We’ve reviewed different trade-in solutions and features recently. Today, let’s move to the other end of the process and consider the process to use for asset monetization. That’s a fancy word, “monetization”. As is often the case, the theory sounds simple: sell at a higher price. What’s the secret sauce then, where’s the magic?
Here is the situation:
Your company (or client) currently has some used inventory of consumer electronics. The goal is now to resell the inventory. Business entities sometimes favor speed or convenience. Usually though, the primary goal is to get the highest price possible so that is what we are going to target here.
A few options exist today. You can liquidate all at once on the wholesale market, so buyers who will then resell the products in smaller lots or even individually (“retail”). An alternative is to cut one step in the process and sell retail yourself – either online or in brick & mortar. It gets more complicated though. Some products may be in perfect working condition and look like new. Other products might be slightly damaged (scratches), or even completely broken (glass shattered, water damage, no power). Everyone in the secondary space has a different grading matrix, but these are usually graded as A, B and D respectively.
|Geek’s note on grading practice: |
Here is how grades generally work:
– First, the cosmetics. A = like new; B = light scratches; C = bigger scratches / broken glass; D = significant damage; E / BER = beyond economic repair, use for parts
– Second, the functional. Here we usually use a ‘+’ or ‘-‘ to highlight that some functions don’t work
– Most of the value is usually defined by the cosmetic grading. Recent products will typically have no functional issues. By the time they do there’s often a cosmetic defect anyway.
There is no approved, global grading standard today. Indeed, to my knowledge there is no grading standard approved and followed anywhere in the world. The CTIA (Cellular Telecommunications Industry Association) spent years developing a standard that everyone in the US could support. Carriers, Retailers, OEMs, wholesalers, companies big and large participated. I attended a few of the meetings myself. A standard now exists, but no-one uses it for fear of operating at a disadvantage.
The lack of recognized and enforced standard means every company in the value chain needs to test the products to ensure consistency. This adds significant time and costs. The global reverse logistics / secondary / circular economy is very inefficient as a result.
Yes, the lean six sigma expert in me dies a little every time I think of this
Now you have one extra decision to make. Do you repair the broken device? Do you repair it with OEM parts or will ‘fake parts’ be good enough? What sales channel gives the best price for your specific grade? Is the local price competitive, or should you sell for export?
In the features article, I argued that big bang implementations do not work. Best practice is to come to market with a minimum viable product (MVP) then layer on incremental improvements. The same recommendation applies to the asset monetization process.
Below are the steps I propose you follow, in this rough order.
- 1. Get started and get some recovery. Often this entails finding a buyer for a take-all. This is what I did when we launched the Samsung phone Trade-In program a few years ago. That excel spreadsheet was ugly, but I got my sales. Yes, some buyers got lucky!
- 2. Get better wholesale prices. My recommendation here is to work with an auction site (B-Stock is the largest in the US by far, there are others). Multiple buyers now compete for your products so your net recovery value will increase on average. Buyers hate this by the way. At Samsung, I had people reach out every day, asking for a private transaction. Yes, I would have avoided the auction platform’s fees – but they mostly wanted to avoid the competition to get cheaper products. There are times to partner, this isn’t one of them. A buyer’s gain is the seller’s loss. If you need to sell, public auctions are your friends
- 3. Optimize your auction, by varying lot sizes, quantify of information shared, day of the week…
- 4. Layer on new reselling capabilities. For example, high grade products fetch higher prices in eCommerce channels (e.g., Amazon, eBay)
Here is a highly simplified issue tree of what we have so far:
Easy enough, right? Now it’s time to layer on a couple more wrinkles, stay tuned:
- 5. Analyze your low grade products. Can you refurbish them to resell at higher grades? You can outsource this step to go faster if you want. Refurbishment / remanufacturing is a multi-$billion industry in the US. Some players even specialize in specific products and grades
- 6. Sell abroad. The global secondary market is very liquid. Some products / grade combo get higher prices in a part of the world vs. another. For example, broken iPhones (BER – Beyond Economic Repair) get great prices in HK. Some software solutions can help with this step by the way
- 7. Consider reselling on your own platform besides only leveraging the Amazons and eBays of this world. It works better if you already have a brand. You also need consistent supplies of products and better have a solid fulfilment solution. You will also need to spend money on SEO. The upside is you avoid paying the ~10 points of margin that platforms cost you. This is not a get-rich-quick solution and requires investments but is doable.
- 8. Review the whole value chain again. Go back to #3 and possibly even #2
Optimization never ends and relies on good data. To achieve good results, the triaging and reselling teams need to work hand in hand. A good grading process allows consistent lots of products, which buyers come to trust. Good reselling data helps the triaging team to enhance their grading matrix.
I mentioned magic at the beginning of this page. Of course this was tongue in cheek. The only magic is in the process and the people running it:
– You need a true operator to run the triage process, someone who believes in the lean method. Question every “this is the way we’ve always done it” answer, cut waste, improve efficiency. This work is never done, by definition.
– On the reselling side, the buyers won’t trust (and pay up for) your product if they don’t trust your team. You need an intrapreneur, someone who will think like an owner and focus on the long term. Someone who is truthful, but who has no patience for “good enough” results. Again, work is never done, there is always something to improve on.
– For best results, I recommend having these two managers work together. If they are not the same person, they should at least report into the same leader.
As shared earlier, we outsourced the reverse logistics and triage at Samsung yet followed the above process too. My team and I would walk the floors every week, looking for new information and efficiencies. We ran weekly tests to understand the best reselling strategy. Our product grading matrix changed 3 times in as many years as we kept learning. The market understood what we did, and learned to trust us. Buyers knew we stood by our product and would make things right in case of errors. The result was our prices were the second highest on BStock even though I wasn’t allowed to resell abroad. We were never able to get to first place but we sure tried. I also know these top guys were feeling the heat and worked hard to stay ahead of us. I still believe we would have gotten them beat eventually, but suspect they would disagree. I would if I were them. By the way, their Operations manager is a true rock star who I still hope to be able to hire someday. No, I won’t give you her name! Yes most industry old-timers know who I am talking about. Being the best is always a moving target. Both our companies and the market benefited from the friendly competition.
Today, the market for secondary (used) products is bottomless.
Demand outstrips supply, so reselling is easy. If you read this and are in the industry, it’s a safe bet you already do it. What’s not easy is optimizing; not that it’s hard, but it just never ends. Don’t settle, keep moving the goal line. Competition doesn’t rest, neither should you.
Have questions? Think you need to optimize your own capabilities so you don’t leave money on the table, yet unsure of where to start? Reach out and let’s discuss to see how we can help you.