From the GENCO Marketplace point of view – as early providers of “reverse logistics” services (liquidation, recovery value) on returned or distressed goods – a lot has changed since 1992.

Here’s a perspective on how far the liquidation business has come and how current changes improve and impact salvage buyers today.

–Top Ten Wholesale Blog Editor

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Changing Times in Merchandise Liquidation
By GENCO Marketplace
B2B Wholesaler of Distressed Inventories

GENCO Marketplace, which liquidates more than $5 Million worth of product every day, began offering liquidation services in 1992 to reverse logistics customers, who wanted to maximize recovery value on their returned goods.

Back then, the priority for companies was simply getting rid of their distressed merchandise as fast as possible in order to empty the warehouse and cut costs. “Liquidation” may have been accomplished back then in parking lot sales to employees or simply destroying the goods.

For many of GENCO Marketplace’s early customers, we offered a new revenue stream. They were happy with even a small return on their distressed inventory.

How things have changed!!

Today, liquidation is a business. Companies now have budget targets for liquidation revenue and they’ve developed sophisticated programs to maximize recovery value, while minimizing overhead costs.

A few of the changes we have seen over the years, and how those changes are impacting salvage buyers, include:

Internet As Prime Channel. At one time in the recent past, the primary buyers of salvage were discount retailers, flea marketers and brokers. Today, a legion of Internet-based businesses has entered the fray, including eBay power sellers. The Internet has become a prime channel for moving liquidation merchandise.

· For buyers of liquidation merchandise, this means more competition for product and escalating prices. Retailers who formerly liquidated only by the truckload are now conducting Internet auctions for some of the same goods. While you may pay more for loads, increased demand in the secondary market allows you to charge more and make a fair profit.

· Overall, the Internet has been a positive force in the industry, by expanding the market for returned and closeout merchandise.

· On the flip side, Internet as prime liquidation channel has also invited rogue practices. For example, some businesses simply “flipped” loads without ever taking possession. (They found a load for sale online and, before buying the load themselves, they may attempt to sell it online for a profit.) But, after executing a sale, those businesses may learn that the product they “sold” is, in fact, no longer available for purchase.

In instances like the above example, we’ve seen “flippers” purchase a similar load and misrepresent it as the load originally offered. To avoid such rogue practices, you should deal only with sources of supply you know and trust.

Lower Risk From More Visible Load Content. Buyers once purchased mixed loads of various commodities, and they had to wait for delivery to see exactly what they’d purchased. Today, sophisticated liquidators publish online manifests that list products, descriptions, volumes and original value for all items in the load.

These manifests eliminate much of the risk associated with purchasing loads “blind.” Buyers should take advantage of this visibility to know what you’re buying, in advance.

Changed Buying from Higher Freight Costs. Higher freight costs are squeezing profits, translating to less margin for error on load purchases. Buyers used to be willing to gamble more on liquidation loads; but, today, few buyers purchase goods located on the other side of the country. It’s best to find sources of supply with locations near yours, or work with a large liquidator who locates multiple warehouses throughout the country.

Decreased Profit Margins on Electronics Loads. Electronics loads used to be more profitable. Today, retailers and manufacturers are more likely to cherry pick high-quality products from electronics loads, diminishing the load’s value. Also, because the next generation of products are introduced so rapidly, electronics products devalue quickly. So, loads must be remarketed and sold in a hurry … or profits are jeopardized.

Future Trend in Liquidation Merchandise

Economic recession is pressuring retailers. They’re both smarter and more cautious about purchases. This trend is likely to decrease the supply of returns and closeouts, which may increase liquidation load prices.

The only certain predictions we can make:

· The supply of liquidated goods will constantly change based on market demand for particular products, and the specific strategies of retailers and manufacturers.

· The most successful liquidation merchandise buyers are the ones who best adapt to this ever-changing business.