Ragtrader founder Fraser McEwing looks behind the curtain at imported closeouts.
In the days before the schmatta business took itself so seriously, the jobber was a popular figure.
In some ways he was the industry joker – although he didn’t get many laughs when he offered to take surplus stock off your hands for a fraction of its cost, uttering his oft repeated mantra as he patted your hand: “the first loss is the best loss.”
There were textile jobbers and there were garment jobbers.
They made a point of not dressing too well because it might suggest opulence, but inside their daggy clothes there was always a wad of cash – like WD-40 to loosen a rusty deal.
These colourful characters have largely gone as production has moved offshore, so that factory mistakes, late delivery or lack of buyer funds leave the dumped stock at its country of origin – sometimes sitting on a wharf.
Also in times of yore, some of our big apparel retailers were open to being offered imported closeouts. Target and Katies, for example, used to brighten their price attractions with a few racks of imported closeouts.
Momentum for this kind of business was lost as imports became cheaper through duty reductions and competition from emerging supply countries such as Bangladesh entering the market. In the penny-pinching world of budget garments, the price gap between new production (with up-to-date design) and job parcels narrowed to the point where there wasn’t enough difference to make buying closeouts worthwhile.
The importers of closeouts were choked off by increasingly sophisticated and self-important retailers, leaving day-market traders as the main buying group.
They had the disadvantage of not being able to get through the volume typical of overseas job parcels and wanting the goods to be as close as possible to zero in price.
Another factor in taking the shine off overseas closeouts has been the establishment of brand clearance centres such as DFOs. Even though many of their tenant retailers have morphed into offering near-regular priced goods in purposely unlovely surroundings, rather than real bargains from surplus stocks, consumers are still strongly attracted to them.
But the closeout business could be ready to make a comeback. An importer I know showed me just a few of the offers he gets via internet every day – and they are juicy, to say the least.
In his case, they are first quality goods from Chinese factories that value floor space more than goods that have been rejected. These goods are packed and ready to go. They are not production seconds with holes, haphazard leg lengths or funny shoulders. They come in commercial size and colour ranges. And their styling is current – although seldom avant-garde or even challenging. Moreover, to underline their veracity they often carry labels already desired and trusted in Australia.
A random selection received by my import contact on just one day revealed these offers:
• 6000 Jennifer Lauren pull on pants, four colours six sizes, cotton/polyester/spandex US$1.50
• 3000 Everlast stretch sports bras, five sizes US$1.15
• 5000 unbranded pocket dresses, horizontal stripes in red/white blue/white, five sizes $US1.80
• 13,000 rue 21 hoody jackets, fleecy lined, four colours, eight sizes US$2.50
• 13,950 Viv Collection stretch pants, five colours, four sizes poly/spandex US$2.30
• 17,776 Forever 21 tops, three styles, various polyester blends US$1.65
• 5000 H&M loose fit sweaters five colours, four sizes, US$2.50
• 9500 Forever 21 embroidered jeans, denim blue, seven sizes, US$2.20
• 5264 tie waist linen blend Capri pants, six sizes, three colours US$3.10
• 12,073 Mango fitted sweater dresses, three colours, three sizes, viscose/nylon US2.60
By now, these goods would have been sold because they don’t hang around for long. As a quick calculation, to arrive at a landed price in Australian dollars you take the USD price, add six per cent, and divide that by .71.
Thus, the first item on the list, the Jennifer Lauren pull on pant, would land at about A$2.24. If you needed to change the label you could add 15 cents to be on the safe side. And remember that many closeout parcels are subject to lower offers.
The label question has to be taken into account if you don’t want your tuchus sued off.
Selling garments carrying a locally available label (as a parallel import) comes up against the trademark law if that label is already registered in Australia – and that almost always applies.
A case heard in the Federal Court in 2012 between the brand Lonsdale and Pauls Retail (the parallel importer) went in favour of Lonsdale because it was a registered trademark in Australia and had not given Pauls permission to sell it. I couldn’t see the likes of Zara (whose rejected goods sometimes appear on closeout lists) allowing an Australian retailer to sully Zara’s brand with closeouts.
The success of dealing in closeouts is not just about raw price. Even if you stole a container of plain tee-shirts, you’d be up against Australian retailers offering competing goods at three dollars – which would virtually wipe out the chance of making a decent profit.
The key lies in the skill of an import specialist to assemble the right mix of quality, quantity, price and fashion. A good third-party provider (3PP) would earn his slim margin by monitoring the closeout market and putting together viable parcels for Australia. Accountant-driven retailers trying to do it themselves might come a cropper.
So much for the availability of closeouts. Apart from hard-doer market day-traders, who could retail goods like these? Did I hear the words Big W?
Now, there’s a thought.
They’ve got big retail ships drifting rudderless in the Sea of Budget and all their owners can think of is to scuttle 30 of them. What if Big W went full-on into closeouts? Every week would bring something new, something unexpected, something of unbelievable value - and plenty of it. The public loves a bargain and these closeout offers could well require crowd-control if they got going.
If Big W does pick up this idea, I expect a bronze bust of my good-self in the buying office foyer and shouted to a pub lunch. And the same goes for any other retailer who gets into it.