Liquidation Inventory Buying

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.

Macy's is once again operating a liquidation marketplace in the B-Stock Sourcing Network.  The site goes under the name Department Store Auctions and is offering inventory in many categories, including:

• DRESSES & SUITS
• HANDBAGS & ACCESSORIES
• HOUSEWARES & KITCHEN
• MEN'S APPAREL
• TEXTILES
• WOMEN'S BETTER APPAREL
• WOMEN'S EVERYDAY APPAREL
• WOMEN'S PLUS SIZES
• WOMEN'S SHOES

While the auctions are not all starting at reasonable prices, there are definitely some gems available that draw significant attention.

It is definitely worth checking out the site!

It has been a while since I've posted, and since the last time there has been a mini-explosion of new marketplaces making inventory available to small buyers.  In particular, within the B-Stock Sourcing Network, we have seen a bunch of new launches.

Best Buy:  Probably the biggest of the retailers launching new inventory liquidation marketplaces is Best Buy.  According to a Reuters profile of Best Buy:

Best Buy Co., Inc., incorporated on October 20, 1966, is a provider of technology products, services and solutions. The Company offers products and services to the customers visiting its stores, engaging with Geek Squad agents, or using its Websites or mobile applications. It has operations in the United States, Canada and Mexico. The Company operates through two segments: Domestic and International. The Domestic segment consists of the operations in all states, districts and territories of the United States, under various brand names, including Best Buy, bestbuy.com, Best Buy Mobile, Best Buy Direct, Best Buy Express, Geek Squad, Magnolia Home Theater, and Pacific Kitchen and Home. The International segment consists of all operations in Canada and Mexico under the brand names, Best Buy, bestbuy.com.ca, bestbuy.com.mx, Best Buy Express, Best Buy Mobile and Geek Squad. As of December 31, 2016, the Company operated 1,200 large-format and 400 small-format stores throughout its Domestic and International segments. It has a global sourcing operation to design, develop, test and contract-manufacture its brand products.

The Company's Domestic and International segments have offerings in six categories, such as consumer electronics, computing and mobile phones, entertainment, appliances, services and other. Its consumer electronics category includes home theater, home automation, digital imaging, health and fitness, and portable audio. Its computing and mobile phones category consists of computing and peripherals; networking; tablets; mobile phones, which include related mobile network carrier commissions; wearables, which include smart watches, and e-readers. The entertainment category includes gaming hardware and software, movies, music, technology toys and other software. It offers appliances, such as refrigeration, dishwashers, ovens, laundry, coffee makers and blenders. It offers services, such as consultation, design, delivery, installation, set-up, protection plans, repair, technical support and educational classes. Its other category includes snacks, beverages and other sundry items. The Company's retail stores have procedures for inventory management, asset protection, transaction processing, customer relations, store administration, product sales and services, staff training and merchandise display that are standardized within each store brand.

Needless to say, there is a TON of inventory opportunity here.  It appears that the marketplace is starting with major appliance liquidations but it would not surprise me if the selection expanded over time into other categories.

Pirch:  Pirch is a niche retailer of high end appliances and other home products.  The products available for liquidation look absolutely beautiful and include all varieties of high end appliances.  If you are an appliance reseller, or want to be one, you have to check this site out (https://bstocksupply.com/pirch).  According to Wikipedia:

The company was founded in San Diego, CA in 2009 by a team of businessmen including Phil Roxworthy, James Fikes, and Tom Cavallo, under Rox Design DBA Fixtures Kitchen Bath Outdoor. The team shared the point of view that the appliance retail industry had a need for the re-invention of the complete in-store, shopping and delivery/installation experience, as there was "a void in the marketplace, left by industries that had remained virtually unchanged for decades.”

On February 26, 2013, Catterton Partners (a private equity firm based in Greenwich, Connecticut, known for its funding of companies such as Build-A-Bear, Pop-Chips, Baccarat, Outback Steakhouse and Restoration Hardware), announced its investment in Pirch as a minority shareholder. The transaction accelerated the growth of the retail concept as it began its aggressive expansion across the country.

Pirch has four stores in California, more than any other state, including San Diego, Rancho Mirage, Costa Mesa and the Glendale Galleria. The company's first store outside California, as well as the fifth store, opened in a part of a shuttered Bloomingdale's home store at Oakbrook Center in Oak Brook, Illinois, on March 8, 2014, and a sixth at the NorthPark Center in Dallas, Texas, in part of a former Barneys New York, opened on August 23, 2014. On December 13, 2014, a seventh store opened at the Lenox Marketplace in Atlanta, Georgia, as part of the company's plan to expand its luxury retail stores nationwide.

In March 2015, an eighth location was introduced at the Garden State Plaza in Paramus, New Jersey.  A three-story and flagship location opened in the SoHo neighborhood of New York City, New York in May 2016 as the ninth store.  In May 2017, a tenth store was opened in Austin, Texas at the DOMAIN Northside.

JC Penney:  Of course, who doesn't know this iconic retailer.  According to the inventory liquidation marketplace page:

J. C. Penney Company, Inc. (NYSE:JCP), one of the nation’s largest apparel and home furnishings retailers, is on a mission to ensure every shopping experience is worth the customer’s time, money and effort. Whether shopping jcp.com or visiting one of over 1,000 store locations across the United States and Puerto Rico, customers will discover a broad assortment of products from a leading portfolio of private, exclusive and national brands. Supporting this value proposition is the warrior spirit of over 100,00 JCPenney associates worldwide, who are focused on the Company’s three strategic priorities of strengthening private brands, becoming a world-class omnichannel retailer and increasing revenue per customer.

JCPenney Liquidation Auctions is the official B2B marketplace for the liquidation division of J. C. Penney Corporation, Inc. JCPenney Liquidation Auctions will offer bulk quantities of first-quality/excess and customer returns including: domestics, furniture, rugs, hard goods, apparel, footwear, and much more. Auctions lots are between one pallet and a full truckload. These are the same quality products that are sold through jcpenney.com.

So far, we have seen a pretty wide variety of home products on the marketplace, including:  furniture, window coverings, bedding, kitchen and bath products.  There have been some amazing deals to be had and, given their size, I expect to see much more coming in the future.

Scosche:  The newest marketplace just launched this week (week of August 1).  UPDATE: Site has closed and the company's products can be found at BStockSupply.com.

Founded in 1980, SCOSCHE (pronounced skōsh) Industries is an award-winning innovator of consumer technology and car audio products - committed to delivering superior product quality and functionality, exceptional value and unmatched customer service. The designers and engineers at SCOSCHE develop products that reflect a rich heritage in audio and mobile technologies. SCOSCHE finds inspiration in the California lifestyle, culture, music and people. These influences can be seen in the accessories and products that are now in the homes, offices and vehicles of people in over 50 countries. With over 400 patents/trademarks and industry awards received, it is easy to see why SCOSCHE is consistently at the forefront of technology and innovation.

The Company produces quite a variety of consumer technology products.  While we haven't seen the site live yet, as of the time of this writing, it is reasonable to imagine a wide array of inventory available for liquidation.  From mobile and audio products and accessories to heart monitors for athletes, the company has some amazing products.  We can't wait to see this marketplace go live.

It is a golden age for secondary market buyers of liquidation inventory.  Retailers have a bigger need than ever to move returned, overstocked and other distressed inventory while consumers are more interested in a bargain then they have ever been.  Buying directly from these major retailers is the best way for any entrepreneur to start building a business in the secondary market.

Interested appliance buyers should definitely check out Best Buy's new liquidation marketplace on the B-Stock Sourcing Network.  The site looks great and the first listings include 2 single truckloads and one triple truckload lot of customer returned appliances.  They include refrigerators, washers, dryers and microwaves by some of the top brands, like Samsung, Whirlpool and LG.

The bidding started at $100 on each of these lots, so it seems like there will be some great buys available.

The site is located at:  https://bestbuy.bstock.com

Here is a screenshot of the homepage:

According to an article on CNBC.com written by Krystina Gustafson today, Macy's plans to roll out another 30 Backstage shops within Macy's stores this year.  These will be in addition to the existing 15 stores opened last year.  This is a pretty smart and interesting strategic move by Macy's to leverage what might be their best asset, their locations.  Mall owners should love this, assuming the stores perform.

Most of the other off-price retailers, like TJ Maxx and Ross are located in open-air shopping centers rather in malls.  They have been performing very well since the Great Recession, providing yet another reason for consumers to avoid malls.  According to the article, roughly 2/3rds of Macy's customers spend monty at the off-price chains, so these in-store, off-price shops should draw shoppers back into the malls and the stores, specifically.

I have not been in a Backstage store yet.  It will be interesting to see what product is sold there.  Will it be product that would have otherwise been sent to liquidation--like returned merchandise?  Or will it be 'made for the outlet' product like so many outlet stores do today?  

Time will tell what impact this has on the opportunity to buy liquidation inventory from Macy's going forward.

Similar to my last post about Florida inventory, here is a page that aggregates iPhone liquidation lots for those looking for this inventory.

Here is a cool new resource for those of you looking for liquidation lots near you in the Southeast.  Specifically, liquidation lots available in Florida.

Macy's comparable store sales fell 2.1% in November and December, according to its latest earnings release.  The company said it will be closing 68 stores.  These closings are part of the previously announced 100 stores closings.  With some additional restructuring, the total impact on employees will be a reduction of more than 10,000 jobs.  The move is expected to save the company $550 million per year.

There is a decent chance that the store reductions will create a short term bump in liquidation volume, but that is not certain. The company may move inventory to other nearby stores or sell it onsite in closing sales.

Longer term, the continued reduction in revenue will mean a reduction in returned inventory.  Customers can't return what they don't buy.  We will see how things develop, but if they are not able to successfully drive the shift to online fast enough to make up for shrinking revenue in stores, the company will be in for additional pain--store closures and job losses.

Anyone who has bought Home Depot store returns and .com returns will appreciate the higher quality of this e-commerce merchandise.  The .com merchandise is really head and shoulders above general store returns.  I've noticed lately that the .com lots they are selling on their official liquidation marketplace are going for similar prices to the stores merchandise.  This is a clear indication of a great opportunity to score some killer deals.

The .com loads are currently truckload only quantities and, as of the date of this post, they are mixed categories.  However, in around 3 weeks time they are telling me that they will be offering category sort truckloads.  This will be a huge improvement for most buyers who can't deal with items across the wide variety of categories.

Get registered now and bid on some of these .com loads.  I think you will be very pleased with what you get.  Great money-making opportunities here.

As reported today in Commercial Property Executive, Macy's will be closing 100 stores, or roughly 15% of its properties, in 2017.  The company says it will be focussing on better performing stores and strengthening its online presence.  Macy's shares have fallen more than 40% in the past 12 months and profits have all but evaporated.

The impact this will have on inventory liquidation volumes remains unclear.  Inventory may be shifted to other stores rather than liquidated in place, but it would be wise to keep an eye on this.  Once the locations of the closing stores are made public, there may be some local opportunities to purchase product coming out of them.