by Claudia Bruemmer

Many people are going into business for themselves because of layoffs and the difficulty of finding jobs in today’s economy. Some people start off selling general merchandise on eBay and then branch out by opening a store or selling goods  at flea markets. Some may want to buy wholesale pallets and truckloads of name brand liquidation merchandise like apparel, electronics, furniture, general merchandise, handbags, home décor, jewelry, tools and so forth. This article will review the basics about buying liquidation and closeouts merchandise.

You can buy overstocks, shelf pulls and customer-returned items directly from major retail stores because they regularly liquidate what they can’t sell. This gives you an opportunity to buy national brand merchandise at low prices for resale online or offline. You can buy below wholesale from some of the nation’s largest discount retailers or closeout warehouses and turn this merchandise right around for resale in your own store, on eBay or at local flea markets.

Liquidation merchandise becomes available for the following reasons. Sometimes inventory doesn’t sell at the retail, wholesale or at the manufacturing level, so it is liquidated. Additionally, inventory is seasonal; thus, subsequently liquidated. Some items are no longer manufactured so supply can’t be restocked. Some items are replaced by a newer model. Some items are held up in customs and cancelled due to the delay. Other items might be damaged or otherwise compromised. Stock is liquidated at different levels for many different reasons. But the main reason for liquidation is to recoup money that would otherwise be tied up in products that can no longer be sold for a profit. Rather than take a total loss, merchandise inventories are liquidated to recoup some of the invested revenue.

That makes purchasing liquidation merchandise a great way for buyers to attain low cost inventory, as most items can be purchased for pennies on the dollar. Below is a description of the types of liquidated merchandise available.

• Close or Near Dated refers to grocery items. Large retailers send damaged goods or items nearing their Sell By date to a reclamation center for disposal or liquidation.
• Customer-Returned Items are retail items returned for exchange or store credit/refund for various reasons. Some returned items are damaged such that they can’t be resold as new. However, not all customer-returned items are damaged.
• Insurance Claimed Merchandise is inventory damaged due to flooding, theft, or fire/smoke. This salvage merchandise is typically sold by large insurance companies wanting to recoup money paid out in claims settlement.
• Salvage Merchandise is inventory compromised in some way. When you purchase salvage items, it requires re-working damaged products, so it’s hard to recapture value.
• Tested and Found Defective/Broken refers to items returned to retailers that are defective or broken. The reverse supply chain process includes sending items to a testing facility where they are examined for functionality. Some items are either refurbished or liquidated depending on the extent of repairs needed.

Reverse Logistics. If you’re not familiar with this term, it is basically the reason why marketers can buy name brand merchandise (customer returns) at very low prices. Three to four percent of all retail sales are returned for refund or exchange, and not all returned products can be re-shelved. Returned merchandise costs the retail industry some $40 billion dollars a year.

In closing, you want to make sure you fully understand what type of merchandise is being liquidated before making a purchase. When purchasing customer-returned items, it is common for a supplier to quote a ratio or percentage of damaged goods to expect. It is wise to proceed with caution when given this ratio because it’s almost impossible for a supplier to accurately estimate the ratio of damaged merchandise in a pallet or truckload. Some loads have light damages while others can be heavily damaged. It might be prudent to double the estimate of damaged goods to arrive at your estimated total cost when purchasing customer returns.