Liquidation Buying | Customer Returns, Overstock Inventory

Using Retail Liquidations to Beef Up Your eBay Inventory

There is something addicting about selling on eBay. Maybe you started out by selling a couple things around the house. Then as you experienced the thrill of seeing those bids come in at prices higher than you expected, maybe you began actively hunting for things to sell.  Maybe you have even considered scaling it into a part or full time business. If that is the case, there's a better way to increase your inventory on eBay for very low cost giving you the chance to really make a profit with your new found endeavor. 

Have you ever wondered what stores like Walmart and Sam's Club do with overstock and returned inventory? Sure, some goes to clearance, some goes back to vendors, but a ton of it gets liquidated in bulk lots to small buyers. This inventory gets auctioned off in bulk lots for pennies on the dollar. If you do the appropriate paperwork to allow buying wholesale without paying sales tax (ie. getting a resale certificate), you can buy it, split it up, and then sell it all in your online store. It's your chance to offer these products for less than your competitors but at a price still high enough to net you a profit. All you need is some storage space and the time. 

There is a great deal of benefit to buying this way, besides the low price. You get the peace of mind in knowing the items you're buying are legitimate and that you will get what you are promised. You're also leveraging the buying power of these retail giants since the prices they're slashing for you were already lower than smaller retailers. Even the condition of what you receive is better due to the shipping expertise these large companies have in dealing with bulk merchandise. 

Are you interested in increasing your inventory through retail liquidations? Try out the B-Stock Sourcing Network. By registering for the liquidation auction marketplaces that match your personal preferences, you'll receive email alerts when a new auction starts letting you know it's time to bid. There is no cost to join the network. You can find the network and additional information at the B-Stock Sourcing Network website.

Does drop shipping work online?

First, for those who don't know, what is dropshipping?  Wikipedia offers a succinct definition:  

Drop shipping is a supply chain management technique in which the retailer does not keep goods in stock, but instead transfers customer orders and shipment details to either the manufacturer or a wholesaler, who then ships the goods directly to the customer.

On the surface, this is an entrepreneur's dream scenario:  no capital required to carry inventory, no warehouse needed, so you can work out of the spare bedroom, it makes it easy to create the appearance of scale by giving you the ability to offer a huge inventory of different products.  In reality, there are significant problems with this model and it almost never works.

The biggest issue is one of the simple economics of supply and demand and of the dynamics of perfect competition. 

What tends to happen with dropshipping is that a wholesaler will make a particular product available for drop shipping and dozens, hundreds, or even thousands of would-be merchants very quickly start promoting the item to get sales.  Because of the speed of communication via the internet, the market will very quickly approach the theoretical economic condition of 'perfect competition'. What this means in English is that the competition among sellers to sell this product will cause all of the profit margin to get squeezed out of the market. Since there will always be someone with no overhead, they will always undercut the lowest available price (at least until they get down to their cost to buy the product) so the marginal price (the price of the next unit sold) will become equal to the marginal cost (the cost for the seller to buy another unit).  Like most economic theory this is just that, theoretical, however, if you think about it practically, you will understand and appreciate the effect.

Because these little resellers are often small entrepreneurs working out of the spare bedroom just to make some extra money, they have zero overhead.  They have no employees to pay, no rent for a warehouse, no incremental expense to their normal daily life.  If they can price an item $1 above what they pay for it, they believe they are better off than they were yesterday.  This causes the market  price for the product to collapse (and with the help of the internet, this can happen with lightening speed).  The price will drop almost all the way down to the cost of the item (the dropshipping company's price).  If you are the poor shmuck who actually has overhead to cover, you will never be able to make the required gross profit on the item to do so.

A reseller who uses the dropshipping model really adds no value and thus cannot capture any value in the transaction.  While many dropshipping companies will have you believe they are offering an easy way to make a fortune fast, I recommend you steer clear.  

Buying Liquidation Inventory in Canada

B-Stock has launched a new liquidation site for excess inventory and returns buyers located in Canada. Now VDC, a Canadian liquidation firm is using the B-Stock platform to conduct its own liquidation auctions to Candian buyers.

Retail Returns and the Bottom Line

Retail consultant Curtis Greve has an interesting article on his blog entitled “The 5 Myths about Product Returns.” In reading the article, it’s important to keep in mind that the myths are from the supplier’s point of view—the company that has to accept the returns—and not that of the customer or retailer.

Greve’s myths are:

1. Store Returns are junk. In fact, only about 20% of returns are defective.
2. There’s no need to rush processing returns. Actually, for every month that goes by, returns lose 10% of their value.
3. Dedicated returns management is unnecessary. The truth is, it’s too complex for someone to handle on the side.
4. Managing a returns center is relatively easy. Not when you never know what’s coming when.
5. Special software to handle returns is unnecessary. In reality, returns require a wholly different process.

Noting that “the average manufacturer spends between 9% and 14% of sales on returns,” Greve makes a strong case for how an efficient returns department can bolster the bottom line.

In recent sales news, Business Wire’s January 2013 retail report comparing sales of this January to those of January 2012 shows gains across the board. Every store in the Specialty Apparel and General Merchandise categories posted increased sales figures.  In Specialty Apparel, Ross Stores led the pack with a gain of 39%, from $483 million in Jan. 2012 to $672 million in Jan. 2013. The Gap and TJX Companies followed at a 36% increase—from $833 million to $1.13 billion for The Gap; and from $1.4 billion to $1.9 billion for TJX Companies.

In General Merchandise, Macy’s barely led with an increase of 34.6%, from $1.337 billion to $1.799 billion. Kohl’s followed with 34.0%, from $844 million to $1.132 billion.  

Make returns profitable for you: check out the marketplaces in the B-Stock Sourcing Network to bid on liquidation inventory directly from major retailers.  

Purchasing Liquidation Inventory for Your Store

How often have you been to a store and seen products at great prices and wondered how they managed to buy these items cheaply enough to make a profit selling at those prices? This is most commonly seen at small family run stores or bargain outlet chains.  They are able to do this because they know how to buy liquidation inventory in the secondary market.

If you are a small business owner running a bargain outlet or clearance store, you too can purchase liquidation items from large retailers.  It is just imperative that you be very careful to do so in a way that minimizes your financial risk.  It can be very profitable if you have a good sales channel direct to consumers (your store, ebay, Amazon, etc.).

Many stores have their own suppliers for certain items that they keep in stock at all times, and there is nothing wrong with that. However, for some items that you may not sell all the time, purchasing liquidation inventory on an opportunistic basis can work great.  In fact, many brick and mortar store operators also offer this type of merchandise through an eBay stores or on Amazon.  

Large retailers always have excess, liquidation inventory to get rid of, but they are not always willing to deal with small buyers.  Some forward thinking retailers are opening their liquidation sales to a much broader audience and that is what the average small business person has to look for.  Access is the key.  I recommend you check out the B-Stock Sourcing Network to see one great way to get this sort of access for your business.

GameStop Liquidations: Another new B-Stock marketplace

Wow...this is a great looking marketplace!  iPhones, iPads, gaming systems, accessories and more all directly from GameStop.  As you probably know, they operate 6,000 or so retail stores and they run a trade-in program through which you can sell them your Apple devices.  Where does all of that inventory go?  http://wholesale.gamestop.com.

Check it out, but you probably only want to bid on these lots if you have the ability to refurbish the devices.

Common liquidation scam that can cost the novice buyer

One of the most common tricks in liquidation is cherry-picking.  This is the practice of some unscrupulous liquidators who pick through lots they buy and remove the best, most valuable inventory items in an effort to boost their own profit at the expense of their unsuspecting buyers.

The way this works is quite straight forward.  The liquidator buys a lot of 'raw returns' from a retailer. The retailer doesn't sift through the returns to pick out the good stuff because, generally speaking, they don't want to deal with even the high value returned items.  They just want to get the most they can for it and move the inventory out of their warehouse as quickly as possible.  They are already losing money on these products, and every additional minute they invest in it just increases that loss.

So, the liquidator gets the load with everything...the good, the bad and the ugly.  Let's just say he paid 25% of retail for the returns and the lot includes TV's, furniture and apparel.  Well, on their own, TV's might sell for 45% of retail, while apparel might sell for 8%.  So, the liquidator takes out half of the TV's and sells them to someone else for 45%.  Then, he takes what is left and markets that as 'retail returns from xyz retailer' comparing it to untouched lots and charging 30% of retail.  Of course, the buyer receives inventory worth far less than 30% since the highest recovery items have already been sold.

This is just one example of why it is best to always buy directly from the source, NOT from a liquidator who handles the inventory before you get it.  There are some exceptions to this, as there are some retailers who do their own cherry-picking.  They don't do this as a scam, as they are totally upfront about what you are actually buying, but it does result in a lower overall lot quality that needs to be reflected in the price you agree to pay.  I'll address this further in a future post.

Buying Shoe Liquidations

Shoes are a great product to target as a liquidation buyer.  There are millions of pairs of shoes liquidated every month by retailers and manufacturers.  Furthermore, there are 7 billion potential customers to sell them to.

The key with shoes is often having the ability to export.  Many of the brand owners out there try very hard to ensure that any buyers of their liquidation inventory don't wind up competing with them in their primary market.  Consequently, they will often place restrictions on buyers that require the resale of the product to occur outside of the US.

One example of a shoe buying opportunity is Journeys.  Journeys has recently launched their own liquidation marketplace with our friends over at B-Stock Solutions, however, they require any buyers on the site to export what they buy.  You might find customer returns or brand new overstock inventory.  In any case, the pricing will be at a fraction of regular retail so the possibility that you will be able to resell at a profit is very real.

Buy Walmart Returns to Build Your Business

Many people who run small businesses do not realize that they can replenish their stock from major retailers returns or liquidation inventory. For instance, Walmart returns are a perfect opportunity to get a variety of products that are in all different conditions.  These items include consumer returns, overstock and refurbished items that you can get for a fraction of the retail price.  Walmart’s is just one of the dozens of retailers to choose from. Not only can you save money but you can offer your customers products that are often brand new without brand new price tags; you get to pass along the savings as well as make money for your own business. This is perfect for eBay resellers, small business resellers and even for those that sell at a local flea market and there is an easy way to get started.

• Sign up at the B-Stock Solution Sourcing Network website
• Register for any retailer’s marketplace that you are interested in (each one is a separate registration)
• Present your reseller certificate during registration if you live in a state that requires sales tax
• Browse around the listings and look at the variety of lots offered
• Bid on lots and complete the purchase once you win

All of the terms you need to know such as shipping and payment is included in the lots that you browse; there are no hidden fees, small print or surprises. You get to choose from the most popular categories such as electronics, furniture, jewelry and more. The inventory is in amounts that are perfect for any sized reseller because you can choose from a lot, a pallet or even an entire truckload.

Imagine being able to get an entire pallet of purses from Walmart for just a small fraction of the manufacturer’s suggested retail price and then being able to make your money back by reselling the items.

There are no worries about integrity issues either because you are buying from the source and not an outside liquidator. It doesn’t get any simpler than that. 

Full pallet of refurbished Nook Tablets available

It looks like B-Stock has an ongoing supply of refurbished Nooks.  Another full pallet of the ereader tablets is now available.  Take a look at bstocksupply.com/consumer-electronics.html.

The starting bid is only $46.29/unit.  You can see that they are currently retailing for $99.99 online. There is plenty of margin available here for any reseller to make a bundle.