Sunday Dec 04, 2022

As Inventory Piles Up, Liquidation Warehouses Are Busy – The New York Times

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PITTSTON, Pa. — Once upon a time, when parents were scrambling to occupy their children during pandemic lockdowns, bicycles were hard to find. But today, in a giant warehouse in northeastern Pennsylvania, there are shiny new Huffys and Schwinns available at big discounts.

The same goes for patio furniture, garden hoses and portable pizza ovens. There are home spas, Rachael Ray’s nonstick pans and a backyard firepit, which promises to make “memories every day.”

The warehouse is run by Liquidity Services, a company that collects surplus and returned goods from major retailers like Target and Amazon and resells them, often for cents on the dollar. The facility opened last November and is operating at exceptionally high volumes for this time of year.

The warehouse offers a window into a reckoning across the retail industry and the broader economy: After a two-year binge of consumer spending — fueled by government checks and the ease of e-commerce — a nasty hangover is taking hold.

With consumers cutting down on discretionary purchases because of high inflation, retailers are now stuck with more inventory than they need. While overall spending rebounded last month, some major retailers say shoppers are buying less clothing, gardening equipment and electronics and focusing instead on basics like food and gas.

Adding to that glut are all the things people bought during the pandemic — often online — and then returned. In 2021, shoppers returned an average of 16.6 percent of their purchases, up from 10.6 percent in 2020 and more than double the rate in 2019, according to an analysis by the National Retail Federation, a trade group, and Appriss Retail, a software and analytics firm.

Last year’s returns, which retailers are not always able to resell themselves, totaled $761 billion in lost sales. That, the retail federation noted, is more than the annual budget for the U.S. Department of Defense.

It’s becoming clear that retailers badly misjudged supply and demand. Part of their miscalculation was caused by supply chain delays, which prompted companies to secure products far in advance. Then, there is the natural cycle of booms — whether because of optimism or greed, companies rarely pull back before it’s too late.

“It is surprising to me on some level that we saw all that surge of buying activity and we weren’t collectively able to see that it was going to end at some point,” J.D. Daunt, chief commercial officer at Liquidity Services, said in an interview at the Pennsylvania warehouse earlier this month.

“You would think that there would be enough data and enough history to see that a little more clearly,” he added. “But it also suggests that times are changing and they are changing fast and more dramatically.”

Strong consumer spending may have saved the economy from ruin during the pandemic, but it has also led to enormous excess and waste.

Retailers have begun to slash prices on inventory in their stores and online. Last Monday, Walmart issued the industry’s latest warning when it said that its operating profits would drop sharply this year as it cut prices on an oversupply of general merchandise.

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Source: https://www.nytimes.com/2022/07/30/business/retail-returns-liquidation.html

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