This is an abridged article—read the full piece here.
In a 2021 blog post, the online retail platform company Shopify describes e-commerce returns as a disease. $428 billion in nationwide returns give weight to this notion, and as consumers trade physical commerce for e-commerce, the unprecedented volume of returns has led to new headaches for retailers.
Return addiction aside, businesses now cope with supply chain disruptions that leave them with out-of-season unsellable merchandise. And low-cost shortcuts like trashing unwanted stock don't fly with today’s environmentally conscious consumers.
These factors all combine to create an inventory crisis that strains budgets, clogs warehouses, and wastes man-hours with inefficient reverse logistics processes.
While innovative new practices can offer a way forward, it’s critical to understand the factors at play in the current liquidation and reverse logistics crisis.
In the US alone, the market for liquidated goods doubled between 2008 and 2020 to hit $644 billion. This trend raises a key question: Why is there so much excess stock in the market?
For many retailers, dealing with this massive amount of returned inventory is a new and costly part of doing business. Here are the key issues:
Remember that $428 billion mountain of returns? E-commerce orders accounted for nearly a quarter of those. But despite getting the goods back, businesses don’t break even—for every $1 billion in sales, the average retailer incurs $106 million in cost. Here’s why:
The expensive reality is that free, no-questions-asked returns are the new normal. One in three repeat consumers say they would abandon a retailer if they had a “difficult” returns experience but 83% of retailers identified returns as an ongoing threat to profitability.
Thankfully there are a growing number of channels available to retailers and manufacturers that are prepared to face down the challenge.
Excess inventory, rising returns, supply chain disruptions, changing seasons, and missed forecasts are facts of life for modern businesses. But what can retailers and manufacturers do about it?
While liquidation is sometimes appropriate, it’s a blunt instrument. Liquidators often pay just pennies per unit, and occasionally sell to other liquidators, killing any hope of brand and channel control. Sending goods to landfill or the incinerator is even worse, offering zero return and bad optics to sustainability-conscientious consumers. Donation offers a more ethical alternative but still adds to costs.
Resale is the ideal option as long as the process offers good recovery, high speed and scalability, and provides a degree of brand and channel control for the seller. Options include:
The B2B auction is another popular way to match sellers and buyers. In the consumer space, the online auction concept is well-established; think eBay, Mercari, or Rakuten. Today, companies like B-Stock offer auction marketplaces that are tailored specifically for the needs of enterprise sellers and buyers. The unique benefits of online B2B auctions include:
For any company grappling with the challenge of excess inventory and returns, it clearly makes sense to work with a third-party “recommerce” specialist. Outsourcing liquidation processes reduces the human hours needed to handle excess stock, frees up warehouse space, and recovers more value.
As suggested, there are multiple channels for recycling excess stock. But can the process of outsourcing go further? Is it possible to develop a partnership?
Many retailers and manufacturers believe so and are turning to recommerce specialists as advisors rather than just hiring liquidators to clear their warehouse of excess and returned stock. These specialists advise in areas such as:
With a sole focus on recommerce, a specialist can offer superior, market-wide selling insights, helping to achieve better reverse logistics outcomes and enabling organizations to focus on their core competency.
Excess inventory presents a major challenge for retailers and manufacturers as consumer returns and other factors add pressure on overstocked warehouses.
But on the flipside, resellers and consumers are happier than ever to purchase secondary market products and support a growing circular economy. As a result, there is now a genuine opportunity to turn unsold inventory into cash while maximizing operational efficiency and saving precious space and time.
As a leader in the secondary market, B-Stock can help organizations develop, execute and continuously optimize an ever-evolving strategy for managing returns and excess inventory while making the most profit from it.
Want to dive a little deeper? Get the full picture by reading our unabridged article here.
 The estimated cost of returns for the 2020 US holiday season alone was $101 billion