The online channel has been hailed as marketplace that gives retailers a better recovery rate on returned and surplus merchandise, but returns handlers and online auction management providers are finding that volume and service pricing are critical to making it work. They are among the reasons that some seven months after launching a program with technology developer Slingshot Solutions to manage auctions of returned and surplus goods, reverse logistics provider Genco Distribution System has pursued alternative arrangements with another auction services management company.
Genco last month quietly initiated a 90-day pilot program with Atlanta-based Auctionworks. In the pilot, Genco is selling returned and surplus goods from its retail clients using Auctionwork's platform and management services under two new seller IDs. “Chance Deals” offers the type of distressed goods Genco had been selling in online secondary marketplaces under Slingshot’s brand, “Delivery Dog,” while “Retail Surplus” offers the new and like-new returned and surplus merchandise that Genco has been selling online under Slingshot’s "Slingshotman” icon. Both Chance Deals and Retail Surplus are Genco brands.
Currently, Genco is not offering products for online auctions under either Slingshot brand, though a Slingshot Solutions spokesman says the company is still negotiating with Genco on the possibility of continuing auction management services. Slingshot Solutions is currently in discussion with retailers considering one or both of Slingshot’s online auction products as a liquidation channel, adds the spokesman.
Genco retains the 35% stake in Slingshot for which it invested $1 million last fall. But, without additional investment, that level of funding evidently did not justify the time and resources Slingshot Solutions said it needed to effectively service Genco's auctions. “The amount of customer service interface was a surprise to us,” says Genco senior vice president Peter Rector. “At Genco, we’re used to selling by the truckload. We thought everything was listed clearly and people would just get the information from the site. But when selling to the general public, you get every question imaginable.”
Slingshot’s transaction-based pricing for the auction management services it provided to Genco were set in expectation of volume that didn’t materialize, according to the Slingshot spokesman. Delivery Dog and Slingshotman together launched perhaps 100 auctions a day for Genco at peak volume. Auctionworks launches some 2 million auctions per month for its clients, says Rector.
According to the Slingshot spokesman, the time and focus required to support the Genco auctions pulled Slingshot away from its other primary interest: the development of software merchandising tools and an offer engine to determine the best selling strategy for products throughout their life cycle. While it continues to offer auction management services, Slingshot has added a rate structure alternative that’s based on a monthly flat fee rather than transaction volume, he says.
Rector says Genco will evaluate the new Auctionworks pilot with an eye toward continuing the relationship. “We’re pretty convinced we want to stay in the auction business as are the customers we represent,” he says. As to Slingshot’s software development efforts, “We own a 35% stake in them, and obviously we have a big stake in their future success. We’re cheering them on.”
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