Excess Inventory: A Trillion-dollar Problem

Excess inventory: A trillion-dollar problem

Inventory is the single largest asset on any retailer’s balance sheet. It’s also one of the largest costs, with excess inventory costings U.S. retailers an estimated $500 billion a year. Worldwide, the costs of excess inventory tips $1 trillion.

Costs associated with inventory accumulate from several sources:

• The cost of warehousing space, with costs continuing to spiral as warehousing capacity in metropolitan areas exceeds 95 percent
• Associated warehousing costs such as insurance, taxes and management fees
• The impact on the balance sheet and the distortion of inventory value at quarter- and year-end
• The decline of warehoused goods, which are susceptible to damage and obsolescence
• A shift within the industry where responsibility for overstock has become diluted: in many cases it’s not one person’s problem

So why don’t retailers and brands move faster to address and resolve the challenge of excess inventory? In many cases it is concerns over brand equity, limitations relating to brand restrictions and conflicting channels – and simply not knowing where to start.

At TigerTrade we help brands and retailers to move excess inventory while protecting their brand equity and honor all brand-enforced limitations. We work with luxury and household-named brands so they can move large quantities of excess inventory, reach new distribution channels and maximize the financial return from existing stock.

Have stock to sell – or want to find out how to buy from new verified suppliers across the globe? Fill out your information below and get in touch:

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The Overstock Market And Our Commitment To Adding Value

The overstock market and our commitment to adding value

By Tanjila Islam, CEO and Founder, TigerTrade

‘Always add value.’

This is a personal mantra of mine, so it’s no surprise that it’s one of the values on which I founded TigerTrade.

We have breadth in covering apparel, footwear, beauty, toys and fashion overstock across the globe, but our depth comes from the value we contribute to each step of the process.

These unique end-to-end value-adds include:

Verifying suppliers: Every single supplier that we approve goes through a detailed reference and vetting process

Authentication: We authenticate all stocklots and products to ensure the order is correct and true to description

Sourcing inventory: Our current, and growing, supplier base is 60 trusted suppliers across the globe. We share updates via the TigerTrade Daily Deals and also directly work with buyers to help them connect and source relevant stocklots and to fulfil ‘wishlists’

Logistics and shipping: We understand every aspect of shipping and fulfilment, including the complex paperwork behind international overstock deals.

Whether you are a buyer or a supplier, you may not need all of our services, but we understand the whole of our market and know that adding value is key to our success – and the success of our customers.

Want to learn more about how we work, our values and how we could help your business? Join me on September 8th or September 28th for an inside look to our business and how we help our customers succeed.

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The Importance Of Trust In Stocklots

The Importance Of Trust In Stocklots

Most buyers simply cannot afford the potential damages that can result from buying unverified stocklots. For that reason they deal with suppliers and clients with whom they have formed longstanding relationships. This is why trust is such a vitally important factor in this industry.

If you are working with a new supplier for the first time, there are a few precautions you can take to verify them as being legitimate. Asking to see their business registration, doing some background research on their company, and checking their email address are all quick and simple ways to protect yourself from scams. (View a detailed and very informative thread on this topic here.)

When it comes to establishing trust and verifying a lot, you don’t’ have to go it alone. TigerTrade pre-verifies all of its stocklots and works with sellers directly to guarantee that all of the merchandise is legitimate.

 

Channel Control On Your Inventory

Managing channel control on your business’s inventory is a question of details and organization. First, it is important to be sure that you read and understand every part of the agreement you sign with your supplier. Even if your agreement does not explicitly mention any restrictions on where and how you are allowed to sell this merchandise, it is prudent to conduct some research on the brand and product before you buy.

If you find yourself uncertain about the rules regarding the resale of the goods, you can reach out to your trusted contact, or the brand directly. They should be able to provide you with paperwork proving the lot’s authenticity and detailing any channel restrictions that may be in place.

A secondary option is to consult online forums where other sellers have posted their experiences about working with branded merchandise. These forums can be valuable resources for getting advice and insights about how the markets and the industry works. Two of our favorites are retailersforum.com and wholesaleforum.com.
And as we mentioned above, TigerTrade will also handle much of your distribution channel management for you!

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Growth Of The Off-Price Market (part 2)

Growth Of The Off-Price Market (part 2)

Off-price retailers are able to see such astounding growth because their business model allows them to be more agile than their full-price competitors. Off-price retailers stock their inventories from the overstock of other retailers – unsold stock that remains when there are cancelled orders, returns, or when buyers simply miscalculate how much stock they will need. Because they purchase this overstock at deep discounts, off-price retailers are able to pass savings along to their customers, often to the tune of 20-60% off the standard retail price.

Even as the economy has improved, off-price retail continues to grow. Researchers have attributed this sustained growth to shift in consumer mentality towards a “value-oriented” mindset. Experts argue that consumers on the whole have come to prefer a good deal over other factors such as prestige and status that used to have a more dominant role in driving clothing sales. Even relatively well-off consumers (defined as those with incomes greater than $100,000) are shopping at off-price stores more frequently than they used to indicating that this phenomenon is about more than simple economics. As TJX CEO Carol Meyrowitz said, “there has been a paradigm shift among customers [towards] value… regardless of whether the economy is weak or strong, value isn’t going out of style.”

Real estate plays a large role in the success of this market. Off-price stores have a relatively loose set of space requirements and are able to occupy vacancies in malls, shopping centers, strip malls, or standalone storefronts.  In contrast, higher-end department store counterparts are often confined to operate in only larger spaces such as those in malls.

Shopping centers are glad to accommodate off-price retailers, and often seek them out as desirable tenants. As mentioned above, off-price stores generate more revenue per square foot than do department stores, making them more reliable tenants than department stores in many cases. As Andrew Graiser, co-president of commercial real estate firm A&G Realty Partners notes “[mall owners] know that know other stores near a TJ Maxx will do well.”

The spectacular growth of the off-price market means a tremendous new opportunity for those in wholesale closeout. As demand for off-price inventory continues to rise, the more occasions there are for off-price retailers to make profits.

With more of the market moving to off-price and more merchandise being offered to off-price buyers, there are more options than ever for buyers to pick from. Consumers benefit from this abundance of supply as well, enjoying cheaper prices at the register.

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Growth Of The Off-Price Market (part 1)

Growth Of The Off-Price Market (part 1)

Off-price retailers have seen dramatic growth in market share since the economic recession of 2008/2009. As household budgets began to shrink it made good economic sense for consumers to do their shopping in the off-price sector (dominated by chains such as Burlington, Ross, and the TJX family which includes TJ Maxx and Marshall’s.) Shoppers found they could get better value for their money, purchasing many of the same products from familiar brands at steeply reduced prices. By some estimates, off-price retail currently accounts for about 8% of all total fashion and soft goods retail.

But as the economy rebounds, off-price continues to outpace the rest of retail. Moody’s estimates that the off-price sector will continue to see growth on the order of 6-8% for the next five years. Scott Tuhy, Vice-President Senior Credit Officer with the firm forecasts that “the off-price segment will continue to do better than the overall apparel and home sector into the foreseeable future.”

Not only are off-price stores stores being built at a faster rate than traditional department stores, they are also generating more revenue per square foot. TJ Maxx and Marshall’s average approximately $300 per square foot, nearly triple the ratio that JC Penney’s, and almost double the revenue per square foot that Macy’s makes.
How is this possible?

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Wholesale Closeout For Dummies

Wholesale Closeout For Dummies

Retail fashion can be a tricky industry. Buyers who supply the retail chains with inventory have to keep ahead of popular fashion trends before they become popular, and plan out purchasing to make sure that stores have enough in stock to meet demand. Don’t buy enough and the stores miss out on potential sales that they could have made; buy too much and they’ve wasted money on product they can’t move. On top of that there are also items that customers return after purchase, and goods that brands produce but which never make it to retailers in the first place. All of these contribute to excess inventory known in the industry as overstock.

Overstock represents an opportunity cost for retailers and brand stores  because it takes up space that could be used for merchandise that people are actually buying.  Getting rid of overstock items by discounting prices can be a problem for retailers. It can send the wrong signal to customers, implying that the goods aren’t as valuable as they used to be and casting bringing down the perceived value of the inventory as a whole. Even if a retailer chose to discount its overstock items, there is no guarantee that they would sell at a lower price point. Overstock is costly to brands as well because they have already spent the money to produce the goods in the first place.  

If only there were some way for brands to recoup some of their expenses on overstock. There is! Overstock inventory can be liquidated – converted back into capital – to help recoup some of these sunk costs. A wholesale closeout is when overstock goods are sold at reduced prices to other retailers for resale in different markets.

Industry experts estimate that as much as 20% of overall inventory goes unsold (this figure factors in overstock, returns, as well as stock that is never shipped to retailers in the first place.)  

To put that into perspective, if the global garment and apparel industry were worth $1 trillion (this is likely a conservative estimate) and only 1% of garments went unsold (the real figure is almost certainly closer to 20%), then the potential value lost to the market would be over $25 billion. Even from this absurdly low illustration, it is clear that there is a lot of money to be made by someone who knows how to get this excess stock in front of the right consumers.

In the US much of this excess inventory can find a second life at off-price retailers such as TJ Maxx, Marshall’s, Ross, and many others. Since the financial crisis of 2008/2009, the off-price market has seen dramatic growth as consumers looked for ways to get more for their money. Even as the economy recovers, the growth of the off-price market continues to outpace that of the full-price retailers who dominated before the recession.

Many of the overstock from the United States is shipped overseas to fuel overstock markets all around the world. The growth of the global overstock market is one way in which developing countries can get high-quality clothing for relatively cheap prices.

Product makes its way from manufacturers to off-price retailers through a variety of distribution channels including intermediaries such as wholesalers and jobbers (a specific type of wholesaler that specializes in selling to retailers.) Although some brands do produce special lines of products specifically for off-price retailers, most of the merchandise moving through these distribution channels is part of a grey economy.

There are many factors to bear in mind when operating a business in a grey-market industry to make sure that you don’t run afoul of local governments or the brands whose goods you traffic. It goes without saying that businesses that work in this space must comply with the trade laws of the countries in which they operate. But it is also important to abide by the regulations that brands put in place to protect their brand equity, or the value that they will be able to extract from projected sales in the future.

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Welcome To The New TigerTrade Blog

Welcome To The New TigerTrade Blog

I’m excited to welcome you to the new TigerTrade!

Here you’ll find updates, stories, and useful tidbits culled from our years of experience working in fashion wholesale. Make sure to check back here for new content, and please leave us comments! If you have questions about the industry that you’d like to see addressed in a blog post, let us know – we are here to help.

Best,

Tanjila Islam – CEO of TigerTrade

 

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