Where to start buying returns, overstock and liquidation lots
Walmart Liquidations

Liquidation vs. Wholesale

One of the most important, yet subtle, concepts you will want to understand early is the difference between liquidation-minded sellers and wholesale-minded sellers.  If you don't understand this difference you could end up wasting a tremendous amount of time as you attempt to source profitable merchandise.

Liquidation

A liquidation-minded seller has one goal in mind--converting some distressed inventory into cash.  This is what all retailers and manufacturers do with some subset of their inventory at some point in time.  They know they will incur a loss on the product and they are OK with that.  Would they like to minimize this loss?  Of course.  However, they are motivated to sell the products and will trade off price (or recovery rate) for velocity (selling it quickly).

Wholesale

On the other hand, some sellers are really wholesaling.  Wholesaling means they are selling bulk quantities of products at a particular price that is generally above their cost.  This is what most manufacturers of any products do every day.  A pencil manufacturer wholesales large quantities of pencils to retailers who then sell them to consumers.  The pencil manufacturer may have made the pencils for 5 cents each and will wholesale them for 7 to 10 cents each.  They cannot wholesale for 3 cents each or they will lose money.

Similarly, when a liquidator buys a pallet of returns from a retailer, they establish a cost basis.  This liquidator now MUST sell that pallet for more than his cost if he is to make a profit and remain in business.  He will act more like a wholesaler than a liquidating retailer because of this and you will have a hard time getting a great deal on which you can profit.

Always try to buy from someone who is liquidation minded, not wholesale minded.  What you pay should be determined solely by what you can sell the inventory for, not what some middleman paid for it before you came along.

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