For years this major household appliance manufacturer did not utilize a secondary market to sell returns.Like many manufacturers, they were afraid that they would upset their primary market and threaten their high end product’s retail sales. They knew markets are constantly evolving and eventually realized that selling through secondary markets had become a large and expanding revenue opportunity for their returned products.
Holding onto their returns over the years created a large amount of inventory on their books that not only had high residual value, but had growing storage charges each month. The easiest option was to glean their products and sell the inventory to a third party for pennies on the dollar. The downside was loss of control of their product in the market and the chance for warranty fraud to occur.
The secondary channel process was not their core competency and they soon realized that they would have to incur a large amount of additional overhead and infrastructure if they wanted to maximize the value of this inventory with internal resources. This was not a good option.
They approached RMI for a solution.
THE APPROACH & SOLUTION
The RMI team sat down with the manufacturer to learn what their goals and objectives were and then implemented a returns management process that allowed them RMI to receive incoming returns, sort salable product, refurbish and resell the refurbished product through secondary channels. This solution, completely managed by and at the RMI facility, included the destruction and/or salvage of product that was not refurbish-able, design and sourcing of new packaging for refurbished product, and inventory made available in real time for listing on various sales sites. The manufacturer did not want to be involved with the secondary market or the cost involved so RMI developed multiple secondary channels and including fulfilling the orders and updating inventory in real time.
This solution was built on a “Profit share” model that a much lower upfront cost structure for the manufacturer. RMI was fully transparent with costs and revenue a reconciliation was completed every 60 days.
In summary this solution had:
- Minimal upfront cost to implement the RMI solution
- Reduced inventory carrying charges
- Increased customer base
- Streamlined the secondary channel
- Generated new income stream
- On going profit improvement initiatives