Tracking Returns To Retailers: Where Does It All Go?

When the great history of Seattle retailing is written, a footnote may be devoted to John Buller's tea bags.

Buller, senior vice president at The Bon Marche, was shopping in Asia years ago for goods to sell as part of the department store's ``Orient Express'' promotion. He spent $20,000 of company money for zillions of tea bags packaged in Orient Express boxes. Buller priced each box at $2.50 and thought he had a sales winner.

Instead, he had a turkey.

Nobody wanted Buller's tea bags. Nobody. It was as if each box was glued to the display table. ``It was a great idea whose time had not come,'' Buller says today.

Anxious to banish his turkey from The Bon's sales floor, Buller called jobbers, the salvage artists of the retail industry. Jobbers buy and resell merchandise that retailers want to unload. Jobbers bought the tea bags for about $5,000, and Buller moved on to more pleasant experiences.

If every item in every store was sold and kept by customers, Buller and others in retailing would have retired long ago as millionaires.

But not everything does sell.

Customers can be finicky. They buy something, take it home, change their mind and return it to the store. Sometimes, they discover defects in merchandise and want their money back. Sometimes they abuse the system by buying something like a dress with no intention of keeping it.

So where does all that returned or unwanted stuff go? And what about those Nordstrom shoes worn for days, scuffed and returned for a full refund? And what does Uncle Sam say about returning underwear?

Jobbers are just one part of an entire sub-industry involved in handling returns or merchandise that doesn't sell.

A return triggers a series of decisions by a retailer. Does it go back on the floor or somewhere else? If the item is in brand-new condition, the item goes back to the sales rack. If it's in used condition, federal and state consumer-protection laws dictate that retailers cannot sell it as new.

But deciding whether a garment has been worn or just tried on, many sales clerks say, is a fine line that is sometimes crossed in the name of profits. Used merchandise is often sold at a loss to jobbers or is sent back to the manufacturer.

Returned items can also end up going to a charity, a store's own discount outlet or an independent store specializing in used clothing.

Some items simply go to pieces: Surplus shoes are often ground up to make soles for new shoes.

Other stuff comes back to life.

Nordstrom, for instance, ``refinishes'' returned women's shoes. Scuffed shoes will be polished, given new soles and made into ``a like-new condition,'' according to Nordstrom. Those shoes are sent to the Rack stores, where Nordstrom sells much of its ``supplemental merchandise'' - big words for surplus or worn stuff. The shoes are offered at especially low prices and marked with a sticker indicating they were refinished.

For the savvy shopper, the anxiousness of retailers to unload goods creates bargains. A suit originally offered at a downtown department store for $600 sometimes can be found in a slightly rumpled form for $200 at a jobber's outlet such as Value Village, a national discount-store chain based in the Seattle area. The difference between the higher-priced suit and its cheaper cousin may be just a label, which is removed before sale by the jobber.

Remember what you have always been told about underwear?

You can't try it on or return it because of a FEDERAL LAW, clerks have always said. No one argues with Uncle Sam about underwear. Right?

In fact, there are no laws about trying on underwear or any wear. There are no laws about returning these items and no laws that would prevent a retailer from reselling returned underwear.

Robert Schroeder, assistant regional director of the Federal Trade Commission, said it's up to the states to regulate such things. As for stores selling returned underwear, he said: ``It seems like it's in bad taste, but it's not unlawful.''

Washington state has no laws, either. The city of Seattle has a 45-year-old law that regulates rented clothing - it requires that apparel must be disinfected between customers - but nothing else.

However, most retailers won't resell underwear or swimwear that has been returned under any circumstances, law or no law. Buller said The Bon will accept returns of such items, in most cases, but will not resell them unless they are in their original packaging.

The law does say that stores cannot offer as new any worn merchandise. That would be consumer fraud, said Rob Manifold of the Washington Attorney General's office.

Does it happen? Retailers say no, but several present and former Nordstrom employees said that returned goods they thought were unsuitable to be sold as new were sometimes retagged and put back on the racks.

Cathy McCabe, a former Nordstrom manager, says she and others sometimes put returned garments that they thought had been worn back on the shelves.

``There were no guidelines on what to sell again and what not to,'' said McCabe, who worked at three Puget Sound-area stores during 1988 and 1989 as a sales cashier and manager. ``Common sense dictated that if something was noticeably soiled or smelly, you would mark it `out of stock.' ''

``I was more apt to put (returned clothing) back on the floor as a manager than as a cashier,'' said McCabe, who added she quit Nordstrom because she was unhappy with her job. ``As a manager, it affected your bottom line if you marked it `out of stock.' ''

Returns marked ``out of stock'' count against a department's authorized purchases - and thus decreased available inventory to be sold, she said. Because of that, she said, ``it seemed like we leaned in favor of putting it back out.''

In a written statement provided in response to questions from The Times, Nordstrom denied that worn goods are offered as new to the public. The statement was provided to The Times by the public-relations agency, Elgin Syferd, which is handling media questions for the company.

As is common in retailing, said Nordstrom, some returned goods are refolded, pressed, retagged or repackaged for sale. Goods returned because of a minor defect, such as a missing button or loose threads, are fixed and put on the sales floor, the company said.

``If any merchandise is determined to be worn - more than the acceptable amount of trying on - it is Nordstrom policy that the merchandise be marked out of stock and disposed of either through jobbers or as `as is' merchandise at selected Rack stores,'' said Nordstrom. ``As is'' clothing with a slight amount of wear or minor defects has ``market value,'' Nordstrom said, but material marked ``out of stock'' shows greater wear or significant defects.

Nordstrom said it uses jobbers when merchandise is damaged, worn or defective and is not returned to the manufacturer. The merchandise is reduced to zero value on the company's books.

``As is'' merchandise is labeled as such and is not returnable, the company said.

In addition to carrying ``as is'' goods, the Rack carries main-store goods marked down 50 percent or more, slow-selling seasonal goods and merchandise purchased by the Rack's own team of buyers. Rack buyers may purchase items never found in main stores, Nordstrom said.

In a recent interview, Darrel Hume, vice president and general manager of Nordstrom stores in Washington, said worn goods are given to charity. Tim Doke, executive vice president of Elgin Syferd, said that was an error. Nordstrom stopped giving clothing to charities years ago, Doke said.

Paula Brantner Leas, a saleswoman in Nordstrom's downtown store, said stories of clerks putting used merchandise back on racks to be sold are ridiculous.

``In my 10 years' experience at Nordstrom, I've never even heard of a case where apparel that was worn was put back out on the sales floor,'' she said. ``If something is on the borderline and we're not sure whether it's been worn, we mark it `out of stock.' We'd never take a chance of alienating a customer,'' she said.

Dave Marriott, senior vice president of Elgin Syferd, said individual department managers are expected to train their employees on what returned apparel to resell and what to mark ``out of stock.''

Some of the questions about what Nordstrom does and doesn't do with clothing that has been worn may be answered by the Federal Trade Commission and government agencies in Washington, Oregon and California. These agencies are looking into allegations by the United Food & Commercial Workers union that Nordstrom sells apparel as new that employees have worn on the job. Nordstrom denies the charges.

Marriott contends that the consumer-fraud allegations were generated by the union as a bargaining tactic and lack credibility. The union and Nordstrom have been in contract negotiations since last July.

FTC officials won't comment on the case. Oregon officials say they have concluded a preliminary inquiry and have decided to launch an investigation. Officials in Washington and California say they have not decided whether to investigate more fully.

Washington keeps track of consumer complaints about retailers such as Nordstrom, The Bon and Frederick & Nelson. In the past five years, there have been no complaints to the state that any of the three retailers sold used merchandise as new.

Across Pine Street, The Bon Marche and Frederick & Nelson operate differently than Nordstrom in two important ways.

As department stores, The Bon and Frederick's sell much more than just clothing. They sell beds, couches, VCRs, food processors and more, not to mention clothes.

Second, at least half of returns to the department stores involve defects and are shipped back to the manufacturer, said Buller of The Bon. Electronic goods make up a large percentage of returns, he said.

If a radio doesn't work, the issue is simple, Buller said. The radio goes back to the manufacturer and the sales clerk hands the customer a replacement. Clothing returns are also fairly simple, he said.

But in household goods, the issues get complex. For example, a customer may buy dining-room furniture and nick the wood as he tries to install the set in his house. Does the customer get a cash refund for his own mistake? The Bon operates from a ``make-it-right policy.''

``Our associates are given authority to decide what it is to make a fair thing,'' Buller said.

Rather than selling hard goods to jobbers, the department stores try to convert unwanteds into wanteds the old-fashioned way - by cutting prices. Eventually, the price gets low enough for stuff to sell.

The Bon's damaged goods are often sold at warehouse sales, said John Farrington, general merchandise manager. Very little goes to charities, he said.

Some unwanted goods go back to the manufacturer even when free of defects, Buller said. The manufacturer may agree to accept the merchandise during negotiations with the store. In this area, there are no set practices, and what is acceptable this month may be unacceptable next month. (Suppliers complain that department stores browbeat them into accepting returns, but that's another story.)

``The relationship between the retailer and the manufacturer is a relationship of constant communication,'' Buller said.

At Value Village, it's a long way from downtown retailing. There are no thick carpets, well-dressed sales clerks and piped-in jazz. Instead, it's linoleum tile, wire hangers and humming tubes of fluorescent lighting.

You might say it all looks cheap, which is correct. It is very cheap.

There are 50 Value Villages in the United States and Canada, with 11 in greater Seattle, where the discount-store chain is headquartered.

Value Village is often the end of the line for clothing and other goods from big retailers. Bruce Reilly is general manager of purchasing for the chain. About 80 percent of the chain's merchandise is used goods purchased from charities, and nearly all of the remainder is obtained through purchases from retailers, Reilly said.

Reilly scours the nation for retailers in a hurry to unload goods. The items might be returns that are worn and cannot be put on sales racks. They might be turkeys like the Orient Express tea bags. Or they might be goods offered by retailers going out of business.

Goods sold at Value Village that were obtained from retailers are not offered as new, although sometimes they are virtually new except for a slight blemish or minor signs of wear, Reilly said.

Reilly regularly calls retailers, asking if they have goods to unload. Some retailers take those calls; others work from a list of regular jobbers. If the retailer wants to sell and the jobber wants to buy, an appointment is made, and the jobber goes to the store or its distribution center and makes a bid. Value Village bought goods from Nordstrom for 15 years, but the two companies recently ended their relationship amicably, said Reilly, who added his company decided it had enough suppliers. Nordstrom declines to name its jobbers.

A jobber like Reilly may show up to bid on refrigerators, shoes, suits - anything. Generally, Reilly pays a percentage of the last price offered to the public. The amount runs from 5 percent to 14 percent of the last price. Higher-quality goods usually command a higher percentage, he said.

Purchases are made with cash or cashier's check. One time Reilly handed over a cashier's check for $250,000 to a Midwest source for a large amount of household goods and clothing.

Jobbers never know in advance the size or quality of their next purchase.

For example, a retailer may want to dispose of men's suits that

originally were sold for $600. The number of suits offered to the jobber could be two or 2,000, Reilly said.

The jobber may bid an amount that averages out to as low as $40 per suit, although $84 would be more common. Some of the suits would be in such poor condition that Reilly would throw them away.

Retailers put a certain trust in jobbers, Reilly said. Retailers rely on them to live up to agreements to remove store labels or only sell the material at a distance from the retailer's stores. Some retailers will insist that jobbers cannot sell goods within 200 miles of the retailer's own stores.

Removing labels is key to protecting retailers from unscrupulous customers, Reilly said. Otherwise, a customer could buy an item for a fraction of its original retail price at Value Village and return it for a 100 percent refund at the store.

Like any retailer, Reilly wants his goods to sell fast and make room for the next batch.

If goods such as clothing are not sold within five weeks, Reilly starts slashing prices. ``If it doesn't sell, I rag it out,'' he said, explaining that the term has two meanings.

That old suit could go into the garbage, but that's a cost, so Reilly looks for the jobbers to jobbers - rag merchants, who buy old clothing as scrap at, say, 3 to 5 cents a pound.

Once designed for the shoulders of a banker or lawyer, that unwanted suit may go to a merchant here or in the Third World and come back as an oil rag.