At the time of publication: Series A | Total funding raised: 25mn USD
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Excess inventory is a big problem in the world of retail because it locks up precious working capital.
Exact demand forecasting isn't possible. It is estimated that 55% inventory in Apparel and 50% inventory in Fashion accessories and more than 65% in Cosmetics is held for more than 180 days!
Even best-in-class retailers like Walmart and Target (known for their disciplined inventory management) have this problem.
Another big problem (especially) for online retailers is the significant value of returned items.
“…online returns more than doubled in 2020 from 2019 and are a major driver of the overall growth of returns. In 2020, ecommerce accounted for $565 billion or 14 percent of total U.S. retail sales. Approximately $102 billion of merchandise purchased online was returned, with $7.7 billion (7.5 percent) labeled as fraudulent.
The survey found that for every $1 billion in sales, the average retailer incurs $106 million in merchandise returns.”
Retailers have to try to liquidate this slow-moving inventory by offering big discounts to customers. But there is only so much you can sell to consumers and there are other considerations that come into play - for example, very steep discounts may affect a brand’s pricing power in the future.
Hence, they will then have to liquidate it by other means - by selling to other merchants or wholesalers who do not have stock of these items. But there are two problems here:
- Discovery problem: How do you find other merchants who will want to take up this inventory?
- Reputation problem: If a wider set of merchants know that a brand or retailer is liquidating then it doesn't look good and can hit the brand/retailer/manufacturer
Ghost is a US based startup that addresses the problem of excess inventory. Ghost helps in 'making your inventory disappear'.
It is a B2B 'private marketplace' that connects sellers of inventory with buyers of inventory. Verified and vetted sellers can list their inventory 'discreetly' - meaning the buyers wouldn't know the seller’s identity and vice versa. The sellers will have the privacy controls and this inventory listed does not appear in Google searches.
The inventory lots then go up for auction. The buyers (other businesses who need inventory) will place bids on the inventory lots and the highest bidder gets the inventory.
There are two very smart features in this solution approach:
1. It is a discrete private marketplace - Sellers would be more willing to offload their inventory to a wider base of buyers without a hit to their brand and reputation if they are able to sell excess inventory discreetly
2. Auctioning helps in getting the best yield for the excess inventory
Excess inventory is a massive problem in the ‘longer tail’ categories like apparel, footwear, fashion accessories but it is a significant problem in many other categories as well. Ghost has started with the Apparel category but eventually wants to be a multi-category inventory liquidation destination platform.
Techcrunch reports that they are seeing good volumes already and they had their $1mn GMV per day within 180 days of launch. There are going to be strong network effects as more sellers and buyers are added to the platform. And as more buyers are added to the platform, the auctioning mechanism ensures higher yield for the excess inventory. The startup has stellar founders - Josh Kaplan and Dee Murthy with wide experience in fashion and brands space.
To summarize: Ghost operates in a large market with a great solution approach to a very painful problem for its customers. It has huge potential to be the destination platform for getting the best out of excess inventory.