Consumer complaints have companies rethinking how to dispose of unsold inventory
Saturday, January 23, 2010
The demise of the Waldenbooks chain this month would probably have been just another blip on the bleak retail landscape -- until some employees confronted a mountain of unwanted books.
The chain, owned by Borders, had deemed them unsellables -- leftover bodice-ripping romance novels and true-crime stories -- and workers were instructed to strip off the covers and toss the guts. Online and in interviews, employees and customers across the country called it wasteful and launched a viral Internet campaign to change the practice.
"As a librarian & book freak, this hurts my heart!" posted one member of the Facebook group Donate, Not Dumpster! "Give them to kids, homeless shelters, shelters for abused women and families, foster homes, hospitals, health clinics -- the possibilities are endless!"
The controversy sheds new light on what happens to the stuff consumers leave behind. The recession has prompted an unprecedented pullback in spending while consumers clamor for companies to become more environmentally conscious. Even though shoppers are buying less, they don't want the remainder to go to waste.
Since the recession began, marquee names such as Linens 'n Things, Steve & Barry's and Circuit City have gone out of business with warehouses full of inventory. Even healthy retailers are typically saddled with excess inventory after a holiday season that even the most aggressive clearance sales can't eliminate.
"It always seems to be the last thing that a retailer thinks about," said Gary M. Kulp, president of the retail division at Gordon Brothers Group, a liquidation and salvage firm. He estimates that as much as 30 percent of a store's inventory can go unsold.
Retailers frequently turn to such outside firms to handle the purge. The fate of the unsellables can lead to a clothing rack at Marshall's or an export container bound for South America, experts say. Liquidation and salvage firms handle hundreds of millions of dollars of merchandise annually, collecting, sorting, repackaging -- and, in many cases, eventually reselling.
The process begins as soon as the holidays end and the returns begin. Rob Roberts, co-chief executive of Hudson Salvage, said he starts carting trailers of returned merchandise out of the nation's biggest chain stores the week after Christmas. The industry will swing into full gear at the end of January as stores wrap up their clearance sales. It can take all spring for salvage firms to finish sorting through the excess merchandise by hand.
"It's just a zany period just because you're getting so much inventory thrown at you at one time," Roberts said.
The highest-quality merchandise can be resold to discount retailers or even eBay powersellers. But some chains and manufacturers are concerned that their brand could be hurt if their products show up in a bargain bin. Other merchandise is too damaged or outdated to be resold in America. Experts said such merchandise is often exported, primarily to South America or Africa. Sometimes, it gets tossed in the trash.
Such was the case at an H&M store in Herald Square in New York City, where garbage bags full of defaced clothing sat outside the store -- around the corner from a charity that collects donated coats. After a recent report in the New York Times, the retailer said it would stop trashing the store's unsold merchandise and donate it instead.
Organizers of the Borders campaign said the incident felt uncomfortably similar to what they saw happening at Waldenbooks. Retailers typically receive a credit from publishers for shipping back any books they cannot sell. But mass-market paperbacks are so inexpensive that they are not worth shipping back, Borders said. Instead, booksellers rip off the covers to prove the books were not sold and then receive credit. The rest is tossed away.
The practice occurs throughout the year as stores make way for new merchandise, but employees said they were struck by the mass of books headed for the trash heap as nearly 200 Waldenbooks locations shut down.
Borders said many paperbacks could not be donated because the material might not have been appropriate for schools and libraries. But in response to the campaign, it said it would recycle the books rather than throw them away.
"It's our commitment to do the right thing for the product and the book," said Mike Edwards, Borders' chief merchandising officer.
Edwards said the chain is in talks with publishers about long-term alternatives to pulping. In addition, the company said this week that it would donate all non-returnable merchandise, such as its private-label gift items, CDs and DVDs, to the nonprofit Gifts in Kind.
"If the customer just doesn't want it and you've tried multiple pricing strategies . . . that's when you're stuck with it," Edwards said. "It's very difficult at that point to move through the merchandise."