If you’re holding onto assets that you need to get rid of – quickly – there are generally three basic options you may consider in any situation:
- Cash liquidation
- Donation
- Corporate trade
This blog post, an excerpt from our recent white paper, “Turning Unwanted Assets Into Opportunities: What Are Your Options?” dives into the liquidation option.
Channels of Distribution
Secondary channels of distribution are the most likely path for the liquidation of an unwanted asset. Most clients are not going to sell through current channels of distribution because selling in-line channels can cause all sorts of problems. These problems often include: reduced sales of current products; vendors taking an invoice deduction as some sort of price match; retailers seeing slow sales due to consumers buying the older items at a lower price and then returning current products, unless you offer a similar price.
If you are willing to sell through current channels, then you will generate a good cash recovery and the asset was an opportunity.
Secondary channels will vary depending on your business, but here are a few that our clients often consider:
- Dollar stores are in line customers for snack food clients.
- Military PX’s are very large in-line customers for beverage companies.
- Off-price retailers such as TJX and Big Lots can have agreements with manufacturers to take a certain amount of inventory every month/quarter.
Defining a secondary channel depends on your current channels and the product.
The explosion of internet sales has changed the landscape of the discount retailers. There are far fewer outlets and the outlets that remain have become as big as in line retailers. Internet sales have made it very difficult to control the distribution and made it nearly impossible to control the price – or a “no-advertising” mandate.
There are also secondary channels you may not be aware of:
- Many large corporations run in-house company stores. These outlets are really good for high-value, high-consideration purchases such as travel, electronics and jewelry. The company stores do not compete with current distribution channels and the company employees are happy buyers of a good deal.
- There are a number of export outlets that did not exist 10 years ago. The idea of discount retailers is a relatively new concept that has been embraced in a number of countries. The general weakness of the US Dollar may also contribute to the increase of export opportunities.
When selling into secondary channels there are potential issues to consider.
- Do you want to see your products at a discount in a closeout outlet?
- Are you selling all of the inventory or only part of the inventory?
- If you are only selling a portion, then where and at what price do you expect to sell the remaining stock? Unwanted assets are always falling in value and once the items are in the secondary channels, the decline in value quickens its pace.
Are you thinking of selling to a wholesaler that specializes in closeouts? This can be a good solution. The wholesaler will take immediately delivery, and, in some cases, they will be willing to re-pack or re-box the items to ensure that the inventory does not impact current distribution channels. There are far fewer wholesalers, as there are fewer discount outlets. Make sure the wholesaler has the financial resources to make a purchase. We have seen too many instances where the wholesaler is nothing more than a broker, and that can negatively impact your options if the broker puts the assets into play by offering assets they do not own.
Make sure the wholesaler has warehousing and repacking expertise. We would recommend a site visit to the wholesaler’s office or warehouse. A wholesaler will offer a price below a direct sale to a retailer. The price offered by a wholesaler could seem low. Ask what price they plan on going to market with. Typically, a wholesaler is trying to double their money before expenses. They are at risk for the purchase price as well as the warehousing and selling expenses, and the time value of money. But the wholesaler will buy 100 percent of the inventory and should take delivery and have the expertise to move your items into secondary channels that you can approve in advance of the purchase.
Want to learn more about getting rid of unwanted assets quickly, safely and efficiently? Corporate trade is worth reading more about. Download our whitepaper now.