to the point of origin for repair, reclamation, recycling or disposal,” or, in this case, resale. The growing secondary retail market will need resources to collect, manage and move an increasing amount of inventory to the new end users.
APICS offers resources to help you and your company participate in the growing reverse supply chain. Consider earning your APICS Certified in Logistics, Transportation and Distribution (CLTD) designation. The APICS CLTD program covers reverse logistics as well as capacity planning and demand management, order management, inventory and warehouse management, transportation, global logistics, logistics network design, sustainability and other important topics. Learn more at asci.org.au/cltd.
Author – CEO, APICS