Sometimes we need to review basic product sourcing information for those who are new to the concept of buying liquidations. I’ve pulled a few paragraphs from The Liquidators Guide to get us all up to speed:
Why would a retailer, wholesaler, importer, or manufacturer liquidate merchandise?
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- Individual item or product line item is a slow seller
- Inventory is seasonal and must be liquidated to recoup capital once season passes
- Items are no longer being manufactured, therefore restocking supply is not possible
- Item has been replaced by a new or improved model
- Items held up in customs, and due to lengthy delay, end-purchaser order is canceled
- Items are, in some way, damaged or compromised.
It does not matter who is liquidating stock, the primary reason for doing so is simply an attempt to recoup dollars that would otherwise be tied up in a product that can no longer be sold for a profit. Rather than take a total loss, inventories of merchandise are often liquidated to capture some/any amount of revenue.
Purchasing liquidation merchandise represents an excellent way to acquire low cost inventory, as most of the time items can be purchased for pennies on the original wholesale dollar!
Salvage Merchandise refers to inventory that is compromised in some way. One definition of salvage is simply: “The act of saving imperiled property from loss.” In terms of wholesale salvage merchandise, imperiled property is the compromised consumer item, and “loss” can be translated as “recovering as much revenue” from said item. As a salvage purchaser, you will be spending time re-working products that are damaged in some way and/or missing pieces. The process of recapturing value with compromised items is where the true hard work comes in to play.
Of the many reasons merchandise might be deemed salvage, here are the most common reasons inventory might be described as such:
Customer returned items – retail items that for various reasons are returned to the reseller for exchange or store credit/refund. Some customer returned items are damaged in such a way that they cannot be resold as new or be made operable. The caveat here is not all customer returned items are damaged!
Tested and deemed defective/broken – Some items returned to a retailer are, indeed, defective and/or broken. Part of the reverse supply chain process might include sending items to a testing facility where products are examined for functionality. Some items at this point are either refurbished or liquidated depending on the extent of repairs and/or servicing needed.
Close or near dated – In the case of grocery items, large retailers will send damaged and/or items nearing their prospective freshness dating to a reclamation center to either donate, dispose of, or liquidate to us, the wholesale liquidation buyers.
Insurance claims – Inventory that has suffered damages due to flooding, theft, or perhaps fire/smoke damage. This type of salvage merchandise is typically sold by large insurance companies who are trying to recoup dollars paid out for claim settlement damages.