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August 2016

Buying Liquidation Inventory: The Most Important Thing to Know

The single most important thing to know about buying liquidation inventory is that is is always best to buy liquidation inventory DIRECTLY from the retailers and manufacturers themselves. AVOID LIQUIDATORS WHO BUY FROM THESE COMPANIES FIRST.  The difficulty comes from the fact that most of these companies will only sell to a handful of privileged liquidators. One of the reasons for this is that it is very time consuming to try to negotiate with dozens, hundreds or thousands of interested buyers. This leaves the rest of the interested buyers with no other option but to buy from those few liquidators who DO have access to buy direct.

An increasing number of retailers have opened up their liquidation sales to all qualified business buyers by creating online liquidation marketplaces. These new marketplaces are probably the single of the most innovation in liquidation in 50 years.  It is completely transforming the secondary market and creating business opportunities for millions of entrepreneurs.

Let’s examine a very important difference between buying from the retailer directly vs. buying from their appointed liquidator. A typical retailer might generate 1–2% of its revenue from liquidation sales. It is generally insignificant to them. Rather, it is a necessary evil that they must engage in to achieve their primary goal which is to avoid backed up warehouses and a bloated balance sheet. They are definitely not profit motivated when it comes to liquidation. They plan for the losses they take by pricing their product accordingly.

A liquidator, on the other hand, is very different. The inventory you buy from a liquidator is not liquidation to them. Rather, it is their primary means of generating a profit in their business. They look at it and say, “I paid $x so I have to sell it for $x + $y because I am in business to make profit”. Once a liquidator buys inventory, the sale of that inventory makes up 100% of their revenue. Making a profit on those sales is of paramount importance, otherwise, the liquidator goes out of business.

When you introduce the requirement of generating a profit, you introduce the incentive for the liquidator to behave badly. This is what drives some of them to engage in the deceptive type of behavior that has besmirched the reputation of the industry. For example, it is worth it to a liquidator to rearrange a pallet to showcase the desirable product in the front while hiding the ‘crap’ at the back in their photos. Likewise, they might ‘cherry-pick’ a load of products bought from a retailer and sell off all the good stuff first and then sell the rest as ‘untouched’ making you think it will still contain some gems.

These are just some examples of why you are much better off buying directly from the retailer. There are others (like not paying the middle-man markups that a liquidator will impose) that I won’t go into.

The single most important website that you should know about is the B-Stock Sourcing Network(https://sourcing.bstock.com). You will find inventory listings pulled from a large network of branded, retailer and manufacturer marketplaces. When you visit any of the sites represented in this Network, you will know you are looking at an opportunity to buy inventory directly from the company indicated. Your purchase will ship straight from their warehouse.

It costs nothing to register on any of these sites and you will be inundated with inventory of all types available directly from these companies. To be clear, B-Stock does not ever see or touch the inventory being sold across the network. They simply provide the tools to allow these retailers to transform their liquidation business into an open forum in which any legitimate business may participate.