Second chance
Retailers and manufacturers want you to buy their nearly new merchandise
Companies selling spruced-up items include Dell, Costco, Hewlett-Packard, Sony, Palm, and Amazon.com, and some experts think this could represent a unique competitive challenge to eBay (story, Page 46). "Anything that takes buyers' interest away from eBay can hurt the marketplace and the sellers participating," says Derek Brown, an analyst with Pacific Growth Equities. EBay officials say the sale of refurbished or B stock represents a small minority of the goods listed on eBay. "We know retailers and manufacturers have multiple channels through which to get rid of this merchandise," says eBay spokesperson Hani Durzy. "Our goal is to alert them that eBay is a great complementary channel."
Easy chairs. In most cases, companies are selling second-life goods to recoup as much cost as possible. Take the Home Office Solutions Group, a small business based in Northbrook, Ill. Every year, roughly 3 percent of the Herman Miller Aeron desk chairs that it sells are returned or exchanged by customers who may have gotten the wrong size or color. Factor in the scores of chairs used as floor models in the firm's showrooms, and "we can end up having to deal with 200 to 400 chairs," says company founder Marc Levin. "Some of these chairs are in perfect condition, but we can't sell them as new." So Levin highlights such furniture prominently on one of his websites, www.ultimatebackstore.com, like the floor model Aeron chairs for $749. While that's more than $100 off the new price, the company can still potentially gain an additional $200,000 or more in sales every year through these products. And while it still uses eBay to peddle some of its excess wares, Sharper Image also uses its website (www .sharperimage.com) to unload its refurbished merchandise, ranging from air purifiers to massage chairs to stereos.
Gailen Vick, president of Reverse Logistics Trends, a trade group representing firms that help retailers and manufacturers handle returns, estimates that the true cost of handling returns, or "reverse logistics," can be 3 percent to 12 percent of a company's bottom line.
But not all companies view the sale of B stock as merely a way to cut costs. Take KitchenAid, the maker of high-end small appliances. In addition to selling its refurbished goods through eBay, traditional outlet malls, and Amazon.com, KitchenAid also peddles its mixers and the like on its website (www.kitchenaid.com). Obviously, the firm wants to recoup as much cost as it can, says Brian Maynard, KitchenAid's director of marketing. But there's another goal: to introduce its brand--and make it available--to low- and middle- income households. In other words, instead of coming out with a less expensive line of merchandise that might taint KitchenAid's luxury image, the company uses its refurbished goods to fill that void. The hope is that the consumers who buy reconditioned KitchenAid goods will eventually upgrade to newer, more expensive models.
Ditto for Callaway Golf, which recently rolled out a program that allows customers to trade in their used Callaway clubs for credit toward new clubs. The trade-ins are polished up by the company and sold at significant discount online at www.callawaypreowned.com. At the same time, the firm hopes the trade-in deal will motivate existing Callaway customers to trade up.
Huge appetite. Online specialty sites like ubid and Overstock.com, which purchase large quantities of B stock from producers, are also benefiting from this trend. Ubid, for example, helps about 3,000 suppliers move their excess and recycled inventory. Roughly half of the company's sales, approximately $200 million last year, came from refurbished housewares and home electronics and computer equipment. "The appetite is huge for this type of merchandise," says Timothy Takesue, executive vice president at ubid. "That's as long as consumers know they're getting a warranty directly from the manufacturer." That's important, says Gillis, since there is no standard definition of what terms like refurbished or factory reconditioned or open-box or floor model really mean.
Of course, as with the purchase of anything, it's buyer beware. But as long as refurbished items come with assurances like warranties, they represent a tremendous value. Talk about satiating champagne tastes on a beer-barrel budget. -Paul J. Lim
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