When it comes to clearance furniture, consumers and retailers often find themselves at an impasse. Retailers want to sell it at a price that protects their profit margins, and consumers want to purchase it at a sum that reflects its status as “dead stock.” With neither party willing to budge, clearance furniture often winds up idling in warehouses or showrooms, wracking up hefty storage costs by the day. But what if there were a way for both parties to meet in the middle?

Dutch auction pricing offers this elusive middle ground. Its focus on gamified shopping experiences helps introduce playfulness and price flexibility to the selling process that engages consumers without forcing retailers to sacrifice their profit margins. 

Of course, the concept of Dutch auctions for clearance sales can seem entirely foreign (no pun intended) to most retailers, so let's break it down.

What is a Dutch auction, and how does it work?

The trademark feature of a Dutch auction is its use of a descending price model. In traditional auctions, prices gradually climb as buyers compete to outbid one another. However, in Dutch auctions, prices incrementally decrease until a buyer places a winning bid.

Here’s how a typical Dutch auction plays out:

1. The auctioneer sets a high starting price.
2. Consumers bid in their preferred price range.
3. The auctioneer incrementally reduces the price, awaiting a bid that falls into that range.
4. The highest bid in the new price range wins.

Because Dutch auctions end as soon as they find a bidder willing to accept the current price, they move much faster than their traditional counterparts. And this efficiency makes them ideal for selling items that need to be offloaded ASAP. Where high-value items like cars and fine art draw better prices from prolonged bidding wars, less expensive or perishable items typically fetch more value from a descending model. In fact, the model takes its name from the method Dutch flower traders have been using to sell tulips since the 1600s. 

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The benefits of using Dutch auction pricing to move clearance furniture

Tulip traders eager to offload their short-lived inventory aren’t the only ones who can benefit from this efficient pricing model. Dutch auctions can be a boon to another group in a similar time crunch: furniture retailers looking to move their dead stock.

It’s no secret that clearance furniture, like flowers, tends to leak value quickly. Not only do the costs of transporting and showcasing it erode already thin margins, but it often steals prime showroom space from full-price furniture. And, the longer it sits, the more of a cash drain it becomes.

Fortunately, Dutch auctions offer retailers the chance to part ways with their clearance furniture while it still has value. The pricing model specifically empowers them to:

Drive user engagement

Dutch auctions engage consumers by giving them a sense of pricing leeway. Although they still have to wait for the auctioneer to officially lower the price, they know their refusal to accept the current one has the power to drive it down. 

And this holds consumers’ attention. Unlike traditional furniture pricing models — whose one-way nature can instantly lose people — the gamified format of Dutch auctions resolves clearance’s consumer-retailer stalemate. With pricing now up for negotiation, consumers are much higher-intent.

Offload inventory quickly and profitably

While the flexibility of Dutch auction pricing earns consumers’ attention, its fast pace is what drives them to convert. Some people may hold out for a better deal, but others will feel the heat and bid at their maximum price point. Since it only takes one bid to end an auction, there’s always a strong possibility inventory will sell not just fast but at good margins.

Get a pulse on price sensitivities

It’s notoriously difficult for retailers to gauge how much consumers are willing to spend on clearance furniture. With only margin calculations and gut feelings to go off, they can easily guess wrong. But Dutch auctions offer a natural bounty of willingness-to-pay data.

Each winning bid is a peek into just how much (or little) consumers will pay for a given item. In fact, Google famously turned to a Dutch auction in 2004 to discover how to fairly price shares in its IPO. Retailers can likewise leverage the transparency of Dutch auctions to set pricing strategies that simultaneously appease consumers and improve bottom-line profits.

The drawbacks of using Dutch auction pricing to move clearance furniture

For furniture retailers at their wits’ end with their clearance inventory, Dutch auction pricing is an indisputably powerful lever to pull. But the model isn’t flawless, and there are a few hurdles that can keep retailers from adopting it:

Having to build complex software from scratch

Since the days of in-person Dutch auctions are mostly behind us (even for tulip sellers), any retailer looking to use this pricing model will need the proper software. However, building out a fully realized digital Dutch auction solution, complete with a back-end pricing engine and sleek bidding interface, would take a full engineering team tens of thousands of hours. Given clearance’s paltry margins, such an undertaking might be hard for some furniture retailers to justify.

Potential impact on brand equity

As empowering as Dutch auction pricing can be to consumers, its flexibility could threaten to undermine the value they associate with the brands that deploy it. After a few clearance purchases, consumers could start demanding that all furniture prices be negotiable and grow conditioned to only purchase on clearance.

Why SaySo’s end-to-end clearance platform is your Dutch auction cheat code

If you want to enjoy all the benefits of Dutch auctions minus any potential pitfalls, look no further than SaySo. With our clearance optimization platform, retailers can effortlessly offload their overstock inventory — without jeopardizing brand equity.

Our process is simple. We help retailers launch a co-branded Dutch auction storefront where they can showcase and sell their clearance furniture entirely online. Like most Dutch auctions, our gamified pricing model empowers sellers to set clearance prices that align with their target margins and their customers’ sensitivities. And, with pricing all sorted, retailers can move inventory much faster to prevent waste or warehouse pile-up.

But it doesn’t end there. To help you squeeze the most value out of your clearance furniture, we offer several additional benefits that regular Dutch auctions can’t provide. With SaySo, retailers also enjoy:

Markdown pricing and optimization software

Creating your own digital Dutch auction and pricing engine would be a hopelessly tall task. Fortunately, SaySo’s already done the work for you. In addition to building a bespoke, co-branded storefront, we also provide a back-end markdown pricing and optimization engine. This engine uses historical data to help you set initial asking prices — and then hovers in the background of every live auction, compiling even more data that you can use to optimize future pricing efforts. 

Although all Dutch auctions offer pricing discovery data, collecting it and then turning it into digestible insights would normally be a significant manual undertaking. But, with SaySo, you can instantly access pricing insights from every sales channel via a user-friendly dashboard. 

Margin and merchandising control 

Just because we build out the clearance storefront for you doesn’t mean you ever have to make any concessions that could cheapen your brand in the eyes of your customers. At SaySo, we ensure you retain complete control over everything from your merchandising to your minimum margins.

On the margin side of things, we enable you to set a reserve price on any auction listing, guaranteeing that no winning bid dips below a certain threshold.

Meanwhile, on the merchandising side, we seamlessly integrate with your existing product catalog to make your life easier and help you bring the branding your customers know to your clearance storefront. With your regular stock photography and product listings prominent in every auction, customers will never feel like they’ve wandered too far afield.

Both reserve pricing and merchandising control, in other words, work hard to keep brand equity intact. And there’s proof: Users of our co-branded storefront have a track record of heading over to our customer’s main site and buying more items at full price.

Reduced operational costs 

The cherry on top? Moving all your clearance operations to a digital auction storefront means you can cut down on all the normal costs of displaying and transporting your clearance inventory. Instead, you can simply store your overstock furniture in distribution centers until it sells.

This benefit was a gamechanger for Ashley Canada’s profit margins. Using SaySo’s Dutch auction model, the retailer overhauled its approach to clearance, resulting in a 20% reduction in transportation costs and a 6x ROAS boost.

Are you ready to turn your dead stock into a new revenue stream?

See what SaySo can do for your clearance inventory by booking a demo today.

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