Goods that a retailer cannot resell are often sold in bulk to liquidators. The whole trade runs on uncertainty, and the prices at both ends reflect it.
Retailers sell problems rather than products
A returned item costs money to inspect, refurbish and relist, and for lower-value goods that cost can exceed what the item would fetch.
Selling the problem in bulk converts a processing cost into immediate cash, and frees warehouse space for goods that do earn their keep.
The retailer accepts a small fraction of retail value in exchange for the whole difficulty disappearing at once. The alternative is holding goods that lose value every week while consuming labour that could be spent on saleable stock.
Lots are sold with limited information
Stock is sold by pallet or truckload with a manifest listing contents, and manifests vary considerably in accuracy and detail.
Some lots are untested and unmanifested entirely, priced far lower because the buyer is accepting complete uncertainty about what arrives.
The buyer's expertise lies in estimating what a category of returns typically contains and bidding accordingly. Experience with a particular retailer's returns is worth more than any manifest, because return patterns are consistent over time.
The condition mix drives the economics
A typical lot contains working items, items needing minor attention, items missing parts and items that are genuinely broken.
The proportions vary by category, with apparel returns usually in better condition than electronics, where faults are a more common reason for return.
A liquidator's margin comes from sorting that mixture faster and more accurately than the price paid assumed.
Resale channels differ by condition
Working items reach online marketplaces or discount retailers, while items needing repair go to specialists or are broken down for parts.
Unsaleable goods are recycled or disposed of, which carries a cost that must be covered by the rest of the lot.
The channel mix determines whether the lot was bought well, and it is settled only after the sorting is complete.
What this means at the consumer end
Goods reaching shoppers through this route are cheap because the risk has been priced at every stage, not because the retailer was generous.
Warranty and return rights on liquidated goods differ from those on new stock and vary by jurisdiction, so the terms deserve reading before purchase.
The saving is genuine, and it is compensation for accepting some of the uncertainty that made the goods available in the first place.