Excess stock, returned inventory and outdated products have long been problematic for retailers, wholesalers and manufacturers. They take up valuable warehouse or shelf space that could be better used to stockpile current inventory and perhaps more importantly, they represent lost revenue.
In South Africa, retailers have traditionally called local traders or auctioneers to dispose of excess, returned and out-of-date products, but now that is changing with more warehousing operations going online. According to Paul Greenberg, chairman of newly launched clearance market place Going.co.za, these traditional means of disposing of such stock is a highly fragmented method that “leaves a lot to be desired”.
This increase in excess stock can, in part, be attributed to the increasingly liberal return policies of retailers, together with the Consumer Protection Act that allows consumers to return goods to suppliers for various reasons. “As a result, we are seeing more and more online liquidators emerging as the demand for inventory liquidation services increases,” says Greenberg.
Going estimates the return-merchandise business in South Africa alone totals approximately R13-billion.
“Most local customers are following international trends and have been trained to expect a no-questions-asked return policy,” says Greenberg. “That’s allowed all the big box guys to build market share, but one of the costs of that strategy is that they have to handle the returned merchandise.”
Web-based liquidation services such as Going.co.za offer a nationwide pool of potential buyers, opening new markets for retailers’ and manufacturers’ excess inventory, he adds.
“With thousands of small businesses and traders, we’re building a market for virtually any quantity or condition of returned merchandise,” Greenberg says. Going’s buyer base is growing rapidly since it was launched together with black empowerment group Amabubesi in early August.
The Web-based liquidation site also gives manufacturers new outlets for their surplus goods, says Australian-based Greenberg who founded Australia’s largest online retailer.
“Imagine having to send sales reps to thousands of small traders across South Africa and its neighbours. It’s just not economical,” he says.
“There’s not a company out there that has the ability to reach millions of small retailers, spaza shops and traders. The traditional salvagers have partners and buyers they go to over and over again. Internet salvagers touch an audience you can’t even put your hands around. Anybody can shop on the Internet.”
Online liquidation platforms also benefits buyers, particularly small, independent retailers, by giving them access to a wider variety of products at lower prices. Instead of travelling to trade shows or auctioneers warehouses in search of inventory, these retailers simply go online.
In today’s fast-paced and highly competitive market, retailers need to be able to unload excess or out-of-date inventory quickly and efficiently, Greenberg says. That’s particularly important in areas such as consumer electronics, where a product can become obsolete shortly after landing on the retailer’s shelf.
“Many products have a three- to six-month cycle now,” Greenberg says. “It’s crucial that the retailer has a strategy for what to do once the item is less than current technology. For online retailers return rates can be as high as 25% because customers can’t try on apparel or examine merchandise before making a purchase,” he adds.
With more and more of the retail trade realising the various benefits and return on investment from online liquidator channels, Going expects more such platforms to emerge over coming months.
For more information visit www.going.co.za.