Retail

Amazon Chops Prices of Preowned, Open-Box Items

What happens when people buy products from Amazon.com Inc. (NASDAQ: AMZN) that they then returned, but in good condition? It resells them to get some revenue from inventory that is otherwise valueless. Amazon has become aggressive in dumping these items as part of a series of warehouse sales.

The Motley Fool recently pointed out the effects of inventory turnover:

A high inventory turnover rate means less inventory needs to be on-hand at any given time. This reduces the amount of capital tied up in inventory, as well as the space needed to store it. For example, imagine two stores that sell the same products and produce the same amount of sales each year. Store A only turns its inventory over once a year, while Store B turns it over twice a year. Store A needs enough space to store a full year’s worth of inventory, while Store B requires half the space. This leads Store A to have higher costs, lower margins, and since more capital is tied up in inventory, a lower return on invested capital.

Amazon turned over its inventory 16 times in 2004. That’s a quick pace for any retailer. Last year, Amazon’s inventory turnover rate was just 8, the result of a decade-long decline.

Likely for that reason, the Amazon inventory dumping program extends to items that are in boxes that have been opened. It makes the purchase of these attractive by offering the opportunity for customers to return them. An Amazon promotion reads:

Check out the latest Warehouse Deals for deep discounts on open-box, like-new, or pre-owned items complete with Amazon’s 30-day return policy.

The “used” items come from a very wide variety of products, including personal computers, home entertainment devices, smartphones, water heaters, vacuums and fitness tools.

Two examples of how the discount program works:

  • Among unlocked smartphones:

Huawei Nexus 6P Unlocked Smartphone, 64GB, US Warranty (Silver) by Huawei $458.15 used (8 offers)

  • And among computers:

Dell 15.6-Inch Gaming Laptop (6th Gen Intel Quad-Core i5-6300HQ Processor up to 3.2GHz, 8GB DDR3, 256GB SSD, Nvidia GeForce GTX 960M, by Dell $682.49 used (8 offers)

Amazon does not show what the items would cost new.

The plans show how Amazon is like many other retailers when it comes to lightly distressed inventory. Better to get something, even it if is less that Amazon paid for the item, that to let it gather dust and eventually be destroyed.

Better to sell dog food cheap …

GREENIES PILL POCKETS Treats for Dogs Chicken – Capsule Size 15.8 oz. 60 Treats by Greenies Pill Pockets $6.07 used (1 offer)

… than to throw it to the birds.