Every year, hundreds of millions of items — between six and nine per cent of goods sold — come back, and the cost to retailers is enormous. Canadians spent $ 513.4 billion in retail stores in 2015, meaning as much as $ 46 billion worth of items were sent back.
“[That] is actually very rare,” says Ted Salter, national leader for consumer products and retail at consultancy Ernst & Young — now known as EY. “I don’t think people realize, more often than not, depending on the category, those items are going into what we’ll call a reverse logistics process.”
That process involves companies such as Liquidity Services. The U.S.-based company, which bills itself as “the world’s largest marketplace for business surplus,” has been operating in the States since the late ’90s and is now expanding to Canada.
The company says about 50,000 items move through the facility every two to four weeks — between 600,000 and 1.3 million products per year. Each and every one of those items is something that has been returned to a major retailer by a consumer.
“Wrong colour, wrong size, something might be defective. We get a lot of buyer’s-remorse returns where the consumer has taken it home and chosen to send it back,” says vice-president and general manager of Canadian operations John Lee.
Lee estimates about 70 per cent of the items are suitable for resale without any need for refurbishment.
There are several reasons why stores don’t want the stuff back, Lee says. Some retailers simply aren’t equipped to handle the inflow of product. But others don’t want their brand associated with items that aren’t brand new.
To give you an example of the type of discount, one pallet filled with home furnishings which in total would have sold at retail for $ 4,500 is listed here at $ 700.
Liquidity Services sells by the pallet or by the truckload. Pallets are sold at two different price points: one for those with a manifest and one for those without. The manifest lists every item on the pallet so the buyer knows exactly what they are going to get.
Pallets without a manifest are much cheaper because they’re simply labelled with a general category — such as housewares — and the buyer is purchasing the goods without knowing exactly what they contain. Think of it like a sort of Storage Wars but with store returns.
It’s a business that has been well entrenched in the U.S. for years now but is really just starting to get off the ground in Canada.
It’s an arrangement that seems to work for everyone. What was once a total write-off for retailers has now become a potential source of additional revenue. Fewer items are needlessly going to landfill. And consumers who don’t mind buying nearly new have access to less expensive products.
At this rate, returning may become the new re-gifting.