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October 2015

Inventories down but economy strong, according to Commerce Department

According to the Commerce Department Q3 economic activity slowed as companies worked off inventory that had built up in their warehouses.  According to a Reuters article by Lucia Mutikani: 

"Businesses accumulated $56.8 billion worth of inventory in the third quarter, the smallest since the first quarter of 2014 and down sharply from $113.5 billion in the April-June period.

The small inventory build sliced off 1.44 percentage points from third-quarter GDP growth, the largest since the fourth quarter of 2012."

The expectation is that activity will pick back up in Q4 because the underlying consumer demand in the economy continues to be strong.  Consumer spending increased by 3.2% in the quarter, which was very strong.

The bottom line for secondary market buyers seems to be  positive, on balance.  The economy is strong, which implies we should see strong holiday spending.  Expectations are for holiday consumer sales increasing around 6-9% over last year.  This will ensure a robust flow of returns and unsold excess in January and February.  So, position yourself now to have capital available after the new year so you will be able to buy some of the highly desirable inventory sure to be flooding the secondary market.

If your capital is tied up in inventory, consider liquidating it through one of the stronger channels out there, like  You will get reasonable value and begin to raise cash for buying products that will turn over more quickly and at higher margins.

Biggest holiday coming for ecommerce

This year will be the biggest yet for e-commerce.  What that means for you and I is a flood of returns heading for the secondary market in a few months.  Typically, around 10% of all sales will become returns and those returns will become liquidation lots in January and February.  

With consumer electronics topping many holiday gift wish lists, you can expect a flood of returns in the category.  Computers, tablets, phones, TV's, Apple TV's and all the other 'hot' gift items this year, will be in ample supply.  Not is the time to begin accumulating capital by reducing your inventory so you are prepared when this tidal wave hits.

Excess inventory creates a great opportunity for entrepreneurs to make money.  As the supply of excess inventory, including returns and overstock inventory, increases after the holidays prices often come down.  The most important contributor to making money buying and selling excess inventory is the price at which you buy.  You make your money when you buy...not when you sell.

My advice:  accumulate cash and be ready to buy after the holidays, when the supply is at its peak.  You will enjoy the benefits of those lower prices for months to come as you sell your stock for a healthy profit.