In its second-largest acquisition, Amazon buys the company for $970 million.
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Pricing a product very low on eBay can lead consumers to conclude they should not shop at the retailer’s primary site. And, while vendors’ minimum pricing rules don’t generally apply to damaged products, he says, offering items cheaply on eBay could make suppliers wonder if ShoppersChoice is trying to get around those rules. Tisdale says he would rather offer the items as contest prizes than to sell them at a price he considers too low.
But disposing of excess goods on eBay may be preferable to offering the same goods on a retailer’s own site, says Scot Wingo, CEO of ChannelAdvisor Corp., a company that helps merchants sell through online marketplaces and comparison shopping sites.
Selling inventory through a clearance section of a retailer’s site risks encouraging existing customers to make purchases that produce lower profit margins. “You might cannibalize your retail sales and not gain new customers,” Wingo says. But with eBay, retailers can sell items and potentially gain a new customer who has not visited the retail site. “We call it the eBay outlet concept.”
Retailers also can sell surplus goods through the Amazon.com marketplace. But there they face a lack of control that gives some retailers pause. “If you have five guys selling the same product, Amazon will choose one description to blanket that same product,” says Richard Sexton, president of Carolina Rustica, an online, catalog and store retailer of home furnishings.
Selling in house
Carolina Rustica could have put its excess inventory, which includes floor samples, up for sale on a site such as Overstock.com, Sexton says. But those sites are designed for sellers that have many pieces of a particular item to sell, he says. “Almost all our clearance items are one of a kind,” he says. “So it was not cost as much as the business model was incompatible.”
Carolina Rustica even wondered if it could conduct clearance sales through a daily deal and coupon site such as Groupon.com. “But we don’t offer massage therapy and we are not a restaurant. We are not an impulse purchase,” Sexton says. “They said, ‘Thanks, but no thanks.’”
The furnishings retailer eventually decided to handle its clearance sales in-house, through its own clearance section on its e-commerce site. “We didn’t want to siphon traffic from our own site,” he says. “And we can link to other products that customers might like, which gives us a good opportunity to cross-sell other products at normal price points.”
Sexton says the clearance section is among the most visited areas of the site, and that clearance shoppers convert at a rate that is twice as high as non-clearance shoppers. Between 5% and 8% of Carolina Rustica’s sales are from clearance, Sexton says, with the number up over the last few years.
With the holidays approaching, and the economy still hurting, retailers will face continued pressure to explore the options for online liquidations and closeouts—and the message, as well as the dollars, is likely to play a role in the paths they take.