When To Liquidate Excess Inventory
If your find yourself in the situation of having excess inventory, then, you should consider liquidation as a last-resort strategy.
First, do some research. This is how you can start:
- Check if the products still have selling potential. For example, if you have seasonal items worth selling, recall your stock and wait for the right time to resell it.
- Use a sales estimator tool. This can help you determine if a specific product is worth being relaunched. If thats not the case, then consider liquidating your stock.
- Review item categories. You cant sell unless you have full stock. Perhaps a change in category might help you find an eager audience for dead or long-tail inventory.
- Maintain good seller performance metrics. Negative ratings and few reviews can have a serious impact on your sales. If thats the case, try to mend these issues to attract more customers.
Once youve run out of scenarios, and you want to eliminate surplus stock, you can look at some liquidation options.
There is no right or wrong time to liquidate excess inventory. The goal is to prevent financial issues for your ecommerce store.
S To Starting Your Own Liquidation Business
First, you will need to think about the money you can commit to your new liquidation business. Youll need to have startup capital to make the business work. You wont need a huge amount of money to get started, but you will need to have at least some amount of funds available to purchase your first inventory.
Second, you will have to be determined enough to track down a liquidation wholesaler or auction site that will let. You purchase returns from larger retailers. Many people choose to find a niche of products and get familiar with those before jumping in too deep. You want to have knowledge about what youre selling if you want to turn it into a business. You will also need to decide if you are going to sell new, salvage, or refurbished stock. Oftentimes, when starting out, it is easier to sell brand new inventory, at least until you get used to the process.
Consider Running Bogo Or Multi
A multi-buy offer is a type of sales promotion that allows customers to purchase products at discounted rates if they buy a certain quantity or amount. BOGO promos as well as offers like Buy 3 get 1 free are some common examples of multi-buy discounts.
This type of promotion can be very effective in moving excess stock, particularly if youre selling commodities or merchandise that are purchased in sets .
We can see an excellent multi-buy promo in action in the following example from the baby apparel retailer, Leo + Zo. Customers who purchase 3 sale items can enjoy an extra 15% off. The company has also made the promo extremely easy to redeem shoppers can just pick out 3 eligible items and the discount will automatically be applied at checkout no code required.
Don’t Miss: Legal Aid For Bankruptcy Chapter 7
Offer Them As Freebies Or Incentives
This tactic works best for low-cost items. If a product is tough to sell, use it as a giveaway or incentive instead. You can, for example, offer it as a bribe to get people to either sign up for your mailing list or to increase their basket value .
This is one of the tactics that Flourish Boutique implements in their stores if they find that a particular item is a dud, but doesnt have such a high cost. Well use it as a freebie or giveaway in event swag bags, in trade for people signing up for our email list or text service list, etc. In doing so, Vanessa says that theyre essentially deploying the cost of the product as a marketing expense.
Another retailer thats doing this well is the apparel store William B + Friends, which recently ran a promotion where they gave away free earrings to shoppers who buy 3 items or more.
Pro tip: When implementing this tip, be sure to promote your freebies by having signs outside your door. Doing so will grab shoppers attention and drive foot traffic to your shop.
Heres an example of this tip in action from Miniso.
What Is Excess Inventory
Excess inventory, also known as overstock, are products that have not yet been and are not anticipated to be sold. In other words, the stock exceeds demand. Often, this stock is kept for weeks, months and even years without ever being used or sold. This is often a result of poor inventory management or unpredictable market demand. It can result in loss of revenue and cause other financial burdens.
You May Like: Can Bankruptcy Stop Writ Of Possession
Causes For Excess Inventory
There are many reasons why a business might end up with excess inventory. Here are a few common ones:
- Inaccurate forecasting/predictions. If your business inaccurately forecasts product demands, you might overcompensate and end up with way too much inventory. Your predictions should take into consideration various factors, like market data and sales history.
- Poor inventory management system. Your inventory management team handles tasks like ordering and purchasing products and materials while coordinating with other teams within your business. If this system is faulty or disorganized, you can easily end up with excess inventory.
- Unreliable vendors. If your suppliers are unreliable, you might find yourself overcompensating to avoid insufficient inventory, ending up with way more stock than you need. For example, maybe their deliveries are often late or products are frequently back-ordered, so you overbuy or order too far in advance, leading to excess inventory.
- Lengthy lead times. From vendors to manufacturers, those involved in your inventory chain might provide long lead times that make it difficult to accurately predict how much you should order. When this happens, you might feel the need to keep more stock on hand just in case.
- Demand variability. Its difficult to order the proper amount of stock when your product demands vary from month to month. To ensure you dont fall short, you likely played it safe by ordering extra rather than risking not having enough.
See If You Can Return Or Exchange Them
When possible, return the merchandise to your vendor in exchange for credit or new merchandise, adds Judy. If they sold you a dog, or the product simply was wrong for your market, make a case for returning it. Just be sure you are keeping the merchandise undamaged and in fresh packaging. Your vendor wants to keep you as a customer. Use that relationship to your advantage.
If you have a great relationship with them, you should definitely explore this option. Just look at what OFY, a luxury mens boutique in Miami, is doing. According to Ofir Farahan, owner of OFY, when certain styles arent selling, they work with their vendors and swap the merchandise.
Weve developed strong relationships with our vendors who will allow swaps, he says. They dont want products sitting on the floor for so long, and obviously, we dont, either. So we work hand-in-hand and try to find a way out.
You May Like: Can You File Bankruptcy Against The Irs
Common Problems Buying And Selling Liquidation Stock
Selling liquidation stock is a popular but challenging business model. Rookie sellers often believe they can make huge profits by buying cheap inventory and selling it at the full retail price. But profit margins often fall far shorter than planned.
A common problem with buying liquidation stock is it is often difficult to know exactly what you are going to get. The condition of the items makes a huge difference to the value. Products can be faulty or broken, or might need repackaging or repairing. Even goods categorized as new in box might have dirty packaging from being on shelves for a long time. You can get good pallets and bad pallets, and its not always possible to know which it is going to be just from studying the manifest.
Many liquidation sellers will include in their manifest an indication of MSRP , which can make potential profit margins look appealing. But the true value of a product is the price that its selling for now, not the suggested retail price. By the time that products hit the liquidation channel, the current price will often be way below the MSRP.
Detailed and accurate manifests are very important. However, be aware that the more detail in the manifest, the higher the liquidation companys processing costs and therefore the higher their mark-up. You have to find a combination that works for you in terms of risk, investment and profit potential.
Find Reputable Liquidation Sites Or Wholesalers
Do your homework on the different companies offering liquidation and wholesale inventory. Decide whether youd rather source direct liquidation or from a wholesaler. Additionally, decide what type of merchandise you want to source. Is there a particular category of goods youd like to sell? Is there a specific condition you want to specialize in? When youre just starting out, we recommend sticking to brand new inventory as its usually easier to resell. And when it comes to sourcing inventory options, A Guide to Liquidation Sites is a great article comparing top companies.
Top 10 Wholesale Liquidation Companies In The Usa
Wholesale liquidators have been playing an essential role in compensating the losses of companies going out of business. The main purpose of these wholesale companies is to buy overstocks, shelf pulls, customer returns, and salvage merchandise from the retail stores and liquidate the inventory at lower rates. They are a great resource for small-large businesses, flea marketers, and local retailers to purchase branded goods at huge discounts.
If you have a small business, you must definitely look into these companies as they offer quality products at wholesale prices without the need for a resale certificate. It is an extremely convenient method of purchasing inventory that will bring in higher profits from the resale. However, finding the right liquidation company is difficult. It requires a lot of research to find the most trusted and genuine wholesale Liquidation Company.
Introducing our new group for Buying and Selling liquidation goods and merchandise!
Find exclusive deals and merchandise opportunities!
Therefore, we have curated a list of the best wholesale liquidation companies in the United States where you will find amazing quality products at the most comfortable price, along with shipping arrangements.
Open A Sales Channel For Your Business On Ebay
If you need to get rid of your inventory but want more control over the sales channel than you get when using an inventory liquidator, eBay is a good option.
Opening a business seller account on eBay can be a great way to sell excess inventory at competitive prices. Setting up your business seller account is free and simple. Be sure to check out the selling guide that walks you through the process with tips and advice. Visit the eBay Seller Center to get started.
You May Like: Can You File Bankruptcy On A Lawsuit
Improve Stock Ordering By Observing How Customers Interact With Your Merchandise
Ensure that youre ordering the right products by keeping your customers needs in mind. Talk to them and observe their behavior so you can gain insights into what items will sell.
As shoppers come into your store your sales staff should hear them make comments about fit, quality, etc. for a particular item this will help clue them in as to why they do or do not like a particular item, says Kat. I would start off by talking to the sales staff to figure out what comments have been made and why the product isnt moving.
Align Your Marketplace To Your Audience
Expanding into wholesale marketplaces is made easier if you know why youre doing it.
Tie your new strategy in with overarching business goals. If thats to expand your brand footprint, for example, look for wholesale platforms with a large existing customer base. Allbirds, a DTC-only brand, had a goal of increasing its brand footprintso it through Nordstrom’s wholesale marketplace in order to reach new customers that didnt directly overlap with their existing audience.
Similarly, look to sell on marketplaces within close proximity to both your businesss warehouse and target market, which will ensure that buyers get their products within as little time as possible.
Finally, choose wholesale marketplaces aligned with your industry. Mabel, for example, is for food and beverage retailers. Cross it off your list if you sell apparel.
This hold true for owned retail, partnerships/marketplaces and wholesale as well. Theres an art to deciding which channel is right at which times but ultimatelygo where your customers are.
Don’t Miss: Can You File Bankruptcy Without A Job
Why Liquidate Excess Inventory
Every ecommerce store must liquidate excess inventory at some point. The problem is that some sellers may see liquidation as a sign of failure. But holding on to surplus inventory is a far more expensive strategy than liquidating it once and for all.
Normally, having surplus inventory is a problem after holidays or promotional seasons, such as Amazon Prime Day. The reason is quite simple: sellers expect to generate more sales due to an increase in product demand.
As a consequence, the following scenarios may occur.
Become An Authorized Reseller
The first thing you need to do to begin sourcing liquidation inventory is to become a legit company. Once youve registered your business, you need to obtain a resale certificate. This certificate exempts you from paying taxes when you purchase the goods to resell. Nearly every reputable, large liquidation or wholesale company requires a resale certificate to purchase pallets of goods.
Buy Items For $10 Or Less
One of the best ways she’s been able to make money on Poshmark is by limiting the amount she spends on inventory, Smith said.
“I try to look for items that are $10 and under,” she said.
When she’s shopping for inventory and isn’t sure how much an item will resell for, she scans the item’s barcode from its packaging or tag on the Amazon app. Then she usually lists the item for half off the original price.
The prices on her Poshmark closet range from a $7 Style & Co. blouse to a $144 Ugg coat.
What To Do With Huge Amounts Of Unsold Or Returned Inventory Is One Of The Biggest Challenges That Retailers Face
Stock liquidation is a problem that many retailers will encounter and when the process is incorrectly managed it can result in lost profits and huge amounts of waste.
When managed properly, liquidation can turn unwanted or excess items into profits and make undesirable products much more attractive to customers.
This problem doesnt show any signs of going anywhere anytime soon as return rates continue to increase. This results in huge amounts of unwanted products sitting in warehouses which takes up space and costs you money.
Many businesses fall into the trap of selling their excess stock to third parties at such a low price they take a loss, just to get rid of what they no longer need, but doing this time and time again is going to eat into your profits and have a negative impact on your bottom line over the long term.
With an increasing focus placed on sustainability and reduced waste, a different approach is needed. Effective stock liquidation can be used to offset losses and allow your brand to become established in a secondary market.
You May Like: How To Buy Pre Foreclosure
Find Liquidator Wholesales On Asd Virtual Market
To source liquidation inventory from a reputable company you will have to obtain your resale certificate. This exempts you from paying taxes when you are purchasing items to resell. Almost all reputable liquidation or wholesale companies will require you to have this to prove that you are a legit company before they let you purchase goods.
Now that you have your resale certificate you will want to buy liquidation merchandise to resell. Most big retailers like Walmart, Target, Macys, Home Depot and more have private liquidation online marketplaces. In these marketplaces you can purchase overstock, liquidation inventory, and customer returned items directly from them. Most of these marketplaces use an auction-based format so you can browse the auctions and bid the amount that you are comfortable with.
Third, after you acquire your inventory, you are finally ready to resell. By now you should have already scoped and researched where you can sell your goods. Whether you choose to sell on eBay, Amazon, or another online marketplace, online is a great place to begin reselling. If you want to eliminate shipping costs and keep your business local, you could sell your goods in a brick and mortar store, thrift shop, or flea market.
Tips For Buying From Liquidation And Clearance Websites
So what is the best way to maximize your chances of making a profit when buying clearance or liquidation stock?
Weve covered this in detail in Sourcing Products from Liquidation Companies: The Essential Guide, and here are the headlines:
- Get a resale certificate most US liquidation companies require one before you buy from them.
- Analyze the manifest get as much detail about what you are buying as you can.
- Understand manifest variance you could be entitled to some money back if the goods vary significantly from the manifest.
- Know all your costs liquidation stock can be very time consuming to process and can tie up money for long periods of time.
- Consider quality and grading there might be little detail on the goods quality in the manifest, so get to know the company and their grading specifics before buying a lot of stock.
- Plan the logistics shipping costs can vary widely, and you might be tied to using the companys own logistics provider.
- Specialize build up your knowledge and expertise in a specific product category.
- Watch out for expiration dates clearance products can be in the supply chain for a long time.
- Build up slowly dont spend your full working capital at once. Take small risks and build up your knowledge slowly but surely.
Get the process right, and there is a huge amount of money to be made. Get it wrong, and it could ruin you.
This article was first published in November 2018 and last updated in July 2021.