Retailers Are Becoming Their Own Liquidators: Damian Polak on Where the Industry Is Headed
On Liquidation Motivation’s Tuesday Talk, Damian Polak explains why big retailers are bringing returns in-house and what buyers should do next.
On Liquidation Motivation’s Tuesday Talk, Tom Schultz asked Damian Polak a simple question: where is liquidation headed? Damian’s answer was blunt. Many people are in for a rude awakening, because the retailers sending out loads are learning to do the liquidator’s job themselves. Listen to the full episode →
THE SHIFT
Why Retailers Are Keeping More of Their Returns
Damian sees people in Facebook groups blaming retailers for processing their loads too heavily. His view is that he’d do the same thing in their position. With roughly $850 billion in U.S. returns last year, why let a load go for $3,000 when you can build your own reverse logistics operation and resell at a much higher margin? He put it in numbers. If a company has $1 million a month in returns and a liquidator gets it 10 percent back, but selling the goods itself could recover 50 percent, the investment pays for itself fast.
THE EVIDENCE
Where Did All the Books Go?
Amazon is Damian’s clearest example. Over the past five or six years it launched Amazon Warehouse and Amazon Renewed, and brands like HP started pulling their own returns back. Each change chipped a little more value out of the loads. Books used to show up in every FC load, often half a pallet or more. Now Damian can’t put together a single truckload of them, and Tom isn’t seeing any either. Someone is getting the books, and Damian’s guess is a recovery-share deal that pays Amazon more than a liquidation load would.
THE NUANCE
Not the End of Liquidation, Just a Different Game
When Tom asked if he was predicting the industry’s demise, Damian pushed back. Not every company can bring returns in-house. A small brand selling a thousand chargers a month won’t build its own returns operation. It will hire a return solutions provider, and those providers are already consolidating inventory from many brands. The opportunity remains, but the loads that reach the open market will keep getting thinner. Damian expects that over time, the main thing left for liquidators may be scrap for recycling.
WHAT BUYERS SHOULD DO
Know Your Numbers and Ask Why
If loads are getting thinner, Damian’s advice is to stop worrying about what everyone else is making and set your own buying criteria. If you can sell Dollar General pallets for $375, you know exactly what you can afford to pay. He also asks the same question about every load that lands in his warehouse: why is this here? Following that trail back to where the product came from, he said, is how a lot of sourcing gets figured out.
For newcomers, his test is simple. Take $100 to a bin store, buy ten items and try to resell them for at least $150. If you can’t flip ten items, you won’t be able to flip ten thousand.
THE TAKEAWAY
Adapt Before You Have To
Damian said he’s tired of blanket statements about liquidation. Amazon FCs, Target GM and Wayfair furniture each come with their own problems and their own solutions. The liquidators who last will be the ones who adapt early and solve problems for their suppliers.
