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One of Amazon’s best features is that returns are free and easy.

I know, I do it a lot. It’s a staple in ecommerce, especially when you sell tangible items (clothing, perfume, anything that you need to sense, really). Ecommerce does a lot of things, but tactile is not a feature on any site.

So, this means Amazon has a little problem with returns. Amazon, as always, will not release numbers on anything, but let’s just assume that it’s a large number. There are internal outlets for these items; Amazon Warehouse, Woot!, etc. But what do you do with this:

From The Atlantic:

“With a couple hundred dollars and a few minutes, you could go to a liquidation website right now and buy a pallet full of stuff that people have returned to Amazon. It will have, perhaps, been lightly sorted by product category—home decor, outdoor, apparel—but this is mostly aspirational. For example, in one pallet labeled “home decor,” available for sale on liquidation.com, you could find hiking crampons, shimmer fabric paint, a High Visibility Thermal Winter Trapper Hat, a Mr. Ellie Pooh Natural White Paper List Pad, a St. Patrick’s Pot O’ Gold Cupcake Decorating Kit, a Spoontiques Golf Thermometer, a Feliz Cumpleanos Candle Packaged Balloon, and five Caterpillar Hoodies for Pets.”

Chaos. Not a Theory.

It’s not ideal and there a lot of questions, but when you buy a palette from Amazon that they say is worth $4K for only $200, you definitely feel like you’re an insider getting the bargain of a century. Except they aren’t:

“Every box is a core sample drilled through the digital crust of platform capitalism. On Amazon’s website, sophisticated sorting algorithms relentlessly rank and organize these products before they go out into the world, but once the goods return to the warehouse, they shake free of the database and become random objects thrown together into a box by fate. Most likely, never will this precise box of shit ever exist again in the world. On liquidation.com, each pallet’s manifest comes with suggested prices for each product in a pristine state. If you add them up, the “value” of the box might be $4,000, while the auction price might only come to $200.”

“So, Liquidity Services, the operator of liquidation.com, became a major (though not exclusive) handler of Amazon’s American liquidations. The company calls dealing with returns “the reverse supply chain”—a part of the retail business that has been growing in importance as online shopping becomes more popular. Liquidity Services now has 3,357,000 registered buyers on its various liquidation websites. In the past fiscal year, it sold $626.4 million worth of stuff.

Amazon represents a growing chunk of Liquidity’s business. In its most recent SEC filing, the company disclosed that it spent approximately $33.7 million on Amazon liquidation inventory, which it then turns around and sells for maybe 5 percent of the supposed retail value. And, assuming the company is trying to turn a profit, it must buy the inventory for a fraction of that. Doing the rough math, we’re talking about inventory that once had a collective value reaching into the billions, before it landed in some box on a doorstep.”

Inventory Just Sucks

Any business will tell you that the cost of acquiring, storing, safeguarding and delivering inventory is the #1 thing tugging their bottom line down. It sucks. HARD.

I’m seeing more and more of my clients move to “physical cloud services,” by which I mean that they employ Fulfilled By Amazon, Shipstation and a ton of other fulfillment services. And they are either delighted that the onus of carrying inventory has been lifted off their shoulders. Until they realize that they have lost control of their entire brand due to the whimsical policies that firms like Amazon mandate. Hairspray. OK yesterday. Not OK today.

cgk.ink can help navigate the turbulent evolution of ecommerce. Let’s talk more in depth about your latest project.