B-Stock Solutions Case Studies Dispelling Myths About Recovery and Velocity

We operate private, online auction liquidation marketplaces for retailers and manufacturers About B-Stock Solutions

Introducing the Presenters Howard Rosenberg CEO Chuck Johnston Director of Repair & Returns Stan Dubbert Sr. Manager, Supply Chain Operations

Balanced Approach: Optimize velocity & recovery Velocity Gross Recovery Low Hi LowHi Sort, Refurb, B2C Large Liquidator, Truckloads Strategy

Both case studies: Relate to the recovery (R)/velocity (V) tradeoff Involved solutions to achieve recovery/velocity goals through better strategy Defy the myth that you can only improve recovery by sacrificing velocity (or improve V by sacrificing R) How Recovery / Velocity Impact Strategy

Recovery FocusedVelocity Focused Goal Maximize recovery Maximize speed of sale Strategy Sort / refurb & sell B2C Rely on negotiation with a few known B2B buyers, as needed Sell everything to a large liquidator Tactics Invest in sorting / refurb / B2C - customer service, facilities, man- hours, etc. ID some B2B buyers Meet with them to vet Distribute lists Negotiate deals each day/week ID a big buyer Meet with them to vet Negotiate a take all price Maintain relationship with buyer to keep them happy Trust condition grading Result Investment often not off-set by additional B2C recovery Builds a dependency on a few buyers Often velocity suffers as you focus on getting best price (buyer uses time to their advantage) Constantly worry about buyer going away Buyer constantly nagging for credits Total dependence on 1 or 2 buyers Despite deal – constant negotiation (“market not what it used to be”) How Recovery / Velocity Impact Strategy

2 Case Studies 2 different situations 2 different goals 2 different strategies

2 years up 2 years down WHY? The Problem: Velocity started to decline

The Result: Warehouse filling up. Buyers weren’t bidding – they weren’t even coming to the site. The Diagnosis Velocity Recovery Economic Competitor pricing A-Stock discounts Other

Goal: Bring buyers back to the site Promotional Listings Buyer Phone Calls The Solution: Better Auction Strategy Lower Starting Bid Prices

+529% The Results: Near record bidding activity

+269% The Results: Record lots sold

+236% The Results: Record sales (Velocity)

The Results: Trend line pricing (Recovery)

Problem: Velocity declining Impact: Warehouse filling up Solution: Optimize auction strategy Result: 236% increase in sales while maintaining recovery Take-Aways: Start price ≠ selling price Optimize strategy for LT goals Whirlpool Summary Velocity Recovery Strategy: Promotional campaign Lower starting bid prices (does not equal low final prices)

The Myth: Can’t Achieve Adequate Velocity w Auction Problem: Need to clear warehouse NOW Fear: Have to wait for auction to end, buyer to pay, and buyer to pick up Challenge: Develop solution that generates superior recovery AND requires no waiting - zero

The Solution: Cross-dock & warehouse solution Solution: Drop trailers and cross-docking solution near DC’s Trucks leave THD warehouse as soon as they are full This creates time for us to apply optimal strategy and not sell out of desperation

The Results: Significant Increase in Recovery Result: Inventory leaves immediately Does not force poor strategy choices Significantly increased velocity AND recovery “OK”“Great”“Awesome”“Wow!”

Problem: Limited warehouse space Typical Impact: Selling from position of weakness. ‘Fire-sale’…low prices Solution: Allow logistics changes to unlock strategy options Result: Increased BOTH recovery and velocity substantially Home Depot Summary Velocity Recovery Strategy: Drop trailers and cross-dock solution Measured pace of selling (don’t flood market)

Recovery & velocity for your customer returns are always correlated but they can be decoupled These two case studies debunk the myth that you always sacrifice one to benefit the other: 1.Optimizing strategy to accomplish a particular objective 2.Using logistics Executed properly velocity can be increased without creating a ‘fire-sale’ Overall Take-Aways