It started 12 years ago with 6,000 leather waste baskets. Marty Shapiro purchased the baskets for $6 each and sold them for $8 at a trade show. He thought he might be on to something.
He was. This year he’s on track for $13 million in gross sales for his one-man company, Going, Going, Gone.
Shapiro is a middle man who “marries” manufacturers, mostly of beauty products, with discount retailers, to get rid of excess merchandise without taking a huge loss through a liquidator.
“Every single company has excess inventory that they would like to move, they just don’t know how, and they don’t want to focus on it until it becomes a real issue and it affects the cash flow,” said Shapiro, who works out of his Corte Madera home.
His business model is very simple, he said.
Say a nail polish manufacturer comes out with a new line of colors for spring and the winter colors start collecting dust in the warehouse. The manufacturer calls Shapiro, who finds a buyer for the nail polish, like T.J. Maxx, Marshalls, or Dollar Tree. He pays the manufacturer for the polish, marks the price up for his profit and bills the retail outlet.
“It’s a win for the manufacturer, a win for the retailer getting access to products they want at a great price, and it’s a win for the consumer paying less than [full] retail [price],” he said.
Shapiro deals mostly in beauty products because they have a high turnover rate. Nail polish changes with the season, and hair care manufacturers often change fragrance and packaging.
Last year, Shapiro moved 1 million units of nail polish. In an average week, he sells $60,000 in eyelashes, $330,000 in hair-care products and about $20,000 in nail polish.
Going, Going Gone typically has access to 4 million–10 million units of manufacturers’ excess product at any given time. As Shapiro doesn’t pay for the product until he has a buyer, he is not storing it in a warehouse. Rather, units are listed on spreadsheets he keeps in a binder. The retailer picks up or ships the product, and Shapiro never touches the goods.
Manufacturers are not typically set up to sell their own excess merchandise, he said. It takes too much work, and they don’t have the long-standing retail relationships like Shapiro does. And, they are paying their own sales staff to sell the current merchandise to regular customers.
So, the excess either ends up collecting dust in a warehouse, goes into the landfill, or gets sold to a liquidator for pennies on the dollar.
Shapiro knows what price retailers will or won’t pay, and tries at least get the cost of the product back for the manufacturer.
Bob Perry owns Hayashi For Hair in Highlands Ranch, Colo. The company manufactures shampoo, conditioner and other hair-care products.
Perry estimated that over the years Shapiro’s service has saved the small company hundreds of thousands of dollars. His only other alternative would be to sell the goods to a liquidator, he said.
“Liquidators are constantly harassing me. They will give you, literally, 2¢–5¢ cents on the dollar. I would take a real beating. I might as well throw it in the dumpster. Marty comes and saves the day. He’s good at moving that inventory, and we get the money out of what we have in the product,” he said.
EASING THE FLOW OF EXCESS INVENTORY
The key is to make the transaction easy for the manufacturer and the retailer, said Brett Rose, CEO of United National Consumer Suppliers. With 18 distribution warehouses around the country, Rose’s company does what Shapiro does on a larger scale. The company purchases excess inventory from manufacturers as well as retailers, and sells to discount stores, through Amazon.com and to other retailers.
United National pays about 50¢ on the dollar, which is less than what Shapiro pays, but is more than a liquidator would pay. Rose also said the success of the company is based on relationships he’s built over 15 years in business.
“The key is to ease their burden and make it easier,” he said.
Shapiro’s success rests in the strong relationships he’s built over the years as a long-time salesman and former senior vice president of sales for Lander. Lander, which went out of business, used to be the largest shampoo supplier in the world, shipping 100 million units per year.
Stu Collins owns a discount beauty store and a wholesale business in the Bronx, New York. He heard about Shapiro from a friend of a friend who met him at a trade show in Las Vegas.
He purchases about $40,000 worth of hair-care products from Shapiro each year.
“He’s in a league by himself. He’s very unique,” Collins said. “He has the patience and wherewithal to deal with all sides of the business. He understands business people and manufacturers and makes the marriage. He’s willing to do the hard work, and doesn’t seem to have an ego.”
Some manufacturers don’t want their excess products seen going for a low price on U.S. shelves at a low price, so Shapiro also sells to retailers abroad. He has sold nail polish to China, cosmetics to Africa and, once, five container loads of hair extensions to the U.K. He also found a buyer for 25 truckloads of Cadbury fondue makers in Canada.
‘CHANNEL CONFLICT’ RESOLUTION
Business at Going, Going, Gone is mostly word of mouth. Shapiro has no staff, no website, he said, because manufacturers typically have distribution channels they don’t want to upset.
It’s called “channel conflict.” That’s when a manufacturer bypasses normal channels of distribution, like selling over the internet while maintaining a physical distribution network. It can cost a company its distributor.
“It’s a double-edged sword,” Shapiro said. “Manufacturers want to get rid of this stuff but they don’t want to upset their regular distributor. So they give it to me at a special price, and I try to go under the radar so the distributor doesn’t see it. That’s why I don’t have a website. I do it quietly. On purpose I keep it lean and mean because I want to protect the manufacturer and make sure the distributors don’t get upset.”
Shapiro says he could double or triple his business within two years by adding salespeople, with all the retailers looking for product. But he chooses not to. Down the road he will probably sell the business, or it could even be turned into a franchise.
Cynthia Sweeney covers health care, hospitality, education, employment and business insurance. Reach her at Cynthia.Sweeney@busjrnl.com or call 707-521-4259.