Merchants Returns Create Consumer Bargain-Shopping Opportunity

As eCommerce players grapple with effort-intensive, costly returns, startup buyWander sees the opportunity to both solve this headache for retailers and meet consumers’ demand for lower-cost goods.

In an interview with PYMNTS, Jordan Allen, CEO of the retail returns marketplace, which launched a week ago, said the platform solves a key point of friction for eCommerce merchants.

“If the box is damaged, the packaging’s messed up, those items typically aren’t sold as new,” Allen said. “The criteria is really high, and a lot of these companies were built to sell new items in new condition. They want low-touch, high throughput, predictable outcomes.”

The marketplace buys returned goods by the semi-truckload, sorts through them, and puts them up for auction.

eCommerce returns have long been a thorn in the side of merchants, with the National Retail Federation estimating that last year shoppers returned 16.5% of items purchased online and in stores. The process can be a logistical nightmare, eating into profits and clogging up space.

Even the largest players in online retail grapple with the challenge of managing returns efficiently, often finding themselves ill-equipped to handle the influx of products coming back into their warehouses.

Taking on Cannibalization

One of the issues brands and retailers face in selling returned items is that the same items often get posted to digital marketplaces at lower prices and compete with the original postings, Allen explained. He noted that buyWander’s listings typically do not appear in search results due to the auction format, and as such, merchants do not need to worry about returned products eating into sales from their full-priced listings.

“Brands and retailers’ biggest concern is, ‘Hey, we just sold you all’s inventory because we didn’t want to sell it and compete with our new stuff,’” he explained. “Now, the liquidator’s re-listed it right back on Amazon or Target or Walmart.com.”

The issue is only becoming more of a headache for retailers. As online shopping continues to become more common, an increasing number of consumers are buying items sight unseen, leading to a surge in returns due to sizing issues, color discrepancies, or simply dissatisfaction with the product, Allen said.

The Consumer Opportunity

Many consumers, for their part, are seeking more budget-friendly retail options.

The January edition of the PYMNTS Intelligence Consumer Inflation Sentiment series, “Consumers Shop Secondhand Stores as Often as Other Retail,” which drew from a survey of more than 2,300 United States consumers in December, found that roughly 1 in 3 shoppers has reduced the quality of the retail items they purchase to cut costs amid inflation.

In its first week of operations, buyWander is seeing consumers engage with its gamified bargain-hunting platform.

“It’s a little bit like gambling when you start because everything starts at $1 and goes up from there,” Allen said. “So, you never really know what price you’re going to get, but people are getting bid and outbid notifications. It’s really fun and exciting to watch it go down.”

Consumers are turning to nontraditional retail channels, increasingly willing to buy items that may not be in factory-new condition. The study revealed that 43% of consumers purchased a secondhand product in 2023, with high-income shoppers the most likely to make such purchases. Plus, 19% of consumers said they increased their secondhand purchasing during the year. Granted, only 15% of these shoppers bought secondhand products on resale marketplaces.

These kinds of budgeting behaviors will likely continue going forward. The PYMNTS Intelligence study “New Reality Check: The Paycheck-to-Paycheck Report: The Pessimism About Pay Rises Offsets the Effect of Falling Inflation,” which was based on a survey of more than 4,300 U.S. consumers, found that 83% are at least somewhat concerned about current and near-future economic conditions.

Anyone’s Bet

While the auction format has a spotty record in eCommerce — take for instance eBay’s pivot to rely more on buy-now sales — Allen contended that given the highly variable nature of buyWander’s inventory, it fits best for what the startup is trying to do.

Unlike fixed-price models, auctions enable buyWander to cater to the unpredictable nature of returned items, ensuring that they are neither undersold nor left to gather dust in warehouses. Despite the eclectic assortment of items on the platform, Allen affirmed that this quirkiness is part of its appeal.

As for scalability, Allen said he envisions buyWander expanding its footprint nationally, tapping into return centers across the country to create a seamless marketplace for returned items.

“If we can build a national footprint and create that marketplace dynamics, now we can actually start to work with smaller brands that ship their products out all over the country,” Allen said. “They have one returns partner that they can work with.”

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