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When Inventory Does Not Sell: The Cancellation Process in a Nutshell

Posted by Deb Alcorn on Thursday 19 Nov 15

*Last Updated: 4.17.2018

In the world of retail sometimes you have products that just don’t sell for whatever reason.  You might be trying to leverage the wrong sales channel, you might miss the prime season for selling, or maybe a competitor put out a better product.  Whatever the reason, inventory failing to sell is one of the primary drivers of co-op cancellation.  In this post we will detail the Kickfurther cancellation process and the Kickfurther liquidation service.

When inventory doesn’t sell on Kickfurther we leverage the same liquidation pipelines that traditional retailers use to try to recoup the maximum value in a reasonable time frame.  This includes working with wholesalers, liquidation websites, and collection agencies.  If a co-op is not performing as expected it will be flagged as troubled and the buyers on that co-op will have the opportunity to vote to cancel the consignment contract and push the co-op into our cancellation pipeline.

If 51% or more of the buyers, weighted by ownership, vote to cancel the co-op the cancellation process begins and follows the below process.

  1. Cure period - 15 days – When a co-op reaches cancellation we will inform the business owner by digital and physical mail of the formal cancellation of their consignment contract.  In the cure period they have 15 days to exercise the following options.
    1. Exercise option price (buyout the inventory)
    2. Provide proof of delivery of inventory
    3. Agree to KF settlement (6 month promissory note secured by a personal guarantee)
    4. Offer alternative settlement to buyers
  2. Review period – 15 days – After the cure period we will account for the various methods the business used to close out their consignment obligation to Kickfurther.  Any balance not accounted for through the above (a-d) methods will be sent to a collections agency.
  3. Collection period – 30 days + - For any settlement agreement made between the business and the buyers (c or d) Kickfurther will work to collect payment directly from the business for distribution to the buyers.  There is a 14-day grace period for payments to arrive, if any payments are later than this we may send the balance of the promissory note to collections.

We account for the value of co-ops that are in collections based on how delinquent on payments they are.  This gives everyone the ability to reasonably assess what their expected performance on Kickfurther will be.  It will follow the below guidelines.

  1. 0-30 days delinquent – 50% - As soon as a co-op is sent to collections we decrement the value of the co-op to 50%.
  2. 30-60 days delinquent – 25% - If attempts at collections are late by more than 30 days we will decrement the expected value of the outstanding balance to 25% of the total value.
  3. 60-90 days – 10% - If attempts at collections are late by more than 60 days we will decrement the expected value of the outstanding balance to 10% of the total value.
  4. 90+ days – 1% - If attempts at collections are late by more than 90 days we will decrement the expected value of the outstanding balance to 1% of the total value.

Inventory received in the cure will be governed by our liquidation process which is as follows.

  1. Delivery and retail period – 0-30 days – In the first 30 days buyers will have the following options.
    1. Sell discounted – We will list the inventory at a discounted price to give buyers the ability to sell and get first out sales on the inventory that has been delivered.
    2. Take delivery – Buyers can take delivery of the packs of inventory they originally purchased.
    3. Direct sale – Kickfurther will try to find a buyer at the option price to recoup payout of the co-op in full.
  2. Tally and wholesale period – 30-60 days – In the following 30-60 days Kickfurther will count the total remaining inventory and package it for sale on wholesale platforms like overstock.com or bstock.com.  The goal is for a 50% recovery of the cost of goods in this period.
  3. Liquidation period – 60+ days – If the inventory fails to sell in the above pipelines the inventory will be sold at any price through any means possible to recoup whatever is possible.

Costs associated with collections or liquidations will be paid out of collected funds before they are distributed to buyers.  Kickfurther will perform all the above service for free with the exception of the liquidation pipeline.  If Kickfurther liquidates the inventory in either the (2) wholesale period, or (3) liquidation period, a 10% service fee of the total recouped value will be charged to the buyers.  Buyers can avoid any fees by taking delivery, or exercising their right to sell the inventory through first out sales.

Below is a graphic that visualizes the above information.

Kickfurther Cancellation Process

Topics: Kickfurther News, Updates

Posted by Deb Alcorn on Thursday 19 Nov 15
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