Tips for Starting a Successful Liquidation Business

Liquidation businesses have been around for a very long time. Nevertheless, with the popularity of large e-commerce platforms like eBay and Amazon, the concept has grown exponentially. The idea behind liquidations is to find a retailer with excess inventory who is willing to part ways with merchandise at a discounted price. Generally, the best route is to look for liquidation wholesalers that deal with the retailers directly and collect overstock merchandise or customer-returned items. A prime example is to source a Walmart liquidation and purchase the products by the pallet or truckload. This provides access to a volume of items that buyers can resell at a profit using different types of sales avenues. However, before engaging in this type of activity, consider the following tips.

Know your vendor

There are a lot of websites that provide liquidation services and sell by the box, pallet, or truckload. Nevertheless, each is different, and one of the most important differences is in understanding the level of clarity in what is being offered. Some companies specialize in Amazon returns and market the merchandise as an “as is” item. Meaning, there are no guarantees in the working order or condition of the products. These are generally priced lower, given that there is a higher risk of malfunction. Other merchandise is sold as products pulled off the shelves.

These types of lots generally have higher prices, as they are more likely to be in good condition, except for minor presentation problems such as stickers or damaged packages. Regardless of what you opt for, be sure to understand the exact condition of the merchandise and purchase only from a reputable vendor. Also, asking why that merchandise was liquidated as-is will provide a clear depiction of the quality or condition.

When purchasing large lots, realize that they may require additional space to store and sort through. Consider additional office space for lease in Brisbane when purchasing large truckloads.

Know the product

Understand the type of product that you are purchasing. This is particularly important if you are looking to resell the item on eBay or Amazon. The reason is that some companies place restrictions on who can sell their brands, regardless of where the merchandise came from. For example, Amazon requires special permission to sell any Apple product. Therefore, before investing, look for any possible copyright restrictions. Otherwise, you may face barriers in selling those items. Overall, certain products will fall under trademark or patent restrictions which eBay and other sites takes seriously and protect. Continuing to list and sell items that are protected can result in an account suspension. Therefore, do your research before purchasing a lot.

Understand the costs

An additional part of knowing what you are buying and ultimately selling is to understand the underlying cost structure. There are several categories of costs that all entrepreneurs need to dominate in order to ensure that they are successful and profitable. The first is understanding the cost per item once shipped to the business location. The easiest way to calculate this is to add the shipping cost to the total cost of the lot and divide by the number of items purchased. This will provide a landed cost.

Another cost important to calculate is the shipping cost of the item to the end user. This includes hidden fees like listing costs, time, packaging material, boxes, and bubble wrap. Additionally, sellers need to account for payment costs such as Paypal fees (if using eBay) and commission fees for marketplaces, which are generally between 10 to 15 percent depending on the marketplace and product category. Once all the costs are added, the result will provide the total cost of goods sold (COGS). This information is useful for determining gross margin and can be a valuable indicator of whether it is worth pursuing the liquidated lot.