Inside the 130,000-square-foot Liquidity Services warehouse in Garland, Texas, the aisles are not lined with typical goods. Instead, they have amassed revenue from Amazon, Target, Sony, Home Depot, Wayfair and others, all in the process of being liquidated.
“Liquidators come and buy all this product in bulk. Then they pack it, put it on pallets and resell it, either for resale on sites like eBay or Poshmark, or even to individual consumers. It has grown into a much larger part of the industry than we ever- have seen before, ”said Sonya Lapinsky from the consulting group AlixPartners.
The liquidation market has more than doubled since 2008, reaching a whopping $ 644 billion in 2020, according to the University of Colorado.
“A lot of it used to be controlled by the Mafia,” said Zach Rogers, an associate professor in the supply chain management department at the University of Colorado. “Honestly, it’s a good way to hide money because no one is looking back. Especially 40 years ago, no one looked to return. “
But in 2021, a record 16.6% of all goods sold were returned compared to 10.6% in 2020, according to the National Retail Federation. For online shopping, the average rate of return was even higher – 20.8% from 18% in 2020. According to Optoro, return processing can cost retailers up to 66% of the original price of the item.
“Now everyone is very concerned about rising prices. I would assume that part of inflation is a large amount of profit to be sold at a loss, reduces the profitability that a company usually has, and it is to raise their prices,” said Tony Siarota, executive director of the Reverse Logistics Association.
There are also high environmental costs. Returns that are not eliminated are often destroyed by burning or sending to landfills. Optoro estimates that U.S. revenue generates about 16 million tons of carbon emissions and generates up to 5.8 billion pounds of landfill waste each year.
This is a sore point for major retailers now a big deal for liquidators. Currently, thousands of companies are in thriving space. One of them is GoodBuy Gear, which specializes in the safe disposal of items for babies and young children.
“By buying one used item, it saves 82% of its carbon footprint, and consumers are really starting to make smart choices. And so I think the liquidation boom is really fueled by consumerism and the way it goes from new to used,” Christine said. Langenfeld, CEO and co-founder of GoodBuy Gear.
Sustainable shopping options are an increasing priority for young shoppers.
“The circus economy exists to make sure these items find a home, connect them to a family or a young consumer, and don’t leave them in a landfill,” said Bill Angrick, CEO of Liquidity Services. He co-founded a company in 1999 called Liquidation.com with his savings of $ 100,000.
“My father and I collected used books and bottles that can be recycled. We move on to eBay. My father and I started playing with it. We realized that the market model can create value for almost any type of used items,” Angrick said.
Liquidity Services CEO Bill Angrick and CNBC senior producer Katie Skulow visit a return warehouse in Garland, Texas, on January 31, 2022.
Scoreboards, kayaks and knives
By 2000, a year after its launch, Liquidation.com had made its first major sale: a $ 200,000 shipping ship to the state of Georgia. In 2006, it went public under the new name Liquidity Services. Its shares peaked in 2012, the next seven years tended to decline and then witnessed a revival during the Covid pandemic.
Liquidity Services remains the only major public liquidator. Another major player is B-Stock Solutions, which manages branded liquidation markets for huge customers such as Amazon, Walmart, Home Depot and Costco. Howard Rosenberg founded B-Stock after six years at eBay, where he saw the benefits of specializing in liquidation for others on a scale.
“Companies don’t usually want to spend a lot of time and effort on this little piece of cake. They want to focus on 99% of the piece of cake, ”Rosenberg explained.
Liquidity Services sells returned goods in various markets. There are Liquidation.com, where return pallets and some individual items are sold at auction, who offers the highest bid, Secondipity for direct sales of individual items and GovDeals for some particularly unusual items.
“We sold paving equipment, whole floors in gyms, scoreboards. All state-funded colleges and universities, all this equipment and uniform comes through our market. We sell construction equipment. utilities, ”Angryk said.
Liquidity Services also handles junk mail and packages for the U.S. Postal Service, military vehicles that have gone out of service, and items left at TSA checkpoints, such as 14 pounds of various knives.
When it comes to electronics, many returns are damaged and cannot be sent immediately for resale. Liquidity Services updates hundreds of TVs every day, which it says sells from 60% to 70% of the original price. Repaired electronics have gained popularity as lagging supply chains have caused a shortage of new products. Repaired headphones and noise-canceling TVs, as well as multimillion-dollar refurbished products, such as machines used to make microchips, are in high demand.
A liquidity officer is updating a TV in a warehouse in Garland, Texas, on January 31, 2022.
“We’ve seen Fortune 500 companies gain access to used equipment in our market because in a circular economy, delivery times are shorter than creating freshly made goods, transporting them by ship, transporting across the ocean to a port that is more likely to all loaded. six or eight months, ”Angryk said.
Many retailers are now selling refurbished items directly as demand for used items grows. Amazon has entire sections of its site dedicated to this. There are stock offers for used goods, Amazon Renewed for refurbished goods, Amazon Outlet for excess inventory and a mocking site of daily deals on the outskirts of the Amazon community called Woot, which sells a “bag of shit” for $ 10.
Now Best Buy has an online store that sells home appliances and TVs, and HP has refurbished computers and more.
“When it is repaired, we get a really good recovery from it: probably 80% to 100% recovery depending on the seasonality of the market. But now the market is very strong because of the shortage of supplies on the front side, ”said Julie Ryan, HP’s manager on returning to North America.
The liquidation boom has spawned another trend. Across the country there are hundreds of stores for lucrative containers with names like Dirt Cheap and Treasure Hunt Liquidators. Dozens of customers line up – sometimes even heading out for the night – to get their first choice after weekly liquidation pallet issues. They dig up big boxes of profits in search of trending items that they can flip over to make a profit.
Buyers line up to search the boxes with liquidation pallets at Treasure Hunt Liquidators in Raleigh, North Carolina, February 11, 2022.
Treasure Hunt Liquidators
“Stores like Big Lots, Bargain Hunt, Ollie’s Bargain Outlet: all those stores and then eBay and even Amazon got into them. So they sell returns to consumers because in 90% of cases there’s nothing wrong with that.” said Siarotta of the Reverse Logistics Association.
Liquidity Services has its own view on the direct consumer trend. At the new AllSurplus Deals warehouse, which opened in Phoenix in October, customers pick up items they won at online auctions, which typically start at $ 5. This is especially useful for eliminating bulky items such as kayaks, shipping which would be too expensive. Angrick says Liquidity Services will open a second lineup of AllSurplus Deals in Dallas later this year.
Watch the video with an exclusive tour of Liquidity Services to see how the business of processing and reselling surplus and unwanted goods in the secondary market is developing.