Stock clearance: Taking stock of all the options

The cancelled orders that marked the start of the recession may have been replaced by more sensible buying, but retailers still face the perennial problem of how to clear stock.

And as well as excess store stock, the explosion of ecommerce and the implications of the Distance Selling Regulations mean shoppers have a right to return unsuitable product even if it has been opened, meaning retailers have experienced a large growth in handling returned product that cannot be simply resold through existing full-price stores.

But at the same time, with more discount stores springing up and online clearance channels proliferating, the choice of how to clear stock has also increased. So which methods are proving most effective?

Traditional channels

In the past some retailers have used small networks of outlet stores - but these are still subject to the rent, rates and staffing costs of their full-price counterparts.

Other retailers and manufacturers have used clearance agents and jobbers - a traditional route that still works well.

Brennan Atkinson International has 30 years’ experience in supplying clearance product with a database of 30,000 suppliers and sells to retailers such as TJ Hughes and the pound stores. Director Simon Fine says the model is changing as stock clearance becomes more sophisticated. “These days the value retailers are as sophisticated as full price and it’s treated like stock you may have manufactured yourself, so we are barcoding it and palletising it, for example,” he says.

Discount retailer 99p Stores buys its products both direct and through clearance brokers. Buying director Faisal Lalani says many manufacturers are making a conscious decision to overstock. “The multinationals have realised they are missing a point - that the discount market will thrive with or without them, so they would rather be on board,” he says.

Other retailers are increasingly using the web to clear product. Comet set up its clearance website in 2005 to complement an existing two-store clearance business. “In 2005 we realised the web could be a huge enabler so we set up a clearance site with a dedicated team of service engineers who recondition and test the product and will then repack and sell through stores or on the site,” says Comet web design and clearance manager Robbie Tutt.

Indeed, the channel has proved so successful that the site, which is linked via the company’s full-price website, has just been redesigned to improve its search engine optimisation capabilities and added functions such as ‘Buy it now’ and multiple item buying. Comet is also considering opening it up to its suppliers to help them clear product too. “It is such an effective channel that we are looking to see if there is anything we can do to help our suppliers. It is a significant area of our business,” says Tutt.

While Comet may have gone for its own site because of the brand reassurances it feels that brings, for other retailers the power of eBay has increasingly grown as a clearance route.

Schuh launched its eBay store in 2005 after a pair of Red or Dead court shoes sold for 10 times what the retailer would have achieved through normal clearance routes. The retailer quickly became eBay’s biggest selling high street retailer.

Littlewoods Clearance launched its eBay store in 2007 and achieved sales comparable to a top 10 store in the first year alone.

In April, eBay repackaged such brands under a new fashion outlet channel on its website - offering links through to these existing stores as well as newer brands such as Karen Millen. It now comprises about 20 stores. “It’s now easier to find the brands that you love and it’s all under one roof, rather than having to navigate through hundreds of stores,” says an eBay spokeswoman. Other high-volume categories such as technology, and home and garden are also likely to be rebranded.

Retailers are increasingly realising the benefit of such channels. Superdry, which also sells via the eBay fashion outlet, has just brought the online outlet for Superdry seconds in-house. It had run as a separate business under the 888 Clothing banner since September last year and in March was ranked first among all UK eBay sellers in the clothes, shoes and accessories category.

The new clearance breed

But for some retailers and manufacturers even channels such as eBay and own stores are too much to manage, allowing a new breed of internet-based clearance businesses to emerge.

Thebiggestclearance.com - a division of Liquidate Mate - launched last year selling overstocks and liquidated stock in a manner similar to eBay, in that sellers photograph and list their stock for sale online. Buyers include wholesalers and eBay sellers.

“To make a listing takes five to 10 minutes and immediately we can guarantee you will get enquiries from the site,” says director Jan Ott.

Stockshifters.com follows a similar model and launched earlier this year. It sells only to trade - including eBay power sellers and value retailers - and works on a commission basis. Debra Barr, commercial manager for E-Trader Group, which runs the Stockshifters site, says it is a great way for retailers and manufacturers to recoup cash.

“If it’s a return there are issues with grading, and the amount of time it takes to manage an eBay store sometimes negates any profit made. Also you have the issue of customers being able to return products again. Therefore many retailers are sat on millions of pounds of stock that they will not be able to push back to the store,” says Barr.

Products are listed and sold on either an auction, ‘make me an offer’ or ‘buy it now’ basis. “Previous methods of retailers clearing stock have been jobbers or auction houses who collect the stock and run auctions to traders but those methods are very inefficient,” says Barr.

She says the online model also works better than the brokers model because it doesn’t need people on the phones trying to sell product. “For a long time retailers have known they aren’t getting the best value for their stock (especially returns) and for many years it’s been a headache and they have had no strategy for it. On eBay, customers still have the opportunity for a refund but on Stockshifters.com as long as the product is as described there is a no returns policy,” she adds.

The company’s technology also allows the retailers or manufacturers to understand what is selling and how and even to whom - allowing better traceability of product.

This means excess stock can be pulled from stores or warehouses as soon as the retailer realises there is a potential overstock - so enabling the product to be sold through at higher margins while still in season rather than a few weeks later when its resale price will have tumbled significantly.

“Jobbers will buy at about 10% to 25%. We’ve doubled the recovery rate that a lot of vendors were getting in a lot of sectors, and in some cases we are managing to recover 80% to 90% of their cost,” says Barr.

Dabs.com uses the site to clear overstocks. In the electricals sector product lifespan can be as short as 12 weeks so being able to react fast is vital. “We had our own internal methods to sell aged stock - such as a dedicated sales team who would speak to business customers but also to value added resellers and brokers to reasonable levels of success,” says Dabs.com commercial director Claire Williams.

“We were able to clear good levels of stock through that channel but the challenge we always had was to maintain our cost model, which fluctuated,” she says. Now by working with Stockshifters, the existing sales team has been able to focus on other things. “The cost efficiencies are gained not only in the price and the retained margin but also in freeing resources,” says Williams.

Asda also uses Stockshifters.com. “Due to the competitive ecommerce market, it is essential to establish robust clearance routes for any residual stock, or products that have been returned to us by customers,” says Asda Direct returns manager Steven Hall.

The market is certainly changing but as the internet has created more challenges for retailers in terms of the stock they have to dispose of, so it seems online businesses are also rising to meet that challenge.