Sourcing The Secondary Market - Buying Liquidations, Overstocks and More
by Chris Malta
Business-to-business (B2B) auction web sites provide E-Biz owners access to large retailers' overstocks and excess inventory. Says Bill Angrick, CEO of bulk auction site Liquidation.com, "Online sellers and E-Biz owners are always in need of new product sources. With B2B auctions, you're getting below-wholesale price points that let you compete in the marketplace."
Performing Due Diligence
To use an auction site effectively, start by conducting market research. First, review the goods you're interested in and gauge the price at which you can resell them. Factor in the costs related to repackaging or refurbishing the inventory, shipping costs, and any buyer's premiums. Determine the profit margin you need to make; and from there, work backwards to figure out the maximum amount you can bid on a lot.
Signs of a Good Site
Don't stop at researching the products – you also need to scrutinize the sites you're sourcing from.
Ask lots of questions:
- Are they reputable? The same things you want in a traditional business relationship apply to an online marketplace: do they have a demonstrated relationship with their product sources? Can you find a physical location for the business that supports them or place a direct call to reach their customer service?
- Do they have efficient shipping? You should be able to obtain shipping quotes, so you can figure out the total cost of goods before placing your bid. Some sites can ship your products from multiple geographic locations, a service which helps reduce your freight costs.
- Do they have a secure settlement and transaction support service? Look for a site that can handle multiple forms of payment, and make sure they won't release your payment to the seller until after you've received and examined the goods.
- Do they provide in-depth product information and history? You want to know where your product is from, how many SKUs, the total quantity, the condition category (shelf pulls, returns, salvage, etc.), and any technical information – the more details, the better.
- Do they offer proxy bidding? Some sites have a system in place that allows you to set your maximum bid, and then automatically bids for you up to that amount. Proxy bidding can save you time and help you stay disciplined in what you're willing to pay for your goods.
- Do they give you the ability to conduct complete product research? Can you search for items by keyword, category, quantity, condition, geographic location, etc? Do they have automated communications to keep you apprised of lots that meet your purchase criteria?
- Do they give you quick access to your buys? While you want enough time to perform due diligence, you also want to have speedy access to your goods so you can move them forward to resale.