E-commerce boom changes liquidation industry

Paul Greenberg

Although traditionally retailers have called on traders and auctioneers to move excess stock and returned items, what the industry is now finding is that more of them are now looking towards online warehousing operations or online liquidators.

Excess stock, returned inventory and outdated products have long been a problem for retailers, wholesalers and manufacturers. They take up valuable warehouse or shelf space that could be better used to stockpile current inventory and, 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In South Africa, retailers have traditionally called local traders or auctioneers to dispose of excess, returned and out-of-date products, but now that is changing with more warehousing operations going online.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 in part can 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.

"Most local customers are following international trends and have been trained to expect a no-questions-asked return policy. 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. "With thousands of small businesses and traders, we're building a market for virtually any quantity or condition of returned merchandise." The company's buyer base is growing rapidly since it was launched together with black empowerment group Amabubesi in early August.

New outlet for surplus goods

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 is just not economical. 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 repeatedly. Internet salvagers touch an audience you cannot 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 traveling 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. That is 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 3-6 month cycle now. It is 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."

With more of the retail trade realising the various benefits and return on investment from online liquidator channels, the website expects more such platforms to emerge over coming months.

For more information, go to www.going.co.za.