As companies deploy new technologies, including automation, AI, cloud hosting, service platforms, and others to make their businesses more digital and efficient, all businesses are becoming technology businesses. Companies selling closeouts and overstock buyers operating in a post-Covid environment fare accelerating this dynamic and the need to digitize and virtualize. This expansion from physical closeout brokers, closeout liquidators, brick and mortar retail stores has lead to a huge increase in closeout websites and online ecommerce discount sellers. Overstock liquidators are moving into digital means like closeout websites and Amazon seller accounts in an effort to keep up with changing times. Many functions and activities that were traditionally labor based are now technology based, and businesses are shutting down 3PL warehouses, moving into smaller warehouses and even moving to direct import only.
Although the tech budget may grow, total costs should decrease—for example, a bank investing more in digital banking while reducing its costs for physical branches. This very thing is happening with retail stores selling closeouts and buying from overstock buyers and wholesale liquidators. They are heavily investing in ecommerce sales and reducing spending in their physical retail locations. For a business needing to manage its costs prudently, this may create a misguided reaction: Because technology spending is growing much faster than the overall cost base, surely more focus and effort must be required to triage and reduce it. But that would be the wrong conclusion, since spending on technology increases efficiency and speeds growth. Closeout brokers as well as other surplus inventory buyers typically have not invested in technology and often are operating second and third generation companies that started after the Great Depression. It was during these times that business were forced to liquidate inventory buy disposing of dead stock and cleaning the warehouse out. They were happy to get pennies on the dollar for all their dead inventory that was no longer selling. Today, selling closeouts and getting rid of excess inventory to closeout brokers is common practice in keeping a business profitable.
With the demand for technology continuing to grow as new capabilities become available, closeout companies and liquidators have to find ways to manage spending on technology that runs the business, while investing more in technology that grows and improves the business. The best performers will invest proportionally more in technology over time, but only in the right places, so that the business can run at maximum efficiency while growing as fast as possible. This might mean investing in online liquidations and putting more money in closeout websites. Overstock buyers are accustomed to meeting one on one, in person to show their wares and make a sale. But things are changing, businesses are shutting down 3PL warehouses because they are too expensive, and there is a movement toward better use of technology.
As tech spending in the closeout business increases, it has proliferated across the functions of the business. Across sectors, more than half of spending on information technology comes from other back-end functions or the lines of business themselves. Companies buying and selling overstock need to take a more sophisticated approach to building an accurate view of spending. Traditional benchmarks, such as IT spending as a percentage of expense or revenue, may be irrelevant and misleading because they are based on the outdated idea that proportionally lower spending on technology leads to better business outcomes. Liquidators and closeout companies are taking steps to cut costs and improve efficiency after many of them relied more on boosting prices in recent quarters to offset inflation and bolster their bottom lines. This can also be helped by getting rid of dead stock and liquidating inventory for cash.
Inflation, at 8.3% in April, is at a nearly 40-year high and companies are being squeezed by snarls in global supply chains, higher commodity prices and a tight labor market. This is creating excess inventory and overstock situations throughout the market, keeping closeout brokers and inventory liquidators busy. Consumer sentiment, meanwhile, has worsened in recent months as prices on items ranging from gas to groceries have risen and demand for larger-ticket closeouts including mattresses and appliances, has softened. Operating expenses at U.S. investment-grade nonfinancial companies—442 businesses in all—during the fourth quarter rose 23% from a year earlier, to a total of $2.75 trillion, according to data provider S&P Global Market Intelligence. Those companies, at the median, spent 83.5% of their total revenue on operating expenses during the quarter, the highest level in a year, according to S&P. The increase reflected rising costs for wages, energy, inventory and rent. Surplus inventory buildups are inevitable as consumers spend less, there is too much inventory sitting in warehouses across the country and it will have to be disposed of or liquidated to overstock buyers and companies that specialize in buying excess inventory.
Twenty percent of CFOs and their deputies, including vice presidents of finance, are planning to cut costs during the next three months through July in response to inflation, according to Gartner, which in May surveyed finance executives at over 180 companies with annual revenue ranging from around $500 million to $100 billion. That number could roughly double in the fourth quarter if current inflation levels persist, Gartner said. While companies implemented emergency, across-the-board expense cuts in the early days of the pandemic, they are now taking less drastic measures aimed at providing longer-term savings, Companies’ earnings results are starting to show a drag on profits, with Target and Walmart, two of the nation’s largest retailers—both reporting lower-than-expected earnings. Target said earlier this month that it will absorb higher costs for freight and fuel instead of passing them on to customers. Walmart also said increased costs ate into its fiscal first-quarter profits, and that it expects to alleviate some of the pressure through supplier negotiations. In times like these, when economic conditions tighten, business are shutting down 3PL warehouses to save money on warehouse expenses. In order to shut down a warehouse or move to smaller warehousing, businesses are forced to liquidate inventory to closeout brokers and closeout distributors specializing in buying excess inventory.
Businesses including restaurant chain franchise Dine Brands Global Inc. and retailers Container Store Group Inc. and 1-800-Flowers.com Inc. have identified or implemented cost savings and are looking to streamline their operations through changes both big and small. Some are looking to reduce delivery costs or invest in automation. Others are looking at more mundane changes, such as installing energy-efficient lightbulbs or upgrading telephone systems. Companies “are starting to compile a list of levers they can pull,” said Alexander Bant, chief of finance research at Gartner Inc., an advisory firm. This may also include shutting down 3PL warehouses with too much inventory in them, and disposing of dead stock sitting idle in the warehouse collecting dust. It is important to convert dead stock into cash by getting rid of old inventory, surplus inventory, discontinued products and all other closeouts.
While most companies haven’t adopted large-scale cost-cutting plans yet, many are sketching out potential savings they could reap in areas such as marketing, sales and real estate, Mr. Bant said.Glendale, Calif.-based Dine Brands, which owns the Applebee’s and IHOP brands, has put together a list of 140 ideas for cutting costs with the help of brand-specific task forces that include suppliers, distributors, franchisees and members of its operations team, Chief Financial Officer Vance Chang said. There are businesses that specialize in working with companies to reduce inventory and cut costs. An online search using terms like closeouts, closeout buyers, inventory buyers, liquidators and companies that purchase overstock will lead you in the right direction. The groups were set up years ago, but their work was suspended in 2020 and 2021 as Dine Brands focused on navigating the pandemic. Among the ideas the company has come up with: experimenting with robots to serve guests or operate deep fryers. Others include asking its staff to take orders on tablets and putting in place energy-saving light bulbs, Mr. Chang said. Dine Brands operates as a franchise, meaning that individual restaurant owners make many of their own financial decisions.
Merchandise USA is a closeout buyer and inventory liquidator specializing in closeouts, discontinued inventory, overstock inventory and surplus merchandise. We buy closeout toys, overstock housewares, closeout lawn and garden products, closeout camping goods and all other excess inventory. If you have inventory to dispose of or even willing to give it away free we can help. We also work with Amazon FBA sellers shutting down their accounts due to excessive storage fees.