If you haven’t considered liquidation as a product source for your E-Biz, you might want to think again – it can be a very profitable prospect for any online seller. When large retailers, wholesalers, and manufacturers need to convert their excess inventory into cash, they often offer it at well-below wholesale costs in an effort to recoup some of their monies. The types of products you can source in the secondary market are as varied as the suppliers disposing of them. Whatever niche market you sell in, chances are you can find some excellent deals on liquidated items that would nicely round out your standard product line.
It’s important, when buying liquidated goods, to know what type of merchandise you’re dealing with – closeouts, surplus, refurbished, etc. Advises Tom Schmidt, president and COO of Government Liquidation, LLC, “Certain types of secondary goods may require a little more effort, in the form of repairs, like salvage, or in the form of marketing, like customer returns, overstocks, or shelf pulls. But they also provide a chance to earn higher margins because you’re adding value to the products.”
Locating the Goods
One of the best sources for finding liquidated products is a business to business (B2B) marketplace, such as Liquidation.com or LiquidXS.com. You gain access to many different types of products and suppliers all in one place, including liquidated lots from suppliers that would normally not sell to small, individual retailers. When shopping B2B sites, make sure you’re only dealing with companies that have solid reputations. Some key characteristics to look for when choosing a marketplace are guaranteed prompt delivery, a range of shipping options, a secure financial settlement process, and good customer support. It’s also a plus if a site has multiple shipping locations – the closer you can have your product shipped from, the less you’ll be paying in freight costs.
Evaluating Your Profit Margins
To capitalize on the resale value of these liquidated goods, there are two primary figures you have to identify:
• You first need to establish the resale value of the items you’re considering. Understand the condition the products are in. Then do your research on business to consumer (B2C) web sites: review the products’ make and model, determine where they are in their life cycle, and use that information to develop a selling strategy.
• The second thing you need to figure out is your total product cost per unit. Besides the cost of the product itself, you need to factor in all logistical and marketing costs, as well as any costs involved in getting the products ready to sell at retail. If your costs per unit are well below your resale value, you know you’ve found a profitable product.
Integrating liquidation into your total sourcing strategy can help you keep your product selection fresh, and keep your target buyers coming back for those items that complement your regular line-up. It’s also a great source for high-margin items and loss leaders. Encourages Schmidt, “Liquidation isn’t something that online sellers need to be afraid of. It’s a sixty-five billion dollar marketplace and, for the Internet entrepreneur, it can be a goldmine.”