Second chance
Retailers and manufacturers want you to buy their nearly new merchandise
Attention, bargain shoppers: Retailers and manufacturers have got a deal for you. How does a 17-inch Dell flat-screen LCD computer monitor for just $228 grab you? Or a KitchenAid 5-quart stand mixer for $179.99, almost half off the list price and cheaper than many listings for the same item on eBay? Does a Sharper Image Ionic Breeze air purifier for under $150 strike your fancy? That's $200 off the advertised price.
OK, there's a catch. This stuff might not be technically "brand new." But in many cases, these items are like new. And at these prices, you'd still be interested, right? Of course.
For years, the retail economy has largely hidden its dark underbelly: the tens of billions of dollars of merchandise that gets scratched or dented or is returned by consumers for any number of reasons. By some estimates, more than $50 billion in retail goods--not counting grocery store items--is sent back to retailers or manufacturers every year. "This market is so big, no one really knows its true size," says Dan Eisenhuth, president of value-added services for the Pittsburgh-based liquidation firm Genco.
Every little bit. Some of these items need to be repaired or refurbished. Others just need to be repackaged. In years past, a good deal of this so-called B merchandise was destroyed or sent abroad, where it wouldn't pollute the main distribution channel of pristine, brand-new goods. But scratched or dented goods sent overseas or sold off to old-fashioned jobbers, or liquidators, garner only a fraction of what it costs to make these products. In some cases, companies may recover only pennies on the dollar. Yet in the ever competitive universe of the retail economy, every penny counts. "Most retailers and manufacturers operate on very, very thin margins," says Mark Zandi, chief economist with Economy.com. "Anything that can boost sales is critical to their success."
This explains why a lot of this merchandise is now getting recycled back into the mainstream domestic market, which has major implications for the retail economy. Certainly, consumers stand to benefit, as these items generally go for 25 percent to 50 percent off the original list price. Moreover, any increase in the supply of B merchandise is also likely to keep prices of new goods low as well. "This is one of those examples where the Internet is facilitating a very healthy relationship between buyers and sellers," says Jack Gillis, director of public affairs for the Consumer Federation of America.
You can certainly thank the success of auction giant eBay, which allows sellers to hawk refurbished goods alongside new items and collectibles, for demonstrating the demand for the lower-priced recycled items. But today, retailers and manufacturers, many of whom sell some of their second-life merchandise on eBay, are beginning to experiment with a different approach. Some are trying to control their brand image--while forging closer ties to their customers--by also selling merchandise directly through their own websites. "If you sell directly, you're not forced to share your customers and their loyalty with the eBays of the world," says Carrie Johnson, retail analyst with Forrester Research. Another advantage for these retailers and manufacturers is that they can often offer extended warranties on refurbished goods, a benefit that an individual seller of used goods on eBay may not be able to provide.
advertisement
