This is part 1 of a 3 part series explaining how to become a liquidation merchandise Broker. A Broker is someone who locates and then sells merchandise he does not own for a commission or markup.
In the first part of our Broker series I want to explain how a Broker makes money, and how much money a successful liquidation Broker can make. You might be tempted to start brokering merchandise based upon the money, but it’s a lot of hard work, as you will see. A successful Broker is someone who has a high level of sales ability and conducts business with high ethical standards. There is a lot of fraudulent liquidation deals within the industry; behind most you’ll find an unethical broker.
Let’s dive right in and figure out how a Broker makes a living!
Commission – In a commission based scenario, a Broker will obtain a profit from the “back-end” of the sale, directly from the owner of the merchandise. The percentage, or fee is decided upon before the Broker actively advertises any inventory. Just like a real estate agent who agrees to sell your home, the merchandise Broker, will actively market excess inventory until it is sold. In this type of brokered transaction, the broker steps aside when a buyer is found. This buyer would deal directly with the inventory seller paying the Broker his percentage once the deal is complete.
Product markup – Of the two ways a Broker makes his living, the product markup is probably the most popular method used today. In this pricing technique a Broker will add flat markup, or percentage, to the merchandise he advertises. In this method, when a sale is made, the Broker will invoice his customer for the full purchase price of the merchandise and his markup. The Broker keeps his markup and then sends the balance of the money to the warehousing seller who would then ship to the Brokers’ customer. In this scenario the Broker obtains his profit from the “front-end” of the deal.
With the two pricing structures above, a Broker can quickly make a comfortable living selling wholesale pallets and truckloads to retail store owners, eBay & Amazon sellers, flea market vendors, and exporters. It’s not uncommon for a wholesale Broker to work with buyers who are willing to spend tens of thousands of dollars for inventory. With transactions this high, adding a few percentage points to the “front-end” can amount to a nice profit for the broker.
For the merchandise Broker, money is good, but there are pitfalls within this profession. In the next part of this series I’ll tell you about what can go wrong brokering pallets and truckloads of merchandise. You just might decide to keep your day job!