Buying in The Liquidation Closeout Marketplace

With all the buzz about wholesale secondary market goods – i.e. liquidations, including shelf pulls, closeouts, and customer-returned merchandise – Amazon and eBay sellers often get overly excited about the prospect of scoring brand-name goods at rock-bottom pricing. Don’t get me wrong – there are high profits to be made reselling liquidated goods, but there’s also a tremendous learning curve to overcome. From my perspective and experience, too many marketplace sellers are jumping in feet first without fully understanding:

  • What liquidated goods are
  • Why merchandise is being liquidated
  • What type/condition of goods are best suited for specific resell channels
  • Where to buy liquidated inventory

According to a recent report, $280 billion worth of retail consumer goods flow through the secondary wholesale market. This “secondary market” gives you and I the opportunity to purchase pallets and trucks of brand-name goods at drastically reduced pricing.

When sourcing goods within the secondary market, bulk buyers need to understand that liquidation merchandise is categorized and sold in the following product conditions:

Customer Returned Merchandise – Customer returns are items that consumers purchased from a store, or e-commerce seller, and then returned. Working percentages on customer return loads depend on multiple factors, including the season purchased and the store the goods originated from.

It’s not uncommon to receive goods in new or open-box condition in return loads, but there is no guarantee what you will receive from load to load. The industry average for items in all categories is 65 to 75 percent working and 20 percent repairable. The remainder are throwaway items. Profits come from selling the working and repaired items.

Shelf Pull Merchandise (MOS) – These are overstocked goods that were displayed for sale in a store but never sold. Shelf pull items typically have original retail tags and price stickers. Damage, if any, is usually minimal, mostly due to handling. The average percentage of damaged goods in a shelf pull lot/pallet/load is between 5 and 10 percent.

Closeout Merchandise – New overstocks, also often called closeouts, are goods that have never been displayed for sale in a store. Such goods can come from importers, manufacturers, or distributors who are closing down or have excess goods in their warehouses. Wholesale retailers tend to sell closeouts in bulk lots at low prices.

Most people make the same mistake when purchasing wholesale liquidation merchandise: they buy the wrong type of goods for their resell channel – for example, by purchasing customer-returned pallets for Amazon sales. Even though you can sell used goods on Amazon, sellers who are trying to scale an Amazon FBA business need to source new merchandise in pristine retail packaging. And you won’t find goods in such condition on a customer-returned pallet. A better option for Amazon sellers is closeout merchandise sourcing. There are tons of closeout-only wholesalers who specialize in selling undamaged goods.

However, customer returns are great for multi-channel sellers. For example, if you’re an eBay seller, and are not opposed to selling a few items locally through Facebook groups or Craigslist, customer returns will work for you. Every pallet and truckload of returns will provide you with a big assortment of goods.

Typically, when sourcing goods through a traditional wholesale company or distributor, you’ll pick out the items you want to sell, purchasing by item in case pack quantities. This is not the case with liquidated goods. When you purchase a pallet or truckload of store excess, you’ll often buy an unknown assortment of merchandise. Some pallets and trucks come with a manifest (a list of contents), but the manifest may fail to disclose the conditions of the items.

Does this sound a bit overwhelming? Working with liquidation goods can be, but this by no means should discourage you from sourcing within the secondary market- the practice can be highly profitable. The best advice I can offer is take your time. Research the type of merchandise you’re thinking of purchasing, start small, and move on from there.