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5 Strategies for Safely Sourcing Liquidation

by Chris Malta
Last updated 7/24/2018

Secondary market goods afford online business owners the chance to earn some substantial profit margins. But you need to take the time to understand exactly what you're buying. Liquidation is a tremendous opportunity, if you do it right. But if you just blindly jump in, you can wind up with a roomful of junk products you can't sell. Here are five key steps for purchasing liquidation lots without getting burned:

    . Research Your Sources in Advance
    There are numerous quality sources for liquidated items - reclamation centers and surplus auction companies. Sometimes, you can even make arrangements with local retail stores to pick up their liquidation items for a percentage of the wholesale cost. But what you don't want to do is just buy from the first dealer that pops up in the search engine results. You need to first determine if a source is legitimate.

    A liquidation company's website should provide you with all the necessary contact information. If a site has no phone number or email address, that should be a big red flag.

    Before you use a company, test their customer service - call or email and ask questions. Find out how long they've been in business, and ask for customer references. If they're local, visit their facility in person. The bottom line here is to use common sense. And remember, if something sounds too good to be true, it is.

    . Understand Exactly What You're Getting
    Gather as much info on your products as you can. What category are they in? What is their condition? For what percentage of wholesale cost are you buying them?

    Your supplier should provide you with a manifest - an itemized list of the goods on the pallet you'll be receiving. It should include both the piece count and the associated wholesale cost for each product listed. By understanding what you're getting, you're able to identify if a purchase will be profitable for you.

    . Determine Your True Product Costs
    You're not just looking at the price of a pallet; you're considering all the factors involved in making the products saleable. Repairs, time, packaging materials - account for everything that contributes to the total cost of getting your goods market-ready. Figuring out your Cost of Goods Sold allows you to pinpoint your actual profit margin.

    . Know Your Product Market
    Learn as much as you can about the market you're selling into. Establish what these types of products are selling for there, remembering to factor in their condition. Look at the demand among your target audience, as well as the level of competition you'll be up against. If there's not enough demand or the market is crowded, it will be hard for you to move those products out the door quickly.

    . Have a Game Plan
    It's important that you know, ahead of time, the sort of products and the category of products you're looking for. Most liquidation pallets are sorted by category and include a wide assortment of items within a category. Some of these items are faster-moving; others tend to be slow movers.

    You may choose to bundle those slower-moving goods, or to use them as loss leaders, up-sellers, or cross-sellers. But however you choose to package them, it's imperative that you have a plan for moving them out speedily. In liquidation, turning items over quickly is a major key to profitability.
Liquidation can be a powerful tool for building your retail business, regardless of your selling venue. You can purchase products that will appeal to your customer base, for pennies on the dollar. But your success hinges on your finding out as much information as you can, and using that information to make educated buying decisions. Focus on sourcing surplus goods knowledgeably, and you'll find that selling them successfully is much simpler than you think.