April 28, 2006, 12:00 AM

The New Liquidators

(Page 3 of 3)

Many online liquidation sites-like Liquidation.com-also provide professional services, such as branding and marketing-that aren’t offered by most traditional liquidators. “Some of them are getting into reverse logistics, like handling warranty and repair,” Blumberg says. “Traditional liquidators are basically brokers.”

The additional services offered by Liquidation.com was a major reason N.E.W. switched to the company, Miller says. “Our traditional partners collected the salvage and then sold it off,” he says. In contrast, Liquidity Services grouped like items together before auctioning them off. “That changed the value proposition for the buyer. Now a buyer is buying a palette or two palettes of similar products-boom boxes, TVs, or laptop computers-versus a mixed bag.”

Just which method of liquidation a retailer chooses depends on many factors. “Everyone has a different need to solve the same problem-the problem being excess inventory,” Wingo says. “What really changes how they operate is channel conflict, how fast they want to sell things and other complexities around the logistics.”

ChannelAdvisor operates Direct2Wholesale, a network of business-to-business auction sites that connect manufacturers and retailers with qualified buyers of surplus. “We help retailers and manufacturers figure out what the right fit is for them,” Wingo says. “Should they be doing eBay? Should they be doing a private marketplace? Is Liquidation.com, where you’re moving it to smaller people, the way to go?”

Retailers who can’t ship single units might turn to online liquidators such as Liquidation.com or Overstock, while those who can ship individual units might use eBay to sell off excess stock, he says. “If they’re only going to sell a truckload, that limits what they can do,” Wingo says. “You’re not going to put a truckload on eBay.”

Despite the advantages offered by online liquidation sites, it’s unlikely that they will replace traditional liquidators any time soon, observers say. They represent only about $1 billion of what is estimated to be an $80 billion market, Wingo says.

Liquidators selling to liquidators

Most traditional liquidators have a depth of knowledge and long-term relationships-for example, contacts for selling out-of-stock and discontinued items outside the U.S.-that online liquidation sites don’t have, Blumberg says.

Surplus Sourcing Group Inc., a traditional liquidator based in Chatsworth, Calif., has been buying excess inventory “from large companies we have had contracts with for many, many years,” says Frank Jadhavji, president of Surplus Sourcing.

Because SSGI deals in what Jadhavji terms “mega-volumes” of merchandise-tens of thousands of a single item-he doesn’t consider online liquidation sites a threat. “We can’t go online ourselves and sell at that kind of volume,” he says. “As a matter of fact, most of these guys are our customers.”

Surplus Sourcing also refurbishes non-working items and sells them in bulk to retailers and distributors, a service that most online liquidation sites don’t offer, he says.

But while traditional liquidators will continue to dominate the liquidation industry, online operations will play an increasingly important role, observers say. “These online liquidators make a very efficient marketplace,” Blumberg says. l


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