Liquidators Take Costs Out Of Handling Returns

Online sales were up over the holidays, jumping 30% in the fourth quarter, according to Gartner. But with increased sales come increased returns, and they can cost E-retailers lots of money.

Once warehouse employees open each box, record the contents, and complete the paperwork on returned items, an E-retailer can spend as much as $30 to take back something it thought was sold. Gartner estimates that processing returns cost Web merchants $3.2 billion in 2001. With that in mind, many are turning to companies such as ReturnBuy.com Inc. and the Internet's most successful retailer, eBay Inc., to cut their losses.

Most big-name retailers cringe at having to resell merchandise at liquidator prices themselves, so they ship returned or excess goods to middlemen such as ReturnBuy. ReturnBuy doesn't buy the inventory; it lists the items on eBay and Half.com and then charges a commission for each sale.

"When the economy isn't so great, cutting costs associated with returns is a big win for retailers," says Scott Silverman, executive director of Shop .org, an association of more than 100 retailers that sell online. "Ebay is a new alternative. It can offer retailers more on the dollar than a traditional liquidator."

ReturnBuy doubled its sales staff and added three customers in December. Says Lawrence Snapp, a co-founder of the company, "Inventory write-offs are just not as acceptable as they once were."