By: Emily Hur

In northeastern Pennsylvania, Liquidity Services houses hundreds of goods from large retailers, including Target and Amazon. Their warehouse sells returned or surplus items at cheaper prices. However, their success reveals the economy’s flaws.

During the last two years, the COVID-19 pandemic has left people isolated and bored. To pass the time, many people went shopping, especially online. As the demand grew, the supply had to follow, but when the spending spree ended, retailers ended up with a tremendous amount of excess goods.

Retailers could have based their supply on the diminishing demand, but optimism and greed often blinds companies from good judgement. Supply chain delays also contributed to their miscalculation. When their merchandise finally arrived, its demand was already receding.

“It is surprising to me on some level that we saw all that surge of buying activity and we weren’t collectively able to see that it was going to end at some point,” J.D. Daunt, the chief commercial officer of Liquidity Services, said. “You would think that there would be enough data and enough history to see that a little more clearly.”

According to the National Retail Federation, a trade group, and Appriss Retail, a software company, purchase returns also added to the inventory problem. In 2021, the average return rate in the US was 16.6 percent. It increased from 2020’s 10.6 percent and was over double the average from 2019.

To deal with the surplus in goods, companies cut down prices, leading to a steep drop in profit. However, several retailers cannot afford to hold so many items or fear that huge sales would damage their company’s reputation. Those stores turn to liquidators, such as Liquidity Services, to sell the cheaper goods for them.

While liquidator companies mainly work for a profit, they ultimately help the environment as well. Returned or excess merchandise can end up in charities, donation boxes, or recycling bins, but much of it winds up in landfills or incinerators. Liquidators can save resources and provide an eco-friendlier alternative.

“We are reducing the carbon footprint,” Tony Sciarrotta, the executive director of the Reverse Logistics Association, the industry’s trade group, said. “But there is still too much going to landfills.”

Despite their contributions to the economy and the environment, major companies tend to hide liquidators. Sciarrotta calls them “the dark side” of retail. However, more people should know about them because they provide identical goods as big retailers but at a lower price. They offer a better option for less fortunate or more frugal consumers.