The popular question: Returns or Shelf pull items? This was posed via email and I decided to touch upon the subject in this post, as well as below in an audio message. To give you a little background, this email was received from someone who just recently purchased our Guide and is in the process of making an initial pallet purchase.
Here is the email I received earlier today:
I have a follow-up question. In general, is there a fairly standard rule (similar to the 80/20 rule in business) that one can use as a very rough, general guideline when it comes to what one might expect when buying a pallet directly from a store? There was a case study in the Liquidators Guide that listed (for example):
60% of items were retail ready (35% eBay / 25% flea market)
20% need to be tested – reason for return “not waterproof” marked on return tags
10% need minor repairs
10% garbage
I know every pallet will be different for sure but is there a rough idea of what the average pallet might have? I am thinking of something like this (using primarily eBay as the reselling avenue, for instance):
X percentage of items that could be marked up roughly X percent
X percentage of items that could be marked up roughly X percent
X percentage of items that need minor repairs
X percentage of items that are basically garbage
I know there is no way to know for sure, but I was curious if there was a rough rule you go by. Thanks again for all of your help!
Listen to me talk about customer returns below. Warning: my words are a game changer! …I’ve always wanted to say that!
If you must apply a standard when purchasing customer returns, figure 50/50. 50% percent damaged and 50% retail ready. Ouch! 50%…really? It’s a possibility, and if you want to try and project profitability, use this loss ratio to see if you can stomach such a proposition. It’s unlikely the load would be this damaged tainted, but I want you to know you’re putting your start-up capital at risk.
Alright, I’m going to go a little further with my response. Are you buckled in? I’m making a new rule that will apply to everyone who is about to purchase secondary market goods.
If you’re just getting started with this idea of purchasing liquidations please either:
- Use allotted start up funds to purchase overstock or shelf pulled items only; or
- Use no more than half of your start up capital on customer returns
Point one above is safer, point two also provides a bit of a backup plan if your initial purchase does not live up to your expectations. If you allocate half of start up capital to customer returns, at least you’re not “out of the game” if the purchase turns out to be a mistake.
I hammer on this point all the time because I see a lot of people get too excited when making their first purchase. For whatever reason, and there are many long-time readers who will attest to this, the prospect of buying secondary market goods, i.e. customer returns, overstock, and shelf pulled items is a bit like the excitement of rolling dice or pulling the handle on a slot machine- Yes, I just made the gambling comparison.
I need a drink tonight after all of this “risky” talk. Would you like to join me? We can further discuss the perils of liquidation purchasing. To answer the question you’re about to ask….YES, one can make money buying secondary market goods! It’s profitable if you use a little common sense and understand there’s a bit of a learning curve. Alright, until next time…good night.
