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Inventory liquidators benefiting from soft holiday sales

by Meaghan M. Norman
Dec 04, 2008


'Tis the season to be jolly--if you're an inventory liquidator.

In this problematic holiday season, the folks who dispose of retailers' excess merchandise are already busy. Stores placed their Christmas orders months ago and now must face up to the realities of the recession and shoppers' reluctance to spend.

“It’s too late to do anything,” said Senior Economist Adolfo Laurenti of Meisrow Financial Holdings Inc.  “I think it will be very tough for retailers and it will be a challenge to keep the volume up.”

Linens ‘N Things and women’s apparel retailer B. Moss are among prominent retailers already in the process of liquidating.  Circuit City is seeking to reorganize and stay alive.

“I doubt that Circuit City – which has just declared bankruptcy – will see the Christmas season.  They’re going to try to get through the holiday, but the blood’s already in the water,” said Eric Chen, an assistant professor of business at Saint Joseph College in West Hartford, Conn.  “Circuit City is going to be stuck with a lot of inventory and will need a lot of discounts to move it.”

Chicago-based auction Web site uBid.com is one beneficiary of this extraordinary pre-holiday disposition of excess merchandise.

Jeff Hoffman, CEO of Enable Holdings Inc., the parent company of uBid.com, said his company works with more than 7,000 retailers and manufacturers.  He said that after this Christmas season, the number of sellers could potentially increase.  While he could not divulge any names, his clients include 20 of the nation’s major retailers. 

“This year so many retailers are failing.  We are in fact picking up truckloads of unsold inventory out of the bankrupt, from their warehouses,” said Hoffman.  “So, we are particularly excited about this holiday season because we’ve got great products at very good prices right now and it’s because of the unfortunate circumstance of a lot of retailers failing.  So this down retail economy is exactly what our business is designed for.”

The company's timing was perfect.  Previously striving to compete with preeminent auction site eBay, uBid earlier this year threw in the towel and announced it would henceforth be a liquidator. 

“We started re-launch our business to focus exclusively on liquidating excess inventory from major retailers and manufacturers.  We just finished building that last month in our fourth quarter,” said Hoffman.

As of now, Hoffman said, the most popular items on the site are electronics, many of which are manufactured by Sony Corp., Dell Inc. and Hewlett-Packard Co.  Most of those products, he predicted, will continue to be popular after the holiday season.

Also benefiting from retailers' overbuying is Overstock.com Inc., a discount Web site for excess inventory.

However, not all retailers will feed the liquidator beast.

Officials of Cincinnati-based Macy’s Inc. said it does not sell its merchandise to wholesalers or discount retailers, but rather, it puts unsold inventory on sale.

“We clear our own merchandise. If we have merchandise in a particular area that’s not selling, it’s marked down on clearance and it gets sold that way, in the stores,” said Jim Sluzewski, spokesman for Macy’s.  “There are some instances given the nature of the product where the vendors require us to return unsold merchandise to them, but in almost all cases it’s cleared in the stores.”

Macy's same-store sales dropped 13 percent last month, but the company says it has a continual buying strategy that allows it to adjust purchasing to reflect how the economy is performing.

"Going into the holiday season, our buyers realize that we don’t want to be sitting on inventory in January that was supposed to sell in November,” said the publicity manager of Macy’s State Street Chicago store, Andrea Schwartz.  “So, they truly bought accordingly.  We’ve already been purchasing merchandise to work with the economy that we have.”