What is a Liquidation Sale?

Starting a business, let alone running one, is equal parts challenging and rewarding. You want to eventually make enough money to pay off your initial investment but how do you keep things afloat in the meantime? Securing inventory can get costly, but sourcing liquidated goods at a deep discount is a great way to get started. You can easily procure great merchandise at a liquidation sale (if you know where to look) and then resell it for a profit!

What is Liquidation?

A liquidation sale means a company is selling its assets to pay back creditors. If they don’t believe they can make their regular payments or are overwhelmed by debt, liquidating can oftentimes be the smartest and easiest way out. Liquidation essentially turns the company’s assets into cash that is used to make these payments. But regardless of paying, these companies are unlikely to recover and are probably closing for good.

Another reason a company might liquidate that doesn’t involve going out of business would be for cost savings. For example, a company moving to another state could save tons of money by liquidating assets, rather than paying to transport everything to a new location. Other avenues for liquidation include when a business sells off only parts of their inventory or even when a product line is discontinued.

However, there’s another big reason companies liquidate– it’s a critical part of their business’s reverse logistics plan. It serves as a way for retailers to offload excess inventory, returns, and those seasonal items that are only good for a particular time of year.

How a Liquidation Sale Works

For retailers, liquidating this inventory is a good way to free up shelf space and make way for new merchandise. To have this inventory left sitting in warehouses taking up real estate, collecting dust, doesn’t make sense. That’s why all the big retailers you’re familiar with are likely liquidating their overstock, seasonal, and customer returns—to recoup some of those losses and make way for new inventory.

Historically, small businesses and resellers didn’t have direct access to top retailers’ liquidated goods. These large companies would sell off their inventory to a few large liquidators who would break these pallets up, cherrypick the best product, and resell it to you with the lower quality merchandise only.

Fortunately, for resellers, retailers have found a better way. Now, retailers will set up online marketplaces to put these goods up for auction so buyers can purchase them directly. It’s a way for them to quickly move the items out of their storage, earn a bit of the money back, and introduce those items into the secondary market via resellers.

These auction lots are sold “as is” so be sure you read the auction details and manifests to assess the condition of the goods you’re buying. Some marketplaces may have you pre-qualify by submitting your resale certificate and other documentation stating that you intend to resell these items. If you’re looking for the best deals in a competitive, online bidding environment, these online marketplaces can be worth it as you have the opportunity to buy a single pallet, many pallets, or an entire truckload of product for pennies on the dollar.

So, as a reseller, liquidation sales are a gold mine for you! Entire businesses revolve around buying and reselling pallets and truckloads of liquidation merchandise. It’s reliable because companies will always be putting out new products and consumers are always going to be looking to buy (and make returns when necessary). The best part is you can get the brands people know and love at deep discounts!

How to Make Money from Liquidation

We mentioned people have entire businesses dedicated to reselling overstock, customer returns, seasonal, and even salvage inventory for parts. But how exactly do you end up making money reselling merchandise from liquidation sales? We’ll break it down step by step.

Start Your Research

Look for websites that will lead you to reputable sites full of suppliers that are selling liquidated merchandise at deep discounts straight from retailers. References, reviews, and ratings will all come in handy here. It’s best to work with marketplaces that are approved by the brand so you don’t fall victim to anyone posing as a reputable supplier. Finding the right supplier will take some shopping around. Obviously, it’s always best to cut out the middleman and buy directly from the retailer to avoid unnecessary markups and shady transactions.

You can also buy liquidation pallets by store. This option is good if you know you have a lot of customers interested in specific brands or categories. Online liquidation sites all operate a bit differently, some in the form of auction sites. Auctions are similar to traditional live auctions but without rows of people and bidding paddles. Major retailers like Target, The Home Depot, Walmart, Nordstrom Rack, and more, use online liquidation auction platforms to get their excess, liquidation, and overstock inventory directly into the hands of business buyers.

Find Out the Demand

Consider the product type, condition, and demand of liquidation items. Just because you can get them for a good deal, doesn’t mean you are going to move them quickly and for a good price. Ask yourself if you have customers that need that particular item. For example, stocking up on snowboots in the Florida summer is probably not going to do you any good. You want to purchase units that will move quickly and not sit in your garage or warehouse for months without a buyer. Making informed decisions about what you’re buying will help alleviate any unnecessary stress of how you’re going to move the product later.

Calculate Your Margins

You want to stay competitive, but not overbid. Will you be responsible for arranging the shipping? Is shipping covered? Review any provided manifests carefully to calculate your margins. Specifically, the number of items in the lot, MSRP, and shipping. Then see how much you could resell items for. The top three highest profit margin categories of liquidated inventory include appliances, apparel, and toys. Source carefully and in quantities and categories that make sense for your business and your customers.

Pick Your Reselling Platforms

Once you have liquidated products to resell, you’ll want to establish yourself as a seller on online platforms like eBay, Facebook Marketplace, Mercari, OfferUp, and Poshmark, to name a few. You want to make sure there are enough interested buyers using the site and that all transactions are transparent. Also, check out the service fees and what shipping options will be available. Free shipping is always an attractive option for your customers! For a list of the 10 best places to resell online, check out our article here.

Employ Simple Marketing Techniques

If you want to make the most of your reselling efforts, you should sharpen a few marketing techniques. First off, photography is key. Buyers want to see the advertised condition and any product highlights. When considering home decor or apparel, seeing it in real-life settings can be very persuasive. So including a few stock photos from the retailer’s site plus any you take is a good way to cover all of your bases.

List Your Items

See what others are selling the same or similar items for. You’ll want your listings to be attractive, and more importantly, offer customers a good deal. Will there be a warranty available? Optimize your listing wherever possible. You’ll attract new customers to your page with keywords. Keywords are usually the search term that buyers will use to find the product that they are looking for. Use the main keyword within your product title as it carries the most weight with search engines. Other places to have the keyword include:

• Page titles
• Meta descriptions
• Image tags (called ALT tags)
• Product descriptions

If you’re ready to start buying liquidation merchandise on B-Stock to grow your small business– let’s get started! Visit our marketplaces site to choose which ones you’re interested in and begin the registration process.