The “Moneyball” Approach to Customer Returns and Excess Inventory
Most of us are familiar with “Moneyball,” a book-turned-Oscar-nominated film about a Major League Baseball team’s data-driven approach to assembling a competitive roster. The idea is that the historical wisdom of baseball insiders is flawed and that more analytical metrics of player performance can better predict team performance. The same tactics can be applied to reverse logistics, specifically how organizations approach the sale of their returned, overstock and excess inventory slated for liquidation. Whether it’s a team of MLB players or racks of customer returns in your warehouse, the answers to building a formula for success lie in the data.
Before we dive into data points though, let’s discuss the reverse supply chain landscape and the transition that is slowly taking place when it comes to solutions for returned and excess inventory. Historically, there has been a lack of innovation for dealing with obsolete inventory, which has resulted in billions of dollars lost by retailers and manufacturers; reactive approaches and traditional liquidation methods are among the problems. Over the past few years however, a subtle shift has taken place in how organizations deal with their returned and excess inventory: many are incorporating technology-based, data-driven liquidation programs into their overall business strategy. This includes customized B2B marketplaces that connect obsolete inventory directly to business buyers, enabling companies to create incremental revenue totaling hundreds of millions of dollars. Whether managed in-house or by a provider, a data-driven B2B online auction marketplace, when properly executed, can often increase recovery by 50% and sometimes much more.
So how do you sustain a successful B2B liquidation marketplace? Let’s get back to the importance of data and take look at how to build a formula for success through bidder acquisition and retention, sustained competition, auction lot configuration and customer service quality.
Finding the Right Bidders
Having the right buyers is always the most important first step to maximize recovery. It’s important to segment buyers by product category, condition code and ability to participate (financial ability, geographic location, etc.) in order to properly drive demand. Only by developing effective campaigns to target the right buyers at the right time, can a marketplace successfully scale.
Generate Repeat Buyers
Repeat buyers create a foundation on which to build a successful marketplace. There are many operational elements that contribute to success here. Building customer loyalty programs that reward repeat purchases is one example. Marketing campaigns that target buyers based on their past bidding and buying history is another.
Sustain Bidder Competition
More bidder competition (among ‘the right’ buyers) means higher prices every time so continually investing in attracting new buyers through targeted demand generation programs is critical. Our data reveals a 300% increase in recovery rates as competition grows from under five bidders to more than 15 bidders.
Optimize Auction Lot Configuration
How auction lots are assembled is extremely important to maximizing recovery numbers. What works best here is very unique to every situation. There are thousands of potential variables to be tweaked and tested. What is required to succeed are the skills needed to figure out what those optimal configurations look like. This takes years of experience that create ‘pattern recognition’. While there is an element of ‘science’ to it, there is also a considerable amount of ‘art’. Y
Offer Quality Customer Service
A customized, private-label B2B liquidation marketplace promotes a direct relationship between you and your buyers; and with that comes the responsibility to provide them with a great buying experience. By offering quality customer service that includes resolving the inevitable disputes that will crop up amicably an quickly, you’ll reap benefits in the form of better prices.
As the relevance and importance of incorporating reverse logistics programs into overall business strategy continues to mature, so should the way we determine what constitutes success in the world of liquidations. The best run retailers and manufacturers use data to generate better results across their businesses every day; it is only fitting that they use it to improve results in the last mile of the reverse supply chain: liquidation.
Howard Rosenberg is co-founder and CEO of B-Stock Solutions, the largest network of private-label B2B liquidation marketplaces. Hundreds retailers including four of the top five U.S. retailers, have leveraged B-Stock Solutions’ technology and service offerings to sell billions of dollars worth of consumer returned and excess inventory. For more information please visit http://bstocksolutions.com.
*This article has been drafted by Howard Rosenberg exclusively for Reverse Logistics Magazine