Low sales lead to a lift in liquidation
Consumer spending is down, leaving stores with a lot of unsold inventory. So retailers are unloading those items to companies that specialize in liquidating merchandise, and business for inventory cleaners is booming. Joel Rose reports.
A man passes a furniture store advertising liquidation prices in Manassas, Va. (Karen Bleier/AFP/Getty Images)
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BOB MOON: There are plenty of other ideas swirling around Washington to give the economy a quick fix. Today, the National Retail Federation reiterated its call for Congress to give consumers an extended sales tax holiday.
Would you buy right now if you knew your could save 6, 7, 8 percent of those big purchases by acting fast? Of course, steep post-holiday discounts didn't seem to persuade shoppers to spend last month. Retailers have been left to unload a glut of apparel and other goods. And that's where the liquidators come in.
As Joel Rose reports, business is booming around the businesses that aren't.
JOEL ROSE: The central New Jersey distribution center of Liquidation.com is a pretty good snapshot of the disastrous holiday shopping season, even more than a month later. Pallets are stacked up to the ceiling, loaded with apparel, flat-screen TVs, even food. There are more goods moving through this warehouse than ever before. And it's not just the scratch-and-dent stuff you might be thinking.
BILL ANGRICK: You'd see higher-end brands, and you'd see higher value merchandise.
Bill Angrick is the CEO of Liquidation.com. He doesn't like to talk about particular brands. But I saw Polo, Calvin Klein, Levi's, Sony, Xbox -- first-tier stuff. The company uses online auctions to dispose of overstock, returns and anything else retailers want to get rid of.
Angrick: They order product as far in advance as six or nine months. So they don't have the dexterity to react to what's really been a cliff in the drop in consumer demand.
That drop in demand means plenty of work for companies that make inventory disappear. The retail liquidation business is estimated to be worth at least $80 billion annually -- a figure that's almost certain to rise this year.
Some liquidators specialize in dismantling store chains in bankruptcy, like Circuit City or Linens 'n Things. Others get their goods directly from manufacturers.
Richard Jaffe is a retail analyst at the investment bank Stifel, Nicolaus.
RICHARD JAFFE: When the department stores see business slowing, they cancel goods. They push it back onto the manufacturer. In turn, the manufacturer has to find a new outlet for it.
In the apparel industry, manufacturers often wind up selling to low-price retailers like TJ Maxx and Ross stores. But this year, there's so much extra stuff around that even bargain-basement retailers can't absorb it all. So some liquidators are going to extreme lengths to make that inventory go away.
IRWIN JACOBS: We're in Europe, we're in Africa, we're in the Middle East or Pakistan, India. Shipped some goods to Siberia.
Irwin Jacobs is the chairman of Jacobs Trading Company in Minnesota. He's been in the liquidation business for 50 years. Jacobs's company buys name-brand apparel, removes the original tags, and then sells it -- either in the U.S. or overseas.
Jacobs: We try and keep it under the radar screen so it doesn't compete with our customers' products here. You know, you can't avoid it completely. And there's some customers who say, "Look, even if I get less money for it, I want it exported. I don't want it in this market." And we're capable of doing it.
But most retail misfires wind up closer to home. Back at the Liquidation.com warehouse in New Jersey, Anita Luczaj and Ezequiel Lascares are picking up cast-off electronics for their mom-and-pop store outside New York City.
Anita Luczaj: We purchase DVRs, combos with DVD and DVD players and VCRs.
Rose: And it was cheaper than you could have gotten anywhere else?
Ezequiel Lascares: Totally. We check in the Internet. We check different places. We got the best prices from here.
Which means Circuit City's loss could be the couple's gain.
In Cranbury, N.J., I'm Joel Rose for Marketplace.
Comments
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From UT, 02/11/2009
These business should consider moving product to eBay since it is selling so well at good price. eBay is branded for getting great designer labels at great prices. In response to the above comment, eBay has a charitable site www.ebaygivingworks.com where liquidators can help nonprofits by donating a portion or all of the proceeds from the listing
From Alexandria, VA, 02/06/2009
Thanks for your interesting piece on the boom for liquidators. Another take on this story is the role that this inventory could play in keeping charitable organizations in business and helping them meet the rising demand for their services. Donating products could be the one way these businesses can continue giving back to the community during the economic crisis. From a business perspective, it also offers many benefits such as tax breaks, supply chain solutions and the opportunity to cut corporate waste.
There are nonprofits that specialize in distributing donated products to charitable organizations that use them to serve people in need and improve the community. One of the leaders is my employer, Gifts In Kind International (www.giftsinkind.org).
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