Is There A Liquidation Market For This Stuff?

Spungen wrote about this a few days ago. But my audience is a little different than hers (although there is some overlap) so maybe Readers here can come up with their own ideas.

A while back, the firm got a judgment against a guy who runs a head shop -- a judgment for something like sixty grand. It's quite unlikely that the judgment debtor (who was foolish enough to sue our client and now must pay for the privilege of having lost) will ever voluntarily pay the money. Nor is he likely to ever have enough cash on hand to make a till tap* useful.

So our idea is that we'll seize the inventory and do a Sheriff's sale. But some of the material it's quite likely the police will not sell -- the bongs, pipes, clips, scales, and other paraphernalia obviously meant to assist with the consumption of drugs. And I don't think they're allowed to re-sell the tobacco and legitimately tobacco-related products, either. So that leaves the balance of the guy's inventory: tall stacks of pornographic DVD's and various sex toys like vibrators and love-gels.

Now, my great suspicion is that these products are sold with incredibly high retail markups. The demand curve for these products is high enough to make them relatively price-insensitive. I had a law clerk many years ago who had worked for a company that produced these movies, and his analysis of the business was that the entire cost of production for each movie -- the actors, the crew, the sets, the costs of the DVD's and the expense of burning them, taxes, fees, licenses, transportation, even craft services -- was recouped in the shipping and handling charges for direct-mail orders. Everything else was pure, sweet profit.

And it kind of has to be -- retail space, for any kind of product, is very expensive. How many tubes of Joy-Juice and copies of Sinful Sorority Secrets Volume XVIII** do you think the local adult novelty store sells in a week? I'd expect that most of the retail outlets selling these only move a few pieces of product a day in most markets. So one unit has to produce enough profit to justify all the shelf space that it and its copies take up, gathering dust until the manufacturer buys them back. The economics of porno requires a high markup for the business to be profitable for the retailer.

Because of that, I question whether we could even find a wholesale market for this stuff -- would some other adult products store be willing to take the product off our hands? They can get it so cheap at the wholesale level from their existing suppliers that it seems like they wouldn't pay enough at a Sheriff's auction to even recover the costs. (The deputy who oversees the seizure, the laborers who move the boxes, the cost of the storage, and the auctioneer's fee all have to be paid out of the proceeds of the sale.) And no one is willing to actually go to the incredibly time-consuming, bothersome, and generally icky extent of retailing this stuff ourselves.

So, Readers, I'm looking for one of two pieces of information. First -- am I wrong, and will there be a significant market of retailers who would show up to buy this product at auction prices? Second -- if I am right and an auction isn't going to recover the cost of the seizure and sale of the inventory, can we do anything profitable with it? (And no, we can't just give it to all of you without violating about nine hundred various state, federal, and probably international laws -- a huge amount of which have to do only with the payment of taxes -- about who can ship this sort of product through the mail.)

* I got to do a till tap once. Incredible fun. The Sheriff's deputy who got the job of executing my writ called me up and told me when to meet him at the retail store that owed my client money. We walked in together and went immediately to the manager, who was working the cash register. The deputy presented the writ to the manager and instructed him to open up the register. He took out all the bills, counted them out to me, and wrote the manager a receipt. As we walked out, a little kid pointed and said, "The lawyer and the cop just robbed the store!" The debtor paid the rest of his judgment by a check the next week.

** Sinful Sorority Secrets # XII was really the best of the series, so it's no wonder if Volume XVIII moves a little slower. Now that I think about it, there no doubt really is a series of videos called Sinful Sorority Secrets and I've just unwittingly violated someone's copyright while trying to crack a joke. Fair use! Fair use!