August 16, 2022

As Inventory Piles Up, Liquidation Warehouses Are Busy

“It’s unprecedented,” said Chuck Johnston, a former Walmart executive, who is now chief strategy officer at goTRG, a firm which helps retailers manage returns. “I have never seen the pressure in terms of excess inventory as I am seeing right now.”

So, much of the industry’s flotsam and jetsam washes up in warehouses like this one, located off Interstate 81, a few exits from the President Biden Expressway in Scranton, the president’s hometown.

The giant facility is part of an industrial park that was built above a reclaimed strip mine dating back to when this region was a major coal producer. Today, the local economy is home to dozens of e-commerce warehouses that cover the hilly landscape like giant spaceships, funneling goods to the population centers in and around New York and Philadelphia.

Liquidity Services, a publicly traded company founded in 1999, decided to open its new facility as close as it could to the Scranton area’s major e-commerce warehouses, making it easy for retailers to dispense with their unwanted and returned items.

Even before the inventory glut appeared this spring, returns had been a major problem for retailers. The huge surge in e-commerce sales during the pandemic — increasing more than 40 percent in 2020 from the previous year — has only added to it.

The National Retail Federation and Appriss Retail calculate that more than 10 percent of returns last year involved fraud, including people wearing clothing and then sending it back or stealing goods from stores and returning them with fake receipts. But more fundamentally, industry analysts say the increasing returns reflect consumer expectations that everything can be taken back.

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