PITTON, Pennsylvania — Once upon a time, when parents were scrambling to steal their kids during the pandemic lockdown, finding a bike was tough. But today, a huge warehouse in northeastern Pennsylvania sells shiny new Huffies and Schwinns at deep discounts.
The same goes for patio furniture, garden hoses, and portable pizza ovens. With a home spa, Rachel Rae non-stick pans, and a fire pit in the backyard, it promises to create “everyday memories.”
The warehouse is run by Liquidity Services, a company that collects surplus and returned items from major retailers like Target and Amazon and resells them, often for a few cents on the dollar. The facility opened last November and has a very high occupancy rate for this time of year.
This warehouse provides a window into the calculations across the retail industry and the broader economy. After two years of consumer spending fueled by government checks and the ease of e-commerce, a nasty hangover has taken hold.
Retailers are now stuck with more inventory than they need as consumers curtail discretionary purchases due to high inflation. Overall spending rebounded last month, but some big retailers are encouraging shoppers to buy less clothing, gardening supplies and electronics, instead focusing on basics like food and gas. says it fits.
Add to that oversupply all the goods people bought (often online) during the pandemic and then returned. Shopper return rates will average 16.6% in 2021, up from 10.6% in 2020 and more than double the rate in 2019, according to analysis by industry group National Retail Federation and software and retailer Appriss Retail. became. analytics company.
Last year’s returns, which retailers can’t always resell, led to a total of $761 billion in lost sales. That’s more than the U.S. Department of Defense’s annual budget, according to the Retail Trade Coalition.
It’s becoming clear that retailers are grossly misjudged supply and demand. Part of their miscalculation was due to delays in the supply chain, which led the companies to secure their product long ago. Then there is the natural cycle of booms. Whether optimistic or greedy, companies rarely pull out before it’s too late.
JD Daunt, chief commercial officer at Liquidity Services, said, “It’s kind of surprising that you haven’t been able to see a coherent look at the spike in buying activity that will eventually end. It is.” Interview at a warehouse in Pennsylvania earlier this month.
“I think we have enough data and enough history to see it a little more clearly,” he added. It suggests that
Robust consumer spending may have saved the economy from ruin during the pandemic, but it has also led to enormous excesses and waste.
Retailers are starting to lower the prices of their inventory in stores and online. Last Monday, Walmart issued the industry’s latest alert, saying its operating profit would drop significantly this year as it slashed prices on an oversupply of common goods.
Many businesses can’t afford to keep discounted items on the shelves as they have to make room for new seasonal items and must-haves that consumers currently prefer. While some retailers are discounting the surplus in their stores, many are holding big sales for fear of hurting their brands by conditioning buyers to expect big discounts as usual. avoid holding it. So retailers are letting liquidators do the dirty work.
Additionally, industry executives say the oversupply is so great that some retailers may run out of space to accommodate everything.
“This is unprecedented,” said Chuck Johnston, a former Walmart executive who is now chief strategy officer at goTRG, a company that helps retailers manage returns. I have never seen pressure in terms of
So much of the industry’s flotsam and jetsam is washed up at warehouses like this one right off Interstate 81. A few exits off the Biden Presidential Highway in Scranton, the president’s hometown.
The huge facility is part of an industrial park built above the landfill strip mine It dates back to a time when the region was a major coal-producing country. Today, the local economy is home to dozens of e-commerce warehouses that cover the foothills like giant spaceships, pouring goods into densely populated areas in and around New York and Philadelphia.
Liquidity Services, a publicly traded company founded in 1999, opened a new facility as close as possible to major Scranton-area e-commerce warehouses to help retailers easily process unwanted and returned merchandise. decided to open the
Returns were a big problem for retailers even before the overstocks hit this spring. The surge in e-commerce sales during the pandemic (over 40% year-over-year growth in 2020) only added to that.
The National Retail Federation and Appris Retail calculated that more than 10% of returns last year involved fraud, such as returning clothes or stealing items from a store and returning them with a false receipt. I was. More fundamentally, however, industry analysts say the increased profits reflect consumer expectations that they can get it all back.
“It’s getting worse and worse,” Mr Johnston said.
A portion of returns and surplus inventory will be donated to charity or returned to the manufacturer. Others are recycled, buried in landfills, burned in an incinerator that produce electricity.
Liquidators say they provide a greener option by finding new buyers and markets for unwanted products, both returned and not originally purchased. Tony Ciarotta, Executive Director of the Reverse Logistics Association, an industry group, said: “But there is still too much going to landfills.”
While the retailer will probably only receive a fraction of the original value of the goods from the liquidator, it makes more sense to take the loss and move the goods off store shelves quickly.
Still, liquidation can be a sensitive topic for large companies who want their customers to focus on “A-goods” rather than failures.
Shalotta calls it the “dark side” of retail.
During a tour of the Pennsylvania warehouse, Daunt and warehouse manager Trevor Morgan said they weren’t allowed to talk about product origins.
The 85-inch flat-screen TV still has the Amazon Prime sticker on the box. Bought the bathroom vanity at Home Depot. From Walmart’s returns center, there was a “home theater” memory foam duvet with a built-in cup holder.
Many unopened boxes on the warehouse floor bore the familiar Target Bullseye logo. Air fryer, stroller, Barbie doll’s towering “dream house” includes pool, elevator and home his office. (Even Barbie seems sick of working from home.)
When Target’s sales exploded in the first year of the pandemic, the company was a Wall Street darling. But in May, the company said it was suffering from an oversupply of certain products, causing its stock price to plummet nearly 25% in a single day. Shares of other retailers have also fallen.
Target’s stumbling block was an opportunity for people like Walter Crowley.
Crowley regularly rents a U-Haul and drives from his home near Binghamton, New York to the clearinghouse.
Crowley, who turns 54 next month, focuses primarily on discounted home improvement products, which he resells to local contractors. For example, what originally cost him $14,000 he got for $600, his discontinued garage door, his opener multiple pallets, and so on.
But on a sweltering day earlier this month, he was standing outside U-Haul’s warehouse loading goods from Target.
“I saw the stock bottom out,” said Mr. Crowley, his cigarette dangling from his mouth and sweat beading his face. “It’s an ugly situation for them.”
He bought several cribs, a set of sheets for his house, and a pink castle for a neighborhood girl who had just turned five.
“To be honest, I give a lot of it to my neighbors,” he said. “Some are barely alive.”
Buyers bid on items in online auctions, drive to warehouses, and collect prizes.
Diverse group. In the Haitian-Jamaican community of New York, there was a science teacher who had stocked up on plastic parts for her class and a woman who planned to resell the neon green igloo cooler, table saw and baby pajamas she had purchased. I did. She ships other items to Trinidad.
The Pennsylvania warehouse is one of eight warehouses operated by Liquidity Services nationwide. It employs about 20 people, some of whom are temporary. Starting salary is $17.50 per hour.
Charles Benincasa, 39, is a temporary worker who has worked in numerous “warehouse” jobs, most recently at the Chewie Petfood Distribution Center in nearby Wilkes Barre.
Benincasa said his friends and family had developed a habit of returning many of their online purchases. But having seen boxes piled up in the liquidity service’s warehouse, he worries about the economic impact.
“Companies are losing a lot of money,” he said. “No free lunch.”