Insights

Are Auctions the most effective Route for Returns Inventory?

Taking all product categories into consideration, most CE manufacturers based in the US utilize either retail salvage or auctions to disposition their returns inventory. Here we discuss the merits of both and provide a summary on which route is the most effective.

With regard to the US secondary market, the majority of CE manufacturers now utilize one of the two top channels in order to resell returns inventory, retail salvage and auctions. But which is the more effective?

Retail salvage
More commonly referred to as bulk liquidation, retail salvage should only be the preferred disposition method of choice when warehouse space is at a premium. Returns are sold-off to a single bulk liquidator who makes frequent pick-ups (multiple times per day if required) and pays a pre-negotiated flat fee across all products.

The advantage to manufacturers here is that they benefit by reduced material handling and storage. However, the downside is that manufacturers then sacrifice all control of the sale, the transparency of market valuation and the financial recovery, which instead goes to the liquidator.

Auctions
Auctions are ideally suited for consumer returns in the wireless and consumer electronics categories, with a recent UK-based WDS Global study demonstrating that a 63% no-fault-found (NFF) rate on handsets translates to a gamble that most secondary market resellers are willing to take. Usefully, CE products often share the same NFF profile.

Thus, with minimal overheads, secondary market resellers can bring in product, test, repackage and resell at good margins. This spells opportunity for original equipment manufacturers, where competitive bidding on top brands drives top recovery, ranging from 50-80%, or more, of standard costs.

Another suggestion to consider is that auctions are particularly useful where space is an issue, as inventories can be auctioned in bundles or lots. This moves all the stock together to the highest bidder, thus achieving the desired result of creating space through competitive bidding rather than pre-agreed flat recovery rates.

Summary
Clearly, the overriding decision on whether to use retail salvage or auctions has to be dependent on your business objectives and whether you are primarily interested in throughput or increased recovery.

However, in value recovery terms, auctions win hands down over bulk liquidation. It’s also important to note that where brand control is an issue – usually a major concern for CE manufacturers, it is critical to seek a service provider that can host your auctions through an online private marketplace that will give you the power of competitive bidding among buyers that you can also control.

FreeFlow offers that precise solution, providing sellers with complete control over routes to market through its own online private marketplace platform.

 

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