We often hear companies asking if they can realistically expect to recover all of their costs on returns and overstocks. The short answer to that question is; no.
You can recover some of the costs, but rarely, if ever, all of them. Conversely, it is remarkably easy to lose more on returns and overstocks, and we see a great many companies do just that. This inventory has a lure, almost like the siren’s song, that we constantly warn against, but still see many companies succumb to, almost always resulting in even greater losses. That lure is the companies perceived value of the inventory. Companies know how much was spent to purchase the inventory, and they know what they sell the items for when they are new, and they firmly believe that value is conserved when discussing returns and overstocks. They believe it so firmly, that they base very important decisions on that belief, and will spend incredible amounts of money to create sales channels specifically for that inventory.
The problem is, the consumer doesn’t know, at what’s more doesn’t care, about any of that data, and it’s ultimately the consumer that determines what value any item has. History has shown, over and over again, that the consumer values returns and overstocks far less than companies do. In almost every case where a company has created a retail channel for this inventory, they are completely surprised by how little the market values it. The size of the retail operation is irrelevant here. We see large national chains every year set up outlet stores for returns and overstocks, and we have yet to see one of those attempts succeed. This is one of the most common, and avoidable, mistakes we see companies make. It’s important to remember that less than half of all returned items ever sell for their full retail value. The rest of those items, sell far below their retail value; most very far below. And if there were a great demand for your overstock items, they wouldn’t be overstocks. They haven’t sold for a reason.
When retailers make decisions regarding selling returns and overstocks, based on their perceived value, they are setting themselves up for failure and a huge hit to their bottom line. It may also be helpful to keep in mind, that selling returns and overstocks is not what you do, and to change that will require you to create an entirely new sales channel. That is a very difficult, expensive and risky proposition, especially when you are still primarily, and rightly, focused on your forward sales channels. Our advice to companies about recapturing value from returns and overstocks is simple; make what you can, as fast as you can, spending as little as possible to do it, by finding a reliable and reputable liquidation company and allowing them to sell the inventory for you. Don’t let yourself get hung up on your perceived value of it. That inventory doesn’t have the value it once did, and the longer it sits in your warehouse, the less value it will have.
A liquidation company allows you to avoid the unnecessary additional costs associated with trying to sell returns and overstocks on your own, and will maximize your recovery rate of that inventory. Selling returns and overstocks is what they do, and they’re far more likely to produce better results for you, recapturing value on your behalf and sending much of that recaptured value back to you. This not only results in a revenue stream from your returns and overstocks, but it reduces your expenses by eliminating the need for you to process any of it, and it keeps you free to focus on what you do best, running your business.
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