Containers of products wait to be sorted and sold
What happens to the items shoppers return to the store?
For most retailers, sales peak in November and December, accounting for 20 per cent or more of annual revenue, according to the U.S.-based National Retail Federation. But for B.C.’s Big Box Outlet Store, Christmas arrives later. “The volume in January and February goes up by 50 per cent,” notes co-founder and president Mark Funk. “It’s the busiest two months of the year for us.”
Funk’s company purchases unwanted products—clothing, housewares, appliances, tools and more—from major retailers and resells them in its stores (12 in B.C. and three in California and Washington State). After the holidays, some are seasonal clearouts, but most are gifts returned by customers. Returns make up half of the business the rest of the year, too: merchandise shoppers didn’t want or that was damaged—for example, a lawnmower that doesn’t work properly. The repair staff will fix it or harvest parts.
In addition to returns, Big Box Outlet Store buys case lots that have been opened or are missing some contents and sells the items (bottles of water, tins of food, rolls of paper towels) individually. A five-pack box of, say, underwear that only contains four pairs will be discounted. The company also deals in discontinued, clearance and new goods, like furniture, which is profitable because it’s high-margin.
Funk sees a bright future for reverse logistics, or returning products to the supply chain. Chain retailers and big box stores have found working with reverse logistics specialists an important component of asset recovery, especially as the cost of handling the item in reverse can be four times what it cost to get it to marketplace, Funk explains. “We’re kind of unique. We process and retail at the same time.” While most in the industry move goods on to resellers, Big Box Outlet Store is the largest in Canada that has its own stores and a direct relationship with the initial retail chain.
Funk got his start in 1985, when he and Todd Friesen, then both 20 years old, borrowed from their fathers to acquire HB Distributors in Surrey for $80,000. The company had contracts with Canadian National Railway Co. and Overwaitea Food Group to buy and resell damaged merchandise. Within two years, they had repaid their dads and expanded the number of stores. Funk bought Friesen out 10 years ago, although he remains with the company.
Renamed MTF Price Matters in 2006 and Big Box Outlet Store in 2014, the operation now spends about $12 million a year on purchasing. Processing is labour-intensive. Boxes piled high with assorted products arrive at the 85,000-square-foot distribution centre in Langley, where some of the 192 warehouse staff enter the contents into the system, place it in trays and send it along a conveyor belt to be packed into boxes for shipment to Big Box’s retail outlets. Two trucks deliver to the Lower Mainland stores, and a semi-trailer to the Interior locations.
Waste is minimal. “Most of what we throw out is packaging,” says operations manager Jon Mackie. “If we deem something is not sellable in one of our retail stores, we’ll send it to a secondary auction”—like several treadmills that have been set aside. They’re a tough sell, Mackie admits. “Treadmills have one month of sales, and that’s about it—it’s January.”