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The Magic of Recommerce

While for the majority of merchants the holiday season is winding down — for a certain select group, things are just getting warmed up. This is the case for retailers like Michael Ringelsten, the owner of Shorewood Liquidators.

“It is crazy how many returns come in during the two to three months after Christmas,” he told The Wall Street Journal. The 38-year-old businessman collects truckloads of goods returned to Amazon.com Inc., Groupon Inc. and Home Depot Inc — wherever the goods are unwanted — and he like many eCommerce resellers, snaps them up and sells them off at bargain basement prices.

And it is a lot of merchandise — nearly one-quarter of eCommerce sales — are expected to be returned, according to Shorr Packaging. Though the rates of return can vary across categories — from 10-15 percent in some areas to as much as 30 percent in others (apparel) reverse logistics expert (and eCommerce secondhand retailer) Optoro notes.

Total returns for 2015 are expected to be $260.5 billion, or around 8 percent of all retail sales, according to trade group National Retail Federation. And eCommerce retailers tend to suffer a higher rate of return than their real world counterparts, which tend to see items come back at about an 8 percent rate.

And when eCommerce goods are returned, they don’t usually go back to the location that sold them, even if they have never been used or opened, as the inefficiency runs up the cost. Instead, goods are taken to bulk liquidation centers and sold off in bulk at extreme discounts to liquidators and SMBs. And we mean really deep discounts — 10 and 20 cents on the dollar on average, according to Optoro.

“We call that ‘re-commerce,’ where products get a second life,” said Ryan Kelly, a vice president of strategy at Genco, a FedEx Corp. business that handles returns for many U.S. retailers. He further noted that children’s toys, sporting goods, housewares and consumer electronics were all popular choices for resellers.

However, retailers are getting less interested in soaking those big losses on returns and are coming up with alternative solutions. Optoro helps firms resell – and lifts recovery rates to 40 to 70 cents on the dollar. Walmart and Home Depot work with B-Stock Solutions to sell off return stock in smaller, higher cost volumes.

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