The bidding opens at 25 cents. High above our heads, two television screens light up with images of the next batch of goods up for sale: women’s underwear. There are frilly slips and glossy satin negligees, brightly colored panties of different sizes and, um, styles. “Lot number 26. Lote número veintiséis,” says the auctioneer, a thickly built man in a white polo shirt and camo-pattern cap. “Assorted”—his voice catches—”intimate clothing. Ropa íntima.”
I scan the four-page bid guide in my lap, which lists the condition of Lot 26: “Customer Returns/Devolución de Clientes.” Translation: Shoppers somewhere in the United States, probably at a big-box store or department store west of the Mississippi River, bought and then, for whatever reason, returned every one of these slips and bras and panties. The returned items were put on a truck headed for a warehouse, where they were unloaded, scanned into a computer database, then boxed up and sealed with shrink-wrap, loaded onto a different truck with other boxes, and shipped here, to Via Trading, the modern-day bazaar where I and about 50 others sit on plastic lawn chairs following the proceedings.
“There’s 327 units,” says the auctioneer, Luis Nuñez. “I’m looking for 20 cents a unit.” With that, the bidding begins.
It’s a hazy spring day in south Los Angeles. We stare out at a surfeit of junk, row after row of wooden pallets holding cardboard boxes the size of hot tubs. There are six-foot towers of Campbell Hausfeld air compressors and used flat-screen TVs packed into Huffy bicycle boxes and dozens of actual bicycles, themselves entombed in plastic wrap. Many of these are returned goods. Others are damaged or defective. Others still are shelf-pulls—products that failed to sell at the retail level and got cleared out to make way for the next season’s products. All of it must go.
Before the auction started, attendees walked among the pallets, inspecting them with the intensity of a livestock judge at the county fair, peering in the tops of boxes and through thick layers of plastic, trying to divine what’s inside. In some cases, it’s obvious: a stack of Hamilton Beach microwaves, an elliptical machine. Other boxes are crammed with random goods and labeled “assorted merchandise”—their contents a mystery. Bidding on one of these is a roll of the dice, as no one can know the condition of the items within until they’ve bought it.
“I have 25 cents,” Nuñez says, his tone gaining urgency. “Anybody have 30 cents? Treinta centavos? … Anybody have 40 cents? Forty cents a unit?”
An L.A. Metro car whines in the distance. The customers raise their paddles in a quiet competition to be the proud owner of 327 pieces of intimate clothing in indeterminate condition—a bidding war for pre-owned women’s underwear.
“Anybody have 75 cents? Setenta y cinco?”
A man seated to my right lifts his paddle.
“A dollar a unit. Anybody have a dollar? A dollar going once … a dollar going twice … sold.” For $245.25, bidder number 68 takes it. Nuñez moves on to the next lot: a box of belts, 504 in all. “Do I have 10 cents? Diez centavos?”
The auction lasts for several hours. Afterward, the bidders gather up their paddles and migrate to a nearby tent to pay. Laborers push pallet jacks stacked with goods out to the parking lot. The winning customers will spend the rest of the afternoon in the scorching heat tearing the plastic wrap off their pallets and carefully packing their goods into Ford trucks and Kia sedans and yellow moving vans—like a 3-D game of Tetris. Some customers have come from as far away as Utah and New Mexico, and after the day’s bargain-hunting and loading are done, they’ll pile back in their cars and make the long journey home.
If, like me, you’ve ever bought a pair of running shoes, or a blender, only later to decide that the shoes didn’t fit or you didn’t want the blender after all and so you returned them, then you are part of this story. Once you shipped back those shoes or walked that blender back into the store, you probably never thought of them again. What happens to the stuff we return? Where does it go? The answers open the doors to a world hidden in plain sight, an economic backwater flowing all around us: the market for misfit stuff. “It’s such an important part of the U.S. economy that nobody knows about,” says Dale Rogers, a supply-chains expert at Arizona State University.
Americans bought $5.4 trillion worth of stuff in 2015, according to the Census Bureau. In recent years, consumers have gotten wise to how our T-shirts and smartphones and running shoes get made. From sweatshop scandals in the sports-apparel industry to exposés revealing the brutal factory conditions of Apple contractors in China, we know more about the provenance of our products than at any time in modern history. Sustainability, fair trade, and ethical sourcing are now mainstream buzzwords. What gets vastly less attention is the other side of the equation: the chain of custody of the stuff we take back.
U.S. retailers pride themselves on their generous return policies. At Costco, I can buy a barbecue grill, cook on it all summer, then return it in the fall for a full refund. (Which is not to say that I would.) Or take the proverbial television bought for Super Bowl Sunday, then returned. The days leading up to professional football’s championship game see a huge spike in TV sales. And just as reliably, the days after the game see a spike in TVs returned to the store.
Returning stuff is an American pastime, a tradition even. The industry-wide consensus is that 8 to 10 percent of all goods bought in the U.S. will be returned. For online sales, the rate is much higher, in the range of 25 to 40 percent. Retailers see their return policies as a way to win loyal customers and undercut the competition. Some e-commerce companies make it so easy to send back used products that it can feel like they’re almost begging you to do it.
Returns are far less common in other countries. In Asia and Europe, less than 5 percent of purchases are returned. “It’s a very uniquely North American phenomenon,” says Charles Johnston, a former executive at Walmart and Home Depot who worked on the returns team. “If you go to Europe and other countries that Walmart is not in, most people don’t return. You go to Germany and it’s just not an expectation.” (The exception is the U.K., which behaves like us.)
For a long time, companies faced with the question of what to do with all that returned stuff had a simple answer: Throw it away. This work was largely done by an informal market of trash-hauling and salvaging enterprises, especially in and around major cities. It was a cash-only business built largely on relationships, and it had a reputation as a magnet for organized crime. “Remember on The Sopranos they had a trash-hauling business? Same deal,” says Rogers, the Arizona State professor, who has written extensively about the secondary-goods market.
Until recently, this market of misfit goods was largely an afterthought. At the company level, returns make up such a small percentage of business—Costco sells $116 billion annually in goods, and returns comprise just 1 or 2 percent of that, according to one well-informed secondary-goods seller I spoke with. So, it hasn’t made much sense for companies to devote time and resources to figuring out what to do with returned, overstocked, and unsold products. It was—and, in some cases, still is—done on an ad hoc, store-by-store basis. “If you’d gone around and asked retailers what they did with liquidation, they’d say, ‘Oh, I got a couple of guys I sell to,'” says Howard Rosenberg, founder of an online auction platform called B-Stock Solutions that retailers use to off-load goods. “‘Who took me to the baseball game this weekend? Maybe I’ll give them the big valuable lot this week.’ There was a lot of that.”
There aren’t many people who study what’s known in the industry as “reverse logistics” (forward logistics being manufacturing and shipping and sales—the part of the supply chain that comes before the customer enters the equation). But that’s not for lack of material. The secondary market is one of the fastest-growing segments of the U.S. economy. Two of the field’s most prominent experts are Dale Rogers and his son Zac.
Zac Rogers has studied the secondary market perhaps more than any other person alive. A supply-chains expert at Colorado State University who used to work in the returns department for a now-defunct Amazon subsidiary, Rogers describes the market as including wholesale and salvage dealers (like Via Trading), pawn shops, flea markets, factory outlets, online auctions (like eBay and B-Stock), value stores (like TJ Maxx), dollar stores (like Family Dollar), and charities—all destinations for returned goods and unwanted stuff that never sold at, say, Macy’s or Costco. Rogers calculated the size of the secondary market at $310 billion for 2008, the first year he started counting. Last year, he says, it totaled $554 billion—a 79 percent increase in eight years. Put in perspective, that’s 3 percent of U.S. gross domestic product and more than the GDPs of 175 countries, including Belgium and Sweden.
Several people I spoke to called it a “gray market”—existing somewhere beyond the more visible and more formal channels of commerce. The more I learned, the more the description seemed apt. There are fewer regulations and less oversight than you’d expect of a half-trillion-dollar industry, and what regulations exist are scattershot at best. Retailers and manufacturers do face scrutiny from federal agencies over how they ship and dispose of hazardous materials—from printers and batteries to fertilizer and pharmaceuticals. And 26 states currently have electronic waste (or e-waste) laws on their books requiring safe disposal of computers, TVs, and other electronics. At the local level, outlet stores and salvage warehouses are subject to the same laws and ordinances as any other business. But there’s little regulation focused squarely on the sprawling gray market where returned goods are batched, sold, and then sold again. The Consumer Product Safety Commission has guidelines on its website for reverse logistics that were last updated four years ago and, at 454 words, run the length of a short blog post. A search of the Federal Trade Commission’s website turns up zilch (though a spokesman said the 1914 law that created the commission is broad enough in scope to cover the reverse logistics business). When asked about federal oversight of this market, Irwin Jacobs, founder and chief executive officer of Minnesota-based Jacobs Trading, one of the country’s largest salvagers, said: “There is nobody in Washington.”
It wasn’t terribly hard finding academics and retired industry types who would talk about the secondary goods market, and they typically responded with a mix of excitement and surprise that an outsider had stumbled upon their obscure corner of the economy. I had a harder time getting information from actual buyers and sellers—those who make their living in this gray market of used goods. I called and visited dozens of stores around the country. I left many a message with a wary sales clerk or store manager and never heard back. One manager told me that outlet stores like hers were prohibited by most retailers from divulging where they got their goods. “We’re not able to say we sell Costco stuff,” she told me. “I could be fired.”
The major retailers themselves proved even less helpful. Most didn’t respond to my emails. Costco, a huge source of goods that flow into the returns economy, declined to participate in any way. The retailers, it seems, would prefer that these goods remain out of sight and out of mind.
Luis Nuñez leads me to a back corner of the Via Trading office. On the wall is a dry-erase board scribbled with numbers and diagrams from a recent employee-training event. He explains the various terms used to describe reverse logistics and the supply chain, but when I ask about the goods themselves, he says, “Dude, it’s junk.” One minute he’ll lament the “entitlement mentality” of Americans who take advantage of generous returns policies. In the next breath, he’ll talk about how his job is to help budding entrepreneurs find their footing and their slice of the American dream.
He walks me through the front office, past employees in black polo shirts pecking at keyboards. When we enter the warehouse, it hits me: I’ve never seen so much stuff. Endless rows of cardboard boxes on pallets, each tagged with an orange label. Huge banners hang from the ceiling announcing the various departments: “Baby/Infant Items—Artículos para bebés,” “Shoes!!! Zapatos!!!” The warehouse spans 240,000 square feet (with vertical storage racks throughout). The first area we visit is open to anyone off the street. “You can walk in,” Nuñez says, “and with 200 bucks, you take that pallet.”
He walks to a nearby box and pulls out a skateboard decorated with a skull graphic and the words Speed Demon. Other than a few scuff marks on the grip tape and the wheels, the skateboard is in fine shape. It couldn’t have been ridden more than two or three times. “Poor quality,” someone—presumably a returns department employee—has scribbled in pen on the weathered receipt scotch-taped to the top of the board. “Looks very old.”
“Seriously?” Nuñez says. “This is what a skateboard should look like.” He drops the board back into its box. “This is the thing I told you to think about—the entitlement mentality that us Americans have.”
As a wholesaler, Via Trading buys returned, excess, and defective goods from various department stores and big-box stores—the same ones you see replicated in shopping malls and strip malls across the country. The first five big-box store names that pop into your head are likely ones that Via buys from. But Via’s contracts with those companies forbid the use of their names in Via’s advertising. In fact, those contracts forbid Via from even mentioning them to this reporter. (This, I learned, is common practice throughout the secondary market.) Some of those contracts are specific: One of the big-box giants sends the majority of its returned children’s bicycles here, which explains the seemingly endless racks of bikes. No two retailers handle returns in the same way, Nuñez says. One retailer, a well-known department store, organizes its shipments by product and category, providing a manifest for each, while a leading discount store is more haphazard, packing a motley mix of goods into a Little Debbie box and slapping a label on it that reads General Merchandise.
We move on to Warehouse 2, where the goods are sold by the truckload—literally. I peer inside a box of blue jeans, one of a 14-pallet load with 13,677 different pieces of clothing that never sold. The retail value of this load is around $120,000. The wholesale value is $91,000. Via’s price for the entire load is $17,338.95, a discount of about 80 percent off of wholesale.
Later that afternoon, I meet up with another Via employee, Mike Stambouli, who is a cousin of Via co-founders Alain and Jacques Stambouli. A soccer buff with a bald head and long, thick beard, Mike Stambouli has a deep voice and a habit of a repeating the same word to make his point. When I ask about Via’s origins, he tells me that Alain and Jacques first opened a traditional retail store in 2002 on L.A.’s Pico Boulevard. But, as Mike tells it, “slowly, slowly, people were coming in and just wanting to buy more and more and asking for a bulk price.” The co-founders realized they could make more money selling returned or unwanted products wholesale than in a traditional retail setting. “The back of the store became wholesale,” he says, “and it slowly, slowly took over the front and then kept expanding, expanding, expanding, expanding.”
Today, Via employs 55 people and earns an estimated $50 million in annual revenue. Located just off the 105 freeway in Lynwood, a city tucked between Compton and Watts, it has customers in 129 countries and will ship to every nation except Cuba, Iran, and Mexico. (The latter surprised me, but Stambouli says the Mexican customs system is too complicated to deal with.) Via’s clientele, he says, range from local thrift-store owners and flea-market vendors to one of the largest eBay sellers in the country, the apparel shop BHFO.com. We’re standing at the back of the warehouse, near the bay doors where semi-trucks bearing the names of various big-box stores unload their goods, and where purchased goods get loaded into other trucks for shipping. Stambouli points to a 26-pallet load that’s awaiting shipment to Jamaica. The buyer never set foot in L.A., instead negotiating the deal with Stambouli via WhatsApp.
For the most part, however, Via’s customers visit the warehouse in person. They want to interact with people like Nuñez and Stambouli and get advice about what to buy and how to get the most for their buck. On the several occasions I visited, most of the customers were Latino, African American, or Middle Eastern; and the same looked to be true of Via’s workforce.
“It’s one of the only industries where you can never judge a book by its cover,” Stambouli tells me. A customer might show up dressed like he’s just stepped off a construction site—dirty pants, ripped jeans—hardly the typical picture of a big spender, and then he’ll drop a pile of cash and walk off with a truckload worth of stuff. The conventional wisdom about customers, Stambouli says, “goes out the window completely.”
In the parking lot after the auction I meet Epalle Nseke, a middle-aged man of Cameroonian descent who lives in Culver City and wears a green South L.A. Leopards T-shirt. Nseke says he came to the auction to buy goods to sell to people he knows back in Cameroon via eBay.
A short, energetic Latino man packing goods in to his truck will give only his email address. He tells me he runs a few outlet shops in downtown L.A. but won’t say more.
And then there is the man who introduces himself to me as Carlos Tienda (tienda being Spanish for store). His real name is Carlos Hernández, and he has gray hair combed slick back over his head and wears a teal polo that strains to cover his ample gut. There’s a pack of Marlboro Reds in one pocket and a Bluetooth headset in his right ear. A veteran of the jewelry business, Hernández says he came here because he was looking to start his own wholesale salvaging business down in Tijuana. He’d heard about Via from a friend and had just dropped several thousand dollars at the auction on TVs, clothing, and other assorted stuff.
Hernández told me that he runs several flea markets—the Spanish word is sobreruedas, which he helpfully wrote in my notebook with a purple-ink pen—in Tijuana, Ensenada, and Rosarito in Baja California. Hernández and I trade phone numbers and he tells me to come visit him sometime.
He says goodbye and I linger for a moment in the parking lot, pondering the interconnectedness of it all—the salvage company made possible by loose return policies, the thrift stores and flea markets made possible by the salvage company, the Latina woman and her nieces who do a brisk business selling tacos and flautas under a pop-up tent near the warehouse entrance, and the family that visits every day to collect excess cardboard for its recycling business. All of them part of a vast economic engine churning largely out of sight.
If this story has a point of origin, it may be the day in 1886 when a railway agent in Redwood Falls, Minnesota, came into possession of a shipment of gold watches. The watches had been sent to a local jeweler, but the jeweler didn’t want them, and offered to sell them to the agent for $12 apiece. The agent, a 22-year-old named Richard W. Sears, resold the watches to his fellow railroad employees for $14 apiece. Sears sold watches until he’d socked away $5,000. Then he moved to Chicago, met a local watchmaker named Alvah Roebuck, and, on September 16th, 1893, the two launched Sears, Roebuck and Co.
Richard Sears was not the first businessman to see opportunity in buying cast-off goods on the cheap and selling them above cost for a quick profit. (That business model is surely older than the Romans.) It was what the company did next that forever changed the retail experience. In 1903, Sears published a catalog (“Cheapest Supply House on Earth,” the cover proclaimed) that included, for the first time, a small but important proviso: “Your money back if you are not satisfied.” What made Sears a pioneer wasn’t just the wide array of goods for sale; it was this promise that any customer unsatisfied with his or her purchase could send it back and receive a refund. The satisfaction-guaranteed promise has been a fixture of American life ever since.
Seventy years later, Mark Charvat arrived at Sears headquarters outside of Chicago, having been hired to solve a problem that Richard Sears had created. It was 1976, and Charvat, then 23, had moved his family to Chicago to help run the company’s returns division and its outlet stores. Charvat, who caught the retail bug stocking shelves as a teenager at the locally owned grocer in his hometown of Pasadena, got promoted 12 times in 14 years at Sears and was on the fast track to the C-suite job he’d thought he wanted. But he grew bored, and found the internal politics of corporate life unbearable. He quit, moved the family back to California, and worked for his mother-in-law’s estate-sale business. Money was tight, credit tighter. It took an act of god, he now says, to finally launch his own retail career.
One day in June of 1996, Charvat got a call from a contractor he knew. A mall in North Hollywood that was damaged in the Northridge earthquake was due to be razed. Its stores were getting rid of their merchandise, and the Charvats agreed to buy some of it. On the appointed day, Mark’s wife, Julie, found a moving crew and drove straight into the shuttered mall, backing the truck up to each store. Mark was in Alaska at the time, and when he got back, Julie took him to their rented warehouse and threw open the doors. It was wall to wall with retail goods, half of the North Hollywood Mall stacked on wooden pallets. “I guess our business just changed,” Mark said to her.
On a hot weekday morning, I visit Mark Charvat at a pair of warehouses in Irwindale, a small city at the base of the San Gabriel Mountains. In the ’90s, Mark and Julie ended up turning Estate Liquidation Services, their estate-sale business, into a retail business, opening a small store called The Outlet by E.L.S. (the initials a nod to their original company). In two decades, Outlet by E.L.S. had grown rapidly, occupying three successively larger spaces—the current location includes a 40,000-square-foot store in nearby Azusa. Like Via Trading, Charvat buys returned and overstock products from big-box retailers and discount stores, the names of which he, too, is obliged to withhold. Unlike Via Trading, however, he unpacks the goods, cleans them up, and sells them individually on store shelves like the ones you find in a Target or a Kmart.
Charvat is warm and welcoming, with an easy, unflappable air about him. Spend 10 minutes with him and you’ll feel like you’ve known him for years. Many of his employees have worked for him for years, some for decades, and with his grown sons now running the warehouse, the business has a distinctly familial vibe to it. We tour the two warehouses, which receive six to 10 truckloads a week, mostly returned goods arriving from across the Southwest and from as far as Florida and Pennsylvania. E.L.S. has about 40 people on staff to repair and repackage the goods before they’re shipped to the store. We talk to five middle-aged Hispanic women in T-shirts and blue latex gloves who knock dents out of banged-up boxes of dishwasher detergent pods. Other employees tinker with products like furniture and kitchen appliances; at one time, Charvat had a full-time crew of three dedicated to fixing vacuum cleaners. “We check them,” he says. “Make sure they work. We repackage them and we guarantee them.”
It’s a short drive from the warehouse to the store itself. With its mix of unopened and opened goods, some dented and scuffed, others brand new, you wouldn’t mistake Outlet by E.L.S. for a Best Buy or a Macy’s. But it’s the nicest outlet store I’ve seen. And from all indications, it has a cult-like following. Charvat never advertises—no newspaper ads, no radio, no online. He has an email list of some 20,000 people that he blasts every week to announce new products and upcoming sales. On a Saturday during a major clearance event, business will be so heavy that customers have to wait for two hours or more in the checkout line.
Charvat says his customers run the gamut, from the bargain hunters who get a thrill out of finding great deals to the shoppers of limited means who can stretch their few dollars at an outlet store like E.L.S. In the time I spent there, I saw big families, a mother-daughter pairing, and lots of solo shoppers of all different ages, races, and ethnicities. Charvat says he knows millionaires who shop at his store, and he knows homeless people who come to buy strollers for hauling their belongings around. For down-on-their-luck customers, he’ll occasionally just give stuff away.
Charvat talks about his customers and, especially, his employees on a first-name basis, as if they were friends or even family. He knows how many of his regulars have died since he’s been in business. He tells me a story of a friend who had worked for the California Highway Patrol who called him one day and asked if he had any work for a fellow retired patrolman. Mike Veal cut an imposing figure, standing 6-foot-6 with the hulking build of a former cop and star football player. Charvat made him the store greeter and security guard. Veal was a hit; customers loved him. “He became the face of our company,” Charvat says.
When Veal died earlier this year, the family asked Charvat to be a pallbearer at the funeral. As he found his seat in the chapel in central L.A., he realized that the majority of the people in attendance were Outlet by E.L.S. employees and customers; one customer even gave a eulogy. She described how she and Veal had struck up a friendship at the store and supported each other as they each battled health problems. “I’m sitting here listening like, God dang,” Charvat tells me. “This is all going on in my store.”
In the past five years, Outlet by E.L.S. increased its sales by 88 percent, Charvat says. At the time of my visit, the store had improved by 10.2 percent on its numbers from the year before. But when I ask him about future plans—a bigger store, a second store, a greater online presence—Charvat demurs. He’s 62 years old, has worked in sales his entire life, and wants to fish more. He’s leaving those decisions to his two sons, who will likely take over the business when Mark and Julie retire.
The Outlet by E.L.S. will never rival Costco or Walmart. But it’s impressive in its own quiet way, an American success story cobbled together out of people’s unwanted stuff.
If you spend time in small and mid-sized cities and in the suburbs ringing big cities, you’ll witness the demise of the brick-and-mortar store. Empty storefronts and ghostly, hollowed-out shopping centers are an all-too-common sight. One in four malls in America will shutter within five years, according to a recent analysis by Credit Suisse. They’re calling it the “retailpocalypse.”
The brick-and-mortar stores that are succeeding are in the outlet or overstock side of the business. According to the commercial real-estate and analytics firm CoStar, five of the 10 U.S. retail companies that added the most square footage in the first half of 2016 were so-called value stores: Dollar General, Family Dollar, Dollar Tree, Marshalls, and TJ Maxx. During the Great Recession, customers started doing more of their shopping at dollar stores and outlets, and those habits stuck after the recession ended. Consider that there are now more Nordstrom Rack stores than there are Nordstroms, and Macy’s recently launched Macy’s Backstage to compete with Nordstrom Rack. KKR, the New York-based private-equity giant that symbolized the 1980s leveraged-buyout craze, recently invested in a Mississippi-based reverse logistics company that runs “extreme value” stores named Dirt Cheap and Treasure Hunt.
Investors see dollar stores and outlet shops as a rare bright spot in retail. Meanwhile, major retailers, faced with tightening margins, are looking to squeeze every dollar out of their businesses. “All those clothes sitting at TJ Maxx and Ross, those were clothes that were sitting on the rack at Macy’s,” says Colorado State’s Zac Rogers. He sums up the thinking of a Macy’s choosing to open its own outlet chain: “We can let somebody else cannibalize our business, or we can do it ourselves.”
As it grows, the market for misfit goods is organizing and formalizing. I saw the changes as I went around the country talking to salvagers and wholesalers and small-scale retailers moving into this burgeoning space. According to two wholesale-store owners who work with Costco, the retail giant recently announced that it was moving to a centralized returns system—overstock sellers will no longer contract with individual Costco stores as they have for years, but instead will need to go through Costco’s corporate office. They’ll also have to start paying for shipping—a new and, for some, daunting prospect. It’s a change that could kill off smaller operators who have relied on Costco contracts, but it could end up benefiting larger players, like Mark Charvat, who handle bigger volumes of goods.
(Photo: The Voorhes)
The rise of online services like B-Stock Solutions—the auction site that works with retailers large and small to get the most money for their excess product—also has the potential to overtake the physical businesses that have dominated the salvage market for decades. When I spoke to Howard Rosenberg, the former eBay executive who co-founded B-Stock, he told me his company ran 45 individual online marketplaces for major clients (including Costco, Walmart, and Home Depot) and that another 600 to 700 smaller businesses are using his B-Stock platform to offload leftover products.
These changes may require some businesses to alter their sourcing models. Yet the overall amount of goods entering the misfit market is only poised to grow. Return rates for e-commerce are three to four times greater than for physical stores, and while e-commerce now makes up 9 percent of all retail sales, that figure is also expected to grow in the years to come. The only question is how fast online stores will overtake traditional brick-and-mortar ones. There’s no indication that the big online companies plan to tighten their generous return policies. Nor are shoppers likely to stop buying a shirt in three different sizes or colors and sending back the ones they don’t want.
So the secondary market is adapting. Via Trading has already contracted with an up-and-coming online home-goods store. Mark Charvat dipped a toe in the water with the purchase of a few pallets of returns from one of the world’s largest online retailers (again, he can’t say which). The shipment, he says, was a mess, missing units and in poor shape—evidence that even the mightiest of retailers was still trying to figure out what to do with the deluge of returned goods. As the business changes, Charvat says he can never know for sure what will arrive from his suppliers, but for him, that’s part of the joy of the job. “We lose TVs? No problem: I’ll turn it into a patio-furniture department. No patio furniture? I’ll make it clothes. Not enough clothes? I’ll make it exercise equipment.” If it arrives in decent enough shape, he can find it a home.
This kind of improvisation is part of why Charvat’s business is growing. That his store fills a niche and a need says a great deal about how we live now and how our economy is changing. Overstock stores and outlets malls and wholesalers are no longer the fallback in times of uncertainty. For many Americans, economic uncertainty is now the norm, each paycheck stretched to the limit, the prospect of financial ruin never far off. The gray market of misfit stuff helps many Americans get by.
But this is also a story of opportunity and ingenuity, craftiness and chance. Where else do flea market impresarios compete with multi-billion-dollar private-equity firms, publicly traded corporations, and immigrants selling goods on eBay?
No other people in the world casually toss off as much stuff as we do. And so thousands of people scratch together a business, and sometimes a livelihood, from the excess. The worst of our impulses thrown together with the best. You pick through the pile and you roll the dice once more, certain in the belief that it’s possible to make something out of someone else’s nothing.
A version of this story originally appeared in the November 2017 issue of Pacific Standard.
