What happens to merchandise when stores go out of business?

CURTIS COMPTON / CCOMPTON@AJC.COM

JC Penney is the latest retailer to announce it will be closing stores this year. The struggling department store will shutter 140 stores by the end of June.

Read more:  J.C. Penney to close between 130-140 stores

The company is offering early retirement to 6,000 full-time employees. Two distribution centers will also be closed.


This is just another day in retail, given plans from many other retailers to reduce the number of brick-and-mortar stores. Sears, which holds Sears and Kmart stores, will close 150 stores and Macy’s is closing 68 stores.

It’s not just department stores that are having trouble. The Limited, Wet Seal and Sports Authority have closed all stores and American Apparel is likely to follow.

Thought much of the blame for closures has been placed on e-commerce, many online businesses are struggling as well. Shoes.com has gone out of business as has Nastygal.com, the fast-growing company founded by it-girl Sophie Amoruso.

“Consumer behavior is continuing to shift and it is making it more and more difficult for companies to compete for the market share of consumers,” said Eric Moriarty, vice-president of B-Stock Solutions. “These trends that are occurring, are putting stress on these companies and if they haven’t proactively or strategically dealt with the issues, inventory is backing up.”

Companies need to recover as much money as they can for obsolete merchandise, he said and not just when they are going out of business. The issue of liquidating unsold merchandise is an ongoing problem.  B-Stock Solutions has helped retailers like Sears Holdings, Lowe’s, The Home Depot, Target, Walmart, Amazon and Groupon, liquidate excess inventory.

Historically, the process has been an afterthought. A retailer ends up with excess inventory — whether from customer returns or store closures — and has to figure out how to get rid of it.

Departments stores such as Neiman Marcus, Saks Fifth Avenue, Macy’s and Kohl’s have all developed off-price centers to help them move merchandise. Retailers may also sell the inventory to a select group of liquidators who bid on the merchandise.

But Moriarty said these methods yield low returns. B-Stock uses technology to expand the buyer base from five liquidators to thousands of resellers.

Returns in fashion, for example, are some of the highest rates of customer returns. “The vast majority of the time when it comes back to the customer, the inventory goes into the secondary market to a reseller that buys that type of inventory and sells it to the community. Resellers range in size from small businesses to major chains. The merchandise may be sold online at flea markets or in brick-and-mortar stores. This offers the retailers direct relations to the reseller rather than going through a liquidator who breaks up merchandise into smaller lots and sells it off.

“It gives [retailers] greater level of control over how their inventory goes into the secondary market,” Moriarty said.

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