Edition 88
Realizing Actual Returns in Secondary Markets
by Paul Baum, CEO, Plan-IT-ROI

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The unknown makes most people uncomfortable. Whether that unknown is a dark basement, a deep ocean or a masked figure, we naturally become uneasy when confronted with what we do not know. Some uncertainties we learn to live with. In the world of Reverse Logistics, there are many unknowns and among the most widespread is uncertainty around the real recovery rates available in secondary markets. To date there is not a consistent and reliable source that can be used to determine the best options for value recovery.

There is a lack of data in the secondary market. How much value can be recovered from assets in secondary markets? Even though some numbers are tossed around, the public research around these figures is not broadly substantiated. The figures being tossed around can create unrealistically optimistic expectations for some while serving to dismay many from secondary markets. Have you ever seen any real recovery rates by channel with transparent costs and corresponding sales numbers for similar units? We don’t see these numbers on a regular basis because there is no real-time tool available today. We need the truth and transparency around these rates to better serve and represent the industry as a whole.

The Consumer Products Committee is excited to announce an ongoing project to better equip the members of our industry with factual recovery rates on all major recovery channel options based on sales prices and the associated costs. We will be publishing an analysis of current market conditions to create a hierarchy of choices. We will not be spreading opinions or hunches but fact-based figures. The report will ultimately encompass Computing assets after the first publication, which will focus on consumer laptops. The Reverse Logistics Association will shed light on what is happening today via real quotes, market data and committee member experience. You will finally be able to look at the available options from an objective perspective to make an educated choice backed by real data.



We will be taking the most popular models to create a comprehensive analysis on recovery rates and will follow them through the different processes dependent on channel. We are building a road map with all available routes visible. Each route will have each step in that specific process appropriately marked and noted. Some routes will have more associated costs, some will have less and they will all end in unique sale prices. To understand the attributes of one option, we have to quantitatively compare it to all other options.

Currently, there are a variety of different channels that can be utilized to recover value on assets. We must make the distinctions clear to show that all options are not created equally. As we all know, different channels have differing associated listing prices, refurbishment costs and selling points. It’s true that it will cost more to list assets on some channels, but those sites will also almost always net the most for these assets. There is also other associated costs that are less obvious that cover: logistics, data erasure, testing and reimaging, repair costs and the cleaning and boxing to name a few. In the table down below is a start. We must also take into account the warranty provided and quality of process to have a realistic picture of where these options stand. We will present all of these numbers for total transparency. We have set out to pin down profitability across channels in a fair and objective manner.

For the purposes of the report, we will divide the available channel options into four categories: OEM website (eg. Acerrecertificied.com and Delloutlet.com), closed markets (eg. BestBuy.com), open marketplaces (eg. Amazon and eBay), and Liquidation Wholesale. These divisions are the current options for value recovery, outside of recycling assets which will not recover any value. Manufacturers will be familiar with these distinctions but for clarity, we want to lay out the differences.

Perhaps the most widespread means of recovering value is regrettably, through wholesale. We often hear terms like “Liquidation” to describe what is really just wholesale- the path of least resistance in the secondary markets. Selling palletized assets in bulk is essentially wiping your hands clean of product. This option requires the least amount of time, energy and investment. It also carries the heaviest risks in terms of consumer data security and environmental responsibility and will always result in the lowest returns down the road. Wholesale is the quick and easy fix, but it is ultimately a bandage. This bulk sale of assets with hidden value happens for a variety of reasons but many who choose this route either don’t know what to do with their product or are under the impression that there is no longer value in these asset so investing into some level of added value touch or refurbishment isn’t worthwhile.

Although wholesale certainly has its place, we don’t have a way to measure where that line should be drawn. When is wholesale the best option? Ever? We are going to find that threshold and the other great news is that this project will work to dispel any misconceptions about this strategy as a whole. Through collective experience, it certainly seems that defaulting to wholesale could potentially be losing companies millions in opportunity cost. We are excited to educate the industry as a whole to how the wholesale recovery rates actually stack up against other options. Through our research, we will help you determine what is and what is not worthwhile.



Other than wholesale, another popular option is selling refurbished product on open marketplaces. When we think about selling on secondary markets online, many will immediately think of places like eBay and Amazon- these are open marketplaces. These marketplaces have developed a reputation as places where practically anybody could sell anything. For the most part, this holds true. Essentially anybody could sell a “refurbished” computer on these sites. Of course, listing product in open markets comes with costs. This scenario certainly opens up a world of opportunity but this also calls into question the returns we can expect on these channels. Do you want your assets being labeled “refurbished” in the same category as a “refurbished” product that is of much less quality? Refurbished products on open marketplaces are often refurbished by other consumers. This is one of the risks that is being taken when relying too heavily on this sort of sales. Understanding these nuances is key to understanding how this path compares to others, especially when we start considering how this choice reflects on your brand. However, these markets do have their place and uses which will be touched on using data in the report.

A consistently better option for secondary sale major retailers with their own refurbished sections on their websites. Unlike open markets like eBay or Amazon, these major retailers are not accessible to anybody with a “refurbished” computer. Closed markets, like BestBuy.com and Staples.com offer a place for vetted refurbishes who must have the capabilities to provide direct warranty, support and drop ship services to the next user. Units will be held to a higher standard here and are both 3rd Party refurbished as well as OEM factory refurbished. That higher value is possible because consumers have a sense of security when buying from retailers that they already know- and rightfully so. The exclusivity alongside other value adds like extended warranties, creates an environment where units are ultimately sold for more. We will demonstrate the advantages of using closed market retailers by providing data and scenarios to support.

The best option for value recovery that often gets overlooked is an OEM recertified marketplace (eg. Acerrecertified.com and Delloutlet.com) where your assets can be sold independent from other manufacturers as OEM factory refurbished. To see the best results from this sort of channel, a verified third party refurbisher with the proper certifications should be utilized. These channels are a form of closed markets that are branded to match your image and styling. By having the name of a trusted OEM in the actual title of the market, customers are feeling the highest sense of security because they will associate this market with the brand that they already trust. You will also have more control over this channel if you own it. This type of market will have unique associated prices, different than other marketplaces but by initiating your own “recertified” site, you will be able to see the highest recovery rates.



Regardless of the channels that you are using right now, you will want the data we are collecting to either back up your current choice or better inform your decisions moving forward. By having better education in this space, we are solidifying the foundation for better decision making. The transparency provided could prove to be invaluable as opportunities continue to grow and grow. To illustrate the point, here is a scenario using average data readily available online.

The bottom line is that you’re going to recover more money doing it the right way. You just have to make sure that you are making choices based on evidence. Your yield is going to be approximately 96%, worst case scenario. With that high of a yield, you need to be selling efficiently. Liquidation might be easier, but you can get so much more for your product. Our report will show you the rates available today based upon the condition and model currently sitting in your warehouse. Together, we will be working to improve and update our analysis to factual evidence that beats all disbeliefs about the secondary market and what you should expect for a real recovery.
RLM
Paul Baum, CEO and founder of PlanITROI, Inc. is an entrepreneur to the core. Paul has a 25-year proven track record of creating “sustainable green value” in the reverse logistics industry, specializing in value recovery. Since 2001, PlanITROI has been the recognized industry leader in reverse logistics IT, and CE asset value recovery according to Gartner, Microsoft, Reverse Logistics Association and IAITAM. Paul has a BS degree in Business Management from Ithaca College where he was recognized as the “1990 Entrepreneur of the Class” and a 2010 Graduate of MIT’s Sloan School of Entrepreneurship’s Birthing of Giants Program.

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