By Mike Jennings, GENCO Marketplace

Your business depends on being able to source quality products from wholesale liquidators at a good price. There are great deals to be had, but it helps to be an informed buyer. Here are some rules to follow:

#1 – Source from stable, financially sound companies
There are few barriers to entry in the wholesale liquidation industry. Consequently, you encounter the rare company that wants to turn a quick profit. When evaluating sources of supply, look for companies with a track record of ethical behavior and a long-term strategy that depends on repeat business from happy customers. As the saying goes, “Adversity teaches us who our true friends are.” If problems arise – let’s say the lot you receive does not match the manifest — you want a partner that will stand behind transactions with honesty and integrity, not one who suddenly stops answering his phone.

#2 – Deal with companies that have direct liquidation contracts
In the secondary market, it’s not unusual for product to go through multiple liquidators on route to the end consumer. While many brokers provide an excellent service, there are advantages to dealing with companies who hold the direct liquidation contracts with retailers and manufacturers:
• Lower your risk. Direct liquidators have warehouses where they assess the product condition to assure the quality of the lot is consistent with how it’s represented.
• Avoid multiple mark-ups as products move through several brokers.
• Deal direct for faster service. For instance, pick-up times can be arranged by calling the warehouse directly rather than working through a middle man.

By building a relationship with a partner that holds multiple direct liquidation contracts, you gain access to many different commodities through a single source. That means you spend less time sourcing and more time selling and making money.

#3 – Look for lots accompanied by a detailed manifest
A manifest is a list describing the items for sale in a particular lot. It includes the quantity, cost, and description of all products. In the secondary market, salvage products are often sold without a manifest in unsorted, bulk lots. Such lots can have good profit potential. But, if possible, purchase lots that come with a manifest. This allows you to confirm that what you paid for is what you received. Industry-wide less than 40% of salvage loads come with manifest. Some liquidators, like GENCO Marketplace, provide a manifest for over 70 percent of the inventories sold. In fact, GENCO allows you to examine the manifest on its website prior to purchase.

#4 – Understand the terms and conditions for reselling products.
Many retailers and manufacturers place restrictions on remarketing their products in order to protect their brands. For instance, some require that you remove the brand label from the product. Retailers often restrict resale of their products within a certain radius of their store locations. Some companies even require exportation of the merchandise. If you don’t clearly understand and follow these restrictions, you risk fines and other legal action. In addition, you’ll lose future opportunities to resell the company’s products.

#5 – Know your freight costs
As the buyer, you are responsible for freight costs from the liquidator to your location. These costs can mean the difference between profit or loss on the load. Buying from smaller, single-location liquidators may involve hefty freight costs that cut into your profit margin. Larger liquidators typically store products in multiple warehouses throughout the country, enabling you to cut freight costs by sourcing product from nearby warehouses.

Mike Jennings is vice president and general manager of wholesale liquidator GENCO Marketplace (https://www.gencomarketplace.com), which liquidates $3.5 million worth of quality product every day. Mike can be reached at 800-224-3141.