.INDIANAPOLIS — Ohio businessman Mufeed Alkhalifa has a good thing going in West Africa.
West Africans need cheap TVs and are willing to pay cash. Alkhalifa knows where to buy used TVs and has a middleman to do the shipping.
His source: a suburban Indianapolis warehouse whose owner is a big player in the thriving returns market. It's a market where billions of dollars of unwanted goods a year get recycled and quickly resold, usually within 30 days.
Almost every week Alkhalifa drives one of his company's two box trucks from central Ohio to a Plainfield, Ind., warehouse owned by a company with the apt name of Liquidity Services.
Last week the Saudi emigree paced just inside the dock doors. He was waiting for a forklift driver to haul out the latest items he'd bought at auction from somewhere in the building's vast reaches. "Today I'm picking up TVs, nine or 10 transactions," said Alkhalifa, who's been in the resale business three years.
Most people don't think about where returned merchandise goes. Suffice it say that much of it doesn't end up back on the seller's shelves or its online inventory.
The reason: Retailers don't have the time or ability to resell all those returned items — especially when they're out of their original packaging and show signs of being used. Electronic devices in particular are tough to resell as new. They get nicked or damaged once unpacked and often were programmed by the buyer or had personal information put into their memories.
So the returns market is awash in TVs, computers, cellphones and accessories, plus almost every non-electronic consumer good you can imagine. Even nonperishable foods, like energy bars or protein powder, make their way into the resale market.
Returns are especially heavy now, after Christmas.
"I'll just show you some," said Karen Ling, general manager at the Plainfield warehouse.
She beelines for the inbound dock, avoiding beeping forklifts. Like everyone else working in the hard-to-heat warehouse, she wears a heavy sweater or coat. "We don't even know what's in these boxes yet," she said, gesturing to dozens of pallets holding newly dropped off returns.
The answer comes on the processing line, where contents of incoming boxes are sorted by some of the warehouse's 125 employees (up from 100 during less-busy months). Every item is scrutinized, categorized and affixed with a computer bar code to track it. Ling peers in one box. It holds a sheet set, razors and automobile parts, among other stuff.
So heavy is the flow of returns and excess inventory that it's not cost-effective to resell items individually, or even by lot. So items coming from the sorting line are tossed in boxes until the accumulated retail value comes to around $1,500. A photo is then taken of the top layer of items in the box, plus three randomly selected items, before the box is sealed and stored to await its sale at auction.
Electronic items do get special handling and are typically sold in lots of similar products. They must be wiped clean of any personal information and tested to be sure they work.
(Employees are forbidden from participating in Liquidity's auctions. They know too much about the boxes' contents.)
Jenny Eggert went to work at Liquidity Services after 16 years as a stay-at-home mom. Most days she finds herself testing game systems. She puts each game through three minutes of play, wipes any personal information from the machine, and neatly repackages its cord and other parts in a box to prepare it for resale.
"It's a very interesting job," said Eggert, who stands up at a cluttered workbench to do her work. "I really enjoy it. It's almost like Christmas every day."
It also shows the labor-intensive nature of the returns business. Eggert is able to process only about 20 used game systems a day.
Liquidity Services doesn't like to reveal names of the retailers it works with, but says it handles returns for seven of the top 10 U.S. retailers. Its competitors include Pittsburgh-based Genco and Westerville, Ohio-based Excel, which is owned by Germany's Deutsche Post DHL.
There's plenty of business for them all. Liquidity estimates that U.S. consumers returned a record $283 billion in merchandise in 2014.
A publicly traded company based in Washington, D.C., Liquidity does its resales via online auctions or straight sales at its websites liquidity.com and secondipity.com.
USA TODAY
Returning gifts gets easier . . . and harder
Liquidity's vice president of e-commerce, Jeff Rechtzigel, who works out of the Plainfield warehouse, ticks off a few reasons for the rise in returns: Consumers are more demanding in their wants, retailers offer more lenient return policies and it's easier than ever to ship items back through the mail.
The ability of companies like Liquidity to get decent prices for resold items also makes retailers more willing to put up with returns. "We're able to drive higher and higher recovery for those products" thanks to the online sales, Rechtzigel said.
Liquidity's auctions typically run for 48 hours and attract anywhere from one or two bidders to several dozen. The company's list of registered bidders has grown to 2.6 million. Most are small businesses that rely on Liquidity and other "reverse logistics" companies for product.
The returns industry has thus become a vast online market for bargains.
Liquidity's auction sites last week were brimming with cut-rate deals. Like a box of seven Ryobi and Dewalt tools, including a gas generator and a table saw, that retailed for $1,624 and sported a high bid of just $339. Or 15 pounds of 320 name-brand cosmetics units, including eyeliner, powder, nail polish and lipstick, that drew 12 bids and sold for the minimum set price of $185.
Alkhalifa, the Ohio wholesaler, said he's built his business, M&J Grove City, using items he buys from Liquidity and one or two other salvage companies. In a normal week, he said, he buys 10 to 25 pallet-loads of salvage items.
"We all depend on these guys," he said. "If they don't have it, we're out of business."
Liquidity is betting that returns will remain a big part of the U.S. retailing scene.
The company is expanding its warehouse network from five to seven by adding locations in Canada and Las Vegas. And the 185,000-square-foot Plainfield warehouse, which opened eight years ago, recently was outfitted with 40% more storage racks to handle all that stuff from the inbound docks.