When Covid-19 erupted 2 years ago and upended retailers around the world, it looked like just another chapter in the sad story of an industry’s decline. The reality of the pandemic era, however, hasn’t played out that way. Overstock buyers and closeout wholesalers were slammed with business and in many cases there weren’t enough closeouts to fill consumer demand. Regular line department stores like Macy’s, Nordstoms and Kohl’s were forced to re-examine off price and discount pricing. Companies that sell surplus inventory helped save the retail landscape from a disastrous outcome. Overstock buyers began buying up old inventory and slow moving products from distributors who couldn't sell it all. Companies that liquidate inventory were suddenly busy trying to meet unprecedented demand for excess inventory.
Every 50 years or so, retailing undergoes this kind of disruption. A century and a half ago, the growth of big cities and the rise of railroad networks made possible the modern department store. Mass-produced automobiles came along 50 years later, and soon shopping malls lined with specialty retailers were dotting the newly forming suburbs and challenging the city-based department stores. But as consumer desire changed along with the economies of different lifestyles, closeout wholesalers opened businesses servicing smaller rural discount markets with closeouts, excess inventory, slow moving merchandise and liquidation stock. The 1960s and 1970s saw the spread of discount chains—Walmart, Kmart, and the like—and, soon after, big-box “category killers” such as Circuit City and Home Depot, all of them undermining or transforming the old-style mall. There was a need to offer discounted merchandise and closeouts.
Each wave of change doesn’t eliminate what came before it, but it reshapes the landscape and redefines consumer expectations, often beyond recognition. As businesses opened and closed, there were always leftover inventories sold off at pennies on the dollar and these goods flowed into the retail market at extremely discounted prices. Opportunities became available to buy liquidation inventory and excess inventory of toys, housewares, home goods, sporting goods, etc. Retailers relying on earlier formats either adapt or die out as the new ones pull volume from their stores and make the remaining volume less profitable. Overstock buyers flourished as the discount retail landscape for closeouts grew dramatically. Overstock buyers became a norm in the surplus industry and as businesses developed the need to sell surplus inventory or dispose of slow moving products, this industry grew as well. If a business is downsizing or shutting down a 3PL warehouse and moving warehouses, the best option is to get rid of inventory and start fresh again. Moving the inventory is cost prohibitive and not worth the cost.
Yes, there was a shakeout with thousands of stores, and some chains, closing for good and completely liquidating all their inventory. A wave of retail workers lost their jobs, some permanently, and an unknown number got sick. But Covid’s shock to the system also brought overdue changes that will fortify the sector for years to come, including big investments in technology, the creation of new methods to connect with consumers and speeding online delivery. Closeout wholesalers and closeout distributors increased sales by working with customers over Zoom, Whats App or Face Time. At the time, it was the only way to show goods to customers with closeout websites or discount brick and mortar stores. There were no trade shows or in person meetings so businesses were forced to get creative in order to sell surplus inventory. For all the human misery the coronavirus brought, it’s not hard to make the case that the pandemic will ultimately strengthen the global retailers who made it through. It’s a startling turnaround from the doom-and-gloom predictions for the industry in mid-2020. Back them it was predicted that a large percentage of retail stores would never had made it through the year.
The pandemic pushed shoppers buying closeouts and excess inventory to adapt quickly, which forced retailers to do the same. Stuck in their homes in those first few months and then wary about visiting stores when they reopened, consumers flush with cash from government stimulus programs — along with savings from not traveling or eating out — embraced e-commerce like never before. Liquidation inventory became an important part of these sales because there was little left during the holidays and the consumer demand was still strong. Companies that buy excess inventory needed bigger warehouses so they closed or moved 3PL warehouses into new facilities. Closeout brokers and closeout websites did well, as long as they had goods to offer. This was an abrupt change from one year earlier, and that’s why the outlook appeared so dire early on for retailers who depended on foot traffic to brick-and-mortar locations.
Closeouts became popular online since Amazon ignited the online shopping era more than two decades ago. The big question has been how do legacy retailers survive? The industry’s answer eventually became ``omnichannel,’’ a fuzzy buzzword about intertwining stores and the internet. Retailers had been investing on that front — think of innovations like online ordering with in-store pickup — but sporadically. Chains including closeout stores, drug chains, discount retailers and restaurants took to online ordering. Closeout wholesalers and other businesses dealing in closeouts made major changes as well. Closeout websites became more popular and virtual meetings with customers were the new normal. Excess inventory is an issue that has to be dealt with regardless of what is going on in the marketplace. Every business has overstock merchandise for one reason or another, and it must be disposed of before it becomes a big problem in terms of both cash flow and taking up valuable warehouse space.
The pandemic created the existential threat many needed to fully embrace this issue. 3PL companies began shutting down or liquidating inventory in an effort to become more lean and profitable. Companies started to liquidated old inventory and Amazon FBA sellers began disposing of inventory due to excessive long term storage costs. Liquidation stock had to be sold off to bring in new products. They responded by shaking up their business models in unprecedented ways, everything from how they handled customer service to the ways they fulfilled orders (groceries ordered online being delivered to the back of an SUV in a Walmart parking lot just a few hours later).
With stores shuttered in the U.S., retailers adopted new ways to serve customers. Live stream selling spread from China and became a bona fide revenue source thanks to inexpensive and easy-to-use software. Closeout buyers and chains also pushed more of the traditional in-store experience to the web. We sold surplus inventory online and added video calls as a way to ease the resistance of buying closeouts and liquidating inventory without in person meetings. There was strong consumer demand creating a push to get rid of old inventory and liquidate overstock to fill the need and convert inventory to cash.
The Covid era will also be remembered for all the retailers who didn’t make it and the employees who got infected by the virus. Pier 1 Imports in the U.S. and Britain’s Arcadia Group, owner of Topshop, were among the chains who shut down their locations and liquidated all their inventory. They were forced to have overstock liquidation sales and selling obsolete inventory. These companies were unable to be profitable during these challenging times and as a result they sold everything to excess inventory liquidators. Many others without as much money to invest as big players haven’t been able to undertake meaningful pivots. They still look vulnerable, especially as pandemic-era stimulus programs are petering out and fuel prices increase. And now with war in Russia, we are facing ever more uncertainty.
The research firm Forrester estimates that e-commerce is now approaching $200 billion in revenue in the United States alone and accounts for 9% of total retail sales. The corresponding figure is about 10% in the United Kingdom, 3% in Asia-Pacific, and 2% in Latin America. Globally, digital retailing is probably headed toward 15% to 20% of total sales, though the proportion will vary significantly by sector. Online closeout sales have faired about the same, and companies that need to sell inventory or dispose of business inventory often turn to the web. A simple search for liquidate inventory, companies that buy overstock or where to sell obsolete inventory will turn up buyers for inventory. Moreover, much digital retailing is now highly profitable. Amazon’s five-year average return on investment, for example, is 17%, whereas traditional discount and department stores average 6.5%. Closeout wholesalers can realize even greater returns than this, depending on the categories of closeouts the buy and how quickly they turn their inventory. Overstock wholesalers tend to move goods quickly at low margins and selling obsolete inventory is a volume business.
As it evolves, digital retailing is quickly morphing into something so different that it requires a new name: omnichannel retailing. The name reflects the fact that retailers will be able to interact with customers through countless channels – closeout websites, physical stores, kiosks, direct mail and catalogs, closeout wholesalers, call centers, social media, mobile devices, gaming consoles, televisions, networked appliances, home services, and more. Unless conventional merchants adopt an entirely new perspective—one that allows them to integrate disparate channels into a single seamless omnichannel experience—they are likely to be swept away. Inventory closeout buyers are here to stay because they can flourish in any environment. There is always the need to dispose of excess inventory or shut down 3PL warehouses.
Merchandise USA sells surplus inventory to closeout brokers, closeout wholesalers, brick and mortar retailers and excess inventory buyers. We carry closeout toys, closeout home goods, overstock sporting