As inventory accumulates, liquid warehouses are in operation.

Pittston, Pa. But today, in a huge warehouse in northeastern Pennsylvania, shiny new Huffys and Schwinns are available at huge discounts.

The same goes for patio furniture, garden hoses, and portable pizza ovens. There are indoor spas, Rachael Ray non-stick pans and a backyard fire pit, which promises to make “memories every day.”

The warehouse is managed by Liquidity Services, a company that collects profits and resells them from major retailers such as Target and Amazon, often selling for dollars. The facility opened last November and is operating at an exceptionally high volume for this year.

The warehouse provides a financial window into the retail industry and the broader economy: After two years of consumer spending — fueled by government checks and the ease of e-commerce — a grim hangover is emerging.

As consumers cut back on impulse purchases due to high inflation, retailers are now stuck with more inventory than they need. While overall spending rose last month, some major retailers say shoppers are buying less clothing, gardening and electronics and focusing instead on basics like food and gas.

Adding to that gluttony is the fact that people bought everything online during the pandemic — often online — and then returned it. In the year Consumers will return an average of 16.6 percent of their purchases in 2021, up from 10.6 percent in 2020 and more than double the amount in 2019, according to the National Retail Federation, a trade group and Aprice retail, software and analytics firm.

Last year’s revenue, which retailers couldn’t always resell themselves, totaled $761 billion in lost sales. That’s more than the annual budget for the US Department of Defense, the retail federation said.

It is becoming increasingly clear that retailers have badly miscalculated supply and demand. Their miscalculation was partly caused by supply chain delays, which prompted companies to wait for products ahead of time. Then, there’s the natural cycle of booms — whether through optimism or greed, companies rarely pull back before it’s too late.

Liquid Services chief commercial officer JD Daunt said: “It’s somewhat surprising to me that we’re seeing all this buying activity and we can’t see it ever ending. An interview in a Pennsylvania warehouse earlier this month.

“You would think there would be enough information and enough history to see this a little more clearly,” he added. But it also suggests that the times are changing, and changing rapidly and dramatically.

Strong consumer spending may have saved the economy from collapse during the pandemic, but it also led to huge profits and losses.

Retailers are starting to offer discounts on inventory in their stores and online. Last Monday, Walmart issued the latest warning to the industry when it said its operating profit would fall sharply this year due to lower prices on general merchandise.

Many companies can’t afford to keep discounted items on their shelves because they need to make room for new, seasonal items and essentials that consumers choose now. While some retailers are cutting back on their in-store margins, many avoid holding big sales for fear of damaging their brands by keeping price cuts as a rule. So retailers look to liquidators to do that dirty work.

Additionally, industry executives say the glut is so large that some retailers may run out of space to house it all.

“It’s unprecedented,” said Chuck Johnston, a former Walmart executive who is now chief strategy officer at goTRG, a firm that helps retailers manage returns. “I’ve never seen the kind of pressure I’m seeing right now in terms of excess inventory.”

So, much of the industry’s flotsam and jetsam washes up in warehouses like this one, just off Interstate 81, a few exits from the President Biden Expressway in the president’s hometown of Scranton.

The massive facility is part of an industrial park built over a reclaimed strip mine when the region was a major coal producer. Today, the local economy is home to dozens of e-commerce warehouses like giant spaceships, packing goods to population centers in New York and Philadelphia.

In the year Founded in 1999, Liquidity Services, a publicly traded company, decided to open its new facility as close as possible to the Scranton area’s major e-commerce warehouses, making it easier for retailers to ship their unwanted and returned items.

Even before the inventory hit this spring, returns were a big problem for retailers. The dramatic increase in e-commerce sales during the pandemic — a more than 40 percent increase in 2020 from last year — has only added to it.

The National Retail Federation and Aprice Retail reported that more than 10 percent of returns last year involved fraud, which includes sending back clothing or stealing items from stores and returning them with false receipts. But at a fundamental level, industry analysts say the rising profits reflect consumer expectations that everything can be taken back.

“It’s getting worse and worse,” Mr Johnston said.

Some returns and surplus items are donated to charities or returned to manufacturers. Others are recycled, buried in landfills or burned in incinerators that generate electricity.

Liquidators, they say, provide a more environmentally responsible alternative by finding new buyers and markets for unwanted products, both those that are returned and those that were not purchased in the first place. “We’re reducing our carbon footprint,” said Tony Sciarrotta, executive director of the Reverse Logistics Association, an industry trade group. But it’s still too much to go to landfills.

Retailers will probably only receive a fraction of the original value of the goods from the bankrupts, but it makes more sense to take the loss and get the goods off the shelves quickly.

Still, filtering can be a sensitive topic for large companies that want their customers to focus on their “A-products,” not failures.

Mr. Sciarrotta calls it the “dark side” of retail.

During a tour of the Pennsylvania warehouse, Mr. Daunt and warehouse manager Trevor Morgan said they were not allowed to discuss where the products came from. But it wasn’t hard to figure out.

The 85-inch flat-screen TV still had the Amazon Prime sticker on the box. Bathroom fixtures came from Home Depot. It was a “home theater” memory foam futon with a built-in cup holder from Walmart’s return center.

Several unopened boxes on the warehouse floor bore the familiar Target bullseye logo. An air fryer with a swimming pool, elevator and home office, a baby carriage and a towering Barbie’s “Dream House” stack. (Even Barbie seems tired of working from home.)

The company was the darling of Wall Street when Target’s sales exploded in the first year of the outbreak. But in May, it was revealed that the retailer was stuck with limited supplies and the company’s share price fell 25 percent overnight. Share prices of other retailers also fell.

The failure of the target was an opportunity for people like Walter Crowley.

Mr. Crowley regularly rents a U-Haul and drives back and forth from his home near Binghamton, NY, to the liquid warehouse.

Mr. Crowley, who turns 54 next month, focuses mostly on discounted home improvement products that he sells to local contractors, such as discontinued garage door openers, tiles and flooring.

But on a blustery day earlier this month, he parked outside a warehouse in a U-Haul as he loaded up items from Target.

“I see the stock tanked,” said Mr. Crowley, a cigarette dangling from his mouth and sweat streaming down his face. “It’s a bad situation for them.”

He bought several beds, a sheet for his own house, and a pink castle for a 5-year-old girl in their neighborhood.

“To be honest, I give a lot to my neighbors,” he said. “Some people rarely get it.”

After purchasing the items through the online auctions, the buyers drive to the warehouse to collect their winnings.

It’s a diverse group. There was a science teacher who stockpiled plastic parts for her classroom — neon green igloo coolers, a table saw, baby pajamas — from Haitian and Jamaican communities in New York, and a woman who plans to resell her purchases. She ships other goods to Trinidad.

The Pennsylvania warehouse, one of eight that Liquidity Service operates across the country, employs about 20 people, some of whom are temporary. The starting wage is $17.50 an hour.

Charles Benincasa, 39, is a temporary worker who has worked several “warehouse” jobs, most recently at Chewy’s pet food distribution center in nearby Wilkes-Barre.

Mr. Benincasa said his friends and family have had the experience of returning most of the items they bought online. But as he watches the boxes pile up in Liquid Services’ warehouse, he worries about the implications for the economy.

“Companies are losing a lot of money,” he said. “There is no free lunch.”

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