A record number of online returns has created a booming $644 billion liquidation market. As supply chain backlogs cause shortages of new goods and Gen Z shoppers demand more sustainable retail options, pain points for one sector of retail are big business for another.
The nation’s only major public liquidator, Liquidity Services, resells unclaimed mail, items left at TSA checkpoints, and outdated military vehicles. It also refurbishes highly sought after electronics, from noise-canceling headphones to the machines that make microchips.
CNBC takes you on an exclusive tour inside a Liquidity Services returns warehouse outside Dallas, Texas, where unwanted goods from Amazon and Target are stacked to the ceiling before being resold on Liquidation.com or a variety of other marketplaces.
Inside Liquidity Services’ 130,000-square-foot warehouse in Garland, Texas, the aisles aren’t lined with typical merchandise. Instead, they’re stacked with returns from Amazon, Target, Sony, Home Depot, Wayfair and more, all in the process of being liquidated.
“Liquidators are coming in and they’re buying up all of this product in bulk. They’re then packaging it, palletizing it and reselling it, either to be resold on a site like eBay or Poshmark, or even to individual consumers. So it’s turned into a much bigger portion of the industry than we’ve ever seen before,” said Sonia Lapinsky of consulting group AlixPartners.
The liquidation market has more than doubled since 2008, reaching a whopping $644 billion in 2020, according to data from Colorado State University.
“A lot of this used to be controlled by the mafia,” said Zac Rogers, assistant professor of supply chain management at Colorado State University. “It’s a good way to hide money, honestly, because nobody’s looking at returns. Especially 40 years ago, no one was looking at returns.”
But in 2021, a record 16.6% of all merchandise sold was returned, up from 10.6% in 2020, according to the National Retail Federation. For online purchases, the average rate of return was even higher, at 20.8%, up from 18% in 2020. Processing a return can cost retailers up to 66% of an item’s original price, according to returns solution company Optoro.
“Everyone’s very worried about price increases right now. I would suggest that it’s possible part of the inflation is these huge amount of returns, that have to be sold at a loss, is detracting from the profitability that a company normally has, and they have to raise their prices,” said Tony Sciarrotta, executive director of the Reverse Logistics Association.
There’s also a big environmental cost. Returns that aren’t liquidated are often destroyed by being incinerated or sent to landfills. Optoro estimates U.S. returns generate an estimated 16 million metric tons of carbon emissions and create up to 5.8 billion pounds of landfill waste each year.
This pain point for mainstream retailers is now big business for liquidators. There are now thousands of companies in the booming space. One of them is GoodBuy Gear, which specializes in safely liquidating items for babies and young kids.
“Buying one used item, it saves 82% of its carbon footprint and consumers are really starting to make smart choices. And so I think that the boom in liquidation is really fueled by consumerism and how it’s shifted from new to used,” said Kristin Langenfeld, CEO and co-founder of GoodBuy Gear.
Sustainable shopping options are a growing priority for younger shoppers.
“The circular economy exists to make sure these items find a home, connect it with a family or a young consumer, and keep it out of the landfill,” said Bill Angrick, CEO of Liquidity Services. He co-founded the company in 1999 as Liquidation.com, with $100,000 of his savings.
“My father and I used to pick up used books and recyclable bottles. Fast forward to the start of eBay. My father and I started toying around with that. We realized that a marketplace model can create value for virtually any type of used item,” Angrick said.
Watch the video for an exclusive tour inside a Liquidity Services warehouse, to see the booming business of processing and reselling excess and unwanted goods on the secondary market.
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How Liquidating Unwanted Goods Became A $644 Billion Business
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Would like to see more of these types of videos where small business owners can get educated on how to liquidate unwanted goods and use them to improve their business.
Buying one used saves 82% of carbon footprint where in China? Everything your selling is made in China what's happening to economic sanctions if your promoting this kinds of business
Well we buy cases of water….
There basically a thrift shop for corporate companies 😂
Too bad for Europe the tax is way bigger 😢
Props to the people who did it before these corporate clowns yeah the guy and gal you wanted to wash your hands from
Lowlife buyers?
I’m looking pallets for my bin store where to can buy pls
All of this will still end up in a landfill.
I love how this is being spinned in a good way. Ever since this craps been going on with Amazon it's impossible to trust brand name product and cheap chinese knock offs have taken over.
How about sell the proper product the first time so there aren't all these returns? How the hell is giving someone else someones return not just going to end up with more problems
Its nothing but a scam selling pre-sorted junk to people who think they will make big money by hocking stuff on ebay or facebook marketplace. Everything valuable is already sold and whatever is left is put on these pallets for some derp with quick money dreams using their tax refund to buy it up as a "business". Not ONE have I seen actually pay out in the long run. Its nothing but a lottery ticket for dumb poor people with 1 : 20,000,000 odds.
No matter who they end up with material goods usually end up in the garbage eventually let’s be real
What was wrong with that director with that "low life" statement?
Remember, pig back then, they were the ones whom you do business with to put bread on your table.
I can clearly see whose low life here
1:07 ….. 'low-life buyers' wtf does that even mean? Just because someone don't have a Million to invest into someone else's junk so you can make your profit for your cookie cutter shareholders don't mean those people are low life, they're probably working twice as hard as this guy ever did 😂😂😂😂😂😂. Wow. Some people….and some perspectives…..never cease to amaze me!
"We would shake hands with people at our trade shows, and you'd wanna go wash your hands afterwards"
OK but, you still shook hands with them? You still made the deal with them and took the money? No one forced you to deal with "unsavoury characters" so stop trying to virtue signal about it now.
What item sale the most and make the most money
There is a growing trend in are area to not buy refurbished stuff because 75% of it is crap that wasn't really refurbished to factory specs but just made to work to sell.. I personally will never buy refurbished stuff ever again.. I have never had a good experience buying refurbished stuff. I have way way way forelock buy-in used from people
Doesn't return items from Amazon goes to the seller?
You get the @Zerodstruction seal of approval. Liquidation is a huge win for the landfill crisis. Now, take it one step further and make a dent in the animal shelter euthanasia crisis by fostering or adopting. California, Texas,
Georgia, and Florida shelters are currently overflowing with young purebred wonderful dogs. They are the most loyal dogs & cats!
❤
Nobody can afford anything loaf of bread is $45 CNBC, " Diets have changed, people are preferring to eat less carbs, lets talk to a Pfizer nutritionist and see why this is a good thing.
They were low life buyers – what every corporation says about the small business they ran out of town.
What a waste of stuff
Great!
Love hearing from the bs CEO 😂
I find interesting that the market for salvage hard goods has increased, but the market of salvage food has mostly died out. The shortages that make salvage hard goods more attractive, killed the smaller sellers on the salvage food market because the quantity and quality of salvaged foods have gone down. We used to have a lot more slack in the food industry, but since 2020 supply is down, so less food survives to expire and go on to the re-sellers.
It's by design, all insurance, and yep tax dollars pays for most of it .
The greatest scam since democrats.
There are several insta accounts of dumpster divers (dive king, glamour dive to name a couple) who show that not all vendors are using this model. The stuff they haul is astonishing.
Remember: it is cheaper for a vendor to make extras, cheaper to ship, cheaper on labor, and cheaper dumping it on the retailer. Retailers don't want to spend the money on this, a LOAD goes into dumpsters.
How was the 644 calculated?
Great…but the real problem is the business model slash shopping model that produces all these returned goods.
Gross
If I wanted to buy used items sold as new, I'd just use Amazon.
This is going to become the new retail sales. NO one is going to buy at the premium prices they are setting today.
If they didn't try to sell so much absolute junk online because the customers can't tell before buying maybe their returns wouldn't be so high
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