Changes in the retail market for appliances is causing some huge opportunities for buyers in the secondary market. Specifically, there have been certain very large retailers out there who, for the past decade or more, have been the biggest buyers of excess inventory from the manufacturers. Those manufacturers came to rely on these retailers to soak up all of their excess appliance inventory. Even though they were getting low recovery prices on the product, they enjoyed the benefits of this symbiotic relationship.
The reason this was symbiotic is that manufacturers have to keep production lines going. The closer to full capacity they can keep their plants, the lower they can drive the cost of their finished units. This enables them to remain competitive with their pricing in the market. The issue they face is that their dealer networks can't always absorb all of that production and the result is that the dealer channel becomes saturated and has to slow down their buying. When this happens, the manufacturers warehouses start filling up with the excess inventory they produced. This is where these giant retailers come in. They love to create compelling opportunities to draw consumers into their stores, and one of the best ways to do this is via big sales. The bigger the better.
So, the retailers have a relationship with the manufacturers whereby they agree that they will take any overproduction but they will pay a very low price. This is a huge help to the manufacturer since it helps to work off that inventory piling up in the warehouse (or avoid having it pile up to begin with).
So What's the Problem?
It is no secret that retailers are facing some serious headwinds lately. Too much retail square footage per consumer is one problem that has come from over building in the industry. Another headwind is the intense competition that has developed in the industry, particularly coming from newer online players. Some of these online players are rewriting the rules around what it means to be customer-centric. These new policies, including very liberal returns policies, are driving down operating margins for everyone. In the case of some of the biggest players in the excess appliance inventory ecosystem, this financial pressure is causing them have to pull back from the symbiotic relationship described above. And THIS is why we are now seeing a flood of inventory being made available in the secondary market more broadly.
This inventory has to go someplace. It has to continue moving towards consumers and eventually land in homes across the United States. Too many companies lose too much money when this product stagnates in warehouses to have it just continue to build up.
So, if you are a small appliance dealer and you want to broaden your selection to include more dent & scratch, returned or overstock inventory, right now is a golden age for you. Several of these companies have created their own online liquidation marketplaces through which you can buy lots for significant discounts. Take a look at the B-Stock Sourcing Network for the biggest selection of these marketplaces.