The single most important factor in wholesale closeouts is trust.

If you are buying an overstock lot, you need to be able to trust that the merchandise is authentic and not counterfeit, trust that the items you receive will be the same items you paid for, trust that the shipping container will arrive at all! These may sound like no-brainers, but those of us who have spent time (and money) in the world of wholesale overstock know there isn’t much you can take for granted.

Unfortunately wholesale closeout is an industry that remains riddled with fraud. There are many people out there who view wholesale fraud as an easy way to make a quick buck, and they prey on the uninformed and underprepared.

Most buyers simply cannot afford the potential damages that can result from buying unverified stocklots. If you are working with a new supplier for the first time, there are a few precautions you can take to verify them as being legitimate:

  • Ask to see their business registration – A legitimate business will have been registered, and should gladly prove it when asked. Of course, just because someone does not have a business registration does not necessarily mean that person is dishonest. But if they give cagey answers or get defensive, take it as a red flag. If your supplier can’t be straightforward about something as simple as a business registration, what else might he be trying to get away with?
  • Ask where the warehouse is – Stocklots take up space – a lot of it. If your supplier doesn’t have a place to store the products, it is safe to conclude either: a) there are no products, or b) the person you are talking to does not have direct access to them. Ask your contact where their warehouse is and gauge their response.
  • Search the business on Google Maps – Scammers will commonly provide false addresses to make their businesses seem legitimate, assuming that nobody will bother to check. Simply taking 30 seconds to type the address into a Google search can reveal a lot about your supplier’s business operations. Use the street view to confirm that the address is in fact a warehouse and not a house or an office.
  • Do a site visit – If time and travel budgets permit, it is always best to meet a supplier in person. It’s much easier to gauge someone’s intent when you meet them face-to-face.
  • Check references – Ask the supplier for letters of reference from other people they’ve worked with. If the supplier has been in business for a while, they should have contacts who can vouch for them. If they are cagey about supplying references, or if you suspect that the references are fake, then the supplier has given you everything you need to know.

Keep in mind that using any one of these methods on its own will not be as effective as using several of them at once.

For any dealer in closeout goods, it is critical to be on the lookout for counterfeits and low quality goods. Be careful of deals that don’t seem believable. Are the prices too good to be true? In many cases, they aren’t. You should always be able to get paperwork on any stocklot you buy, including a business, registration, a certificate of authenticity and a sanitized invoice. If the product is branded, there should be a brand release verifying that it really does come from the brand in question. If your supplier is unable to provide paperwork, thank them for their time and move on.

It is good practice to request a sample of each lot you purchase. Inspect the product carefully, examining subtleties of material and stitching. This requires close attention to detail and substantial knowledge of the product in question; you really have to know the product in order to detect fakes. Go to the store and buy a legitimate piece to compare your sample against, and compare in detail.

Wholesale closeouts always carry a certain degree of risk. Because the lots involved are so big and their value so high, it is really important to take every possible precaution in order to minimize these risks. Knowing what to look out for will keep you from making costly mistakes, and help your business excel.

For more information about reducing risk in the industry, check out these links:

http://www.wholesaleforum.com/discuss/

http://www.retailersforum.com/subscribe/show/32

https://www.bbb.org/

Tanjila Islam is the CEO of TigerTrade, an online marketplace for international fashion and lifestyle stocklots. She is an also an Adjunct Professor at the Fashion Institute of Technology, where she teaches courses on International Trade and Global Sourcing.

Learn more about TigerTrade by visiting www.tigertrade.com.

 

Our 2017 Liquidators Guide chronicles 12 years of wholesale product sourcing experience and includes my personal black book of direct source contacts! As an industry expert, I'll share the success I've enjoyed along with the mistakes I've made buying and reselling liquidation merchandise.

If you are thinking about buying pallets of liquidation merchandise from a liquidator, broker, or direct from department stores, you need to check out The Liquidators Guide