When doing Purchases of pallets with overstock or returned items through a liquidation company can be appealing for resellers and bargain hunters, but there are several potential downsides to consider:
- Quality Variability: Items in liquidation pallets can vary widely in condition. You may encounter damaged, defective, or unsellable products, which can lead to losses if you cannot resell them.
Incomplete or Missing Items: Pallets may not contain all the items listed or may have missing parts. This can diminish the value of the products and complicate resale efforts. - Lack of Information: Liquidation companies often provide limited details about the contents of the pallets. This lack of transparency can make it difficult to assess the potential profitability of the purchase.
High Competition: The liquidation market can be competitive, with many resellers vying for the best deals. This can drive up prices and reduce profit margins. - Storage and Handling Costs: Once purchased, you may need to invest in storage space for the items, and there may be additional costs for handling, sorting, and repackaging them for resale
- Legal and Compliance Issues: Some items may have restrictions on resale, or there may be legal implications related to selling certain returned products. Understanding these regulations is essential to avoid penalties.
Time Investment: Sorting through pallets can be time-consuming. The effort required to inspect, clean, and prepare items for resale can offset potential profits.
Market Demand Fluctuations: The resale value of liquidation items can fluctuate based on market demand. Items that seem valuable at the time of purchase may not sell well later.
Unsold Inventory: There’s a risk that not all items will sell, leading to excess inventory that ties up capital and storage space.
Return Policies: Liquidation purchases are often final, meaning you cannot return unsold or defective items, which can increase financial risk.
You do not know the history and provenance of the merchandise. I just wrote an answer for a company that manufactured jackets overseas and a large number of those jackets came to the United States with a lice infestation.
You probably could get some bargains but it would be preferable to view the merchandise before purchasing. A segment on CBS Sunday Morning showed a kind of “trade show” of merchants selling returned merchandise and there were bargains there.
- The returned items most of the times are junk, with missing parts, broken parts, empty boxes, etc. Maybe 20% of the items are useable.
- Most of the items are not marketable. Expired dates, damaged boxes.
- The items are not sale-able due to no demand. These were items that big stores weren’t able to sell, and outlets like Dollar Stores wouldn’t touch, so how do you think you might be able to sell?
- Some of the Liquidation companies promise lots and may represent lots of things that they might not be able to deliver on.
Normally liquidation pallets only work if you buy in huge quantities direct ( not including middle men potentially cherry picking ). By cherry picking it doesn’t mean they are taking out a laptop from your pallet but they get a manifest of 40 pallets and keep the 1 best one for themselves .
FYI B stocks for example is one of the biggest sources of untouched: liquidation pallets open to the public without contract bidding and has 30-40 retailers all direct selling . If it’s local and you don’t have to pay for shipping it’s a decent cost savings and makes it financially better .
They are easy to sell if you are aggressive on local markets and can fix minor issues or order the one missing / broken piece that makes it like new . Marketplace to sell them online is a little tougher due to high return rates on big items . Some persons do exclusively brand new untouched liquidation pallets 5 years ago and go through several trailers a month but stopped . All the big regional chains and department stores started bidding on the contracts buying all the new goods at high prices .
To purchase liquidation pallets, it can be difficult to know where to start. Most people think that the steps are simple: find a pallet, purchase it, sell the items, and repeat. But let’s be honest… most things are not as simple as they seem. Buying liquidation pallets and reselling them is no different. If you are an established reseller, then this process will be a lot easier for you. For those who are not, the process of buying and reselling pallets can quickly become overwhelming and may seem impossible. But it’s not. It’s not impossible at all! If there are a category of people who are doing it successfully, then you can, too. The challenge is knowing what you need know to have before you make that kind of investment.
Some of the Things You Need to Think About Before Purchasing Your First Liquidation Pallet:
. Start by Sourcing Small-Scale
Where liquidation pallets are useful is that they allow you get bulk quantities of items to resell. The downside is that it is limited in scope of choice. Even if you get pallets of specifics, such as clothing, you’re pretty much stuck with whatever comes out of the pallet. This poses a problem for beginner resellers. There’s no guarantee on the quality of the item or even if the item works. This a common source of panic for new pallet resellers.
Start by selling smaller scale. Sourcing items for free from your own home, family, and friends. You can even offer to consign for them to earn a little extra money. Then use the money you earn from those sales to invest in purchasing products from places like thrift stores, garage sales, and estate sales.
As you do this, you’ll learn more about reselling that will be useful to you when it comes to purchasing liquidation pallets. You’ll learn more about how well certain items sell, what kind of profit you can expect, and more.
2 Develop Your Plan B
When it comes to reselling, your first plan doesn’t always work the way you intend it. The buyer’s market is a fickle thing that changes as easily as the wind does. In some seasons, the sales are good. Then they’re not. You might find that some items that you could sell online are no longer profitable that way. There will be problems that you do not foresee. As with any business, there is no way to know ahead of time all the possible complications that might come with reselling.
This is why it is important to take time to learn your platforms, join communities, and try to keep up with any changes. Learn how to keep an eye on the market and what is selling well and what isn’t, and figure out how to adjust your business strategies to keep up with those trends.
And above all else– always have a plan B. Find a way to sell online and locally. Maybe you want to focus on selling online, because it works well for you. But always know what your local reselling options are. When you start buying liquidation pallets, there will inevitably come products that you cannot sell in your Plan A platform. This is where you have to utilize your own creativity and find ways to move these items efficiently.
3. Understand Your Overhead Cost
Remember that purchasing a pallet is not simply about the cost of the pallet itself. Pallets cannot fit on a mail truck, and very rarely will UPS or FedEx be a cost-effective way to move a pallet. There are fees you’re going to want to think about before you purchase a pallet, because these all need to be configured into how much money you need to make off the inventory to break even, or hopefully, profit.
How much does it cost to ship a pallet? Are there freight companies that you can hire to do this? Does the liquidator offer shipping? If you live in a residential area, can a large truck maneuver in your neighborhood? How do you plan on getting the pallet off of the truck? Do you have a forklift? Or can you pay extra to get a truck with a lift gate?
The overhead costs can get really high. If you have a trailer, or you’re willing to rent one (which, regrettably, is not always a cost effective long term solution) it might be more efficient to pick them up yourself. In which case, how much time are you spending getting these pallets yourself? Remember, any time you spend doing this is time you’re NOT spending listing. How much gas or car maintenance will you need to keep up with the demands of picking those pallets up yourself?
4. Know Your Liquidator’s Pallet Listings and Programs
It’s not enough to say, “I would like to buy a pallet of Amazon goods”. What kind of Amazon program are you looking for? Are you looking for a bunch of small items that wouldn’t sell online, but could sell in a store? Are you wanting larger items like furniture? Something in the middle?
You also have to consider the condition of the items on that pallet. Many of them will be mixed between customer returns and shelf pulls. But you can also find pallets of salvage items (usually lower cost, but much higher risk that the items are not working), or you can find high dollar items of completely overstock and/or shelf pulls. Less risk, for sure, but you’ll pay for it in the price of the pallet. The same goes for any major big box company’s liquidation pallets. Most companies will have different pallet programs, and not all liquidators are going to have all of them. You would need to spend time learning about all the various programs available to you, and determine if you even have the means to sell those items in your chosen business model. And honestly, sometimes you may just need to try a couple to really get a feel for what kind of items you can expect. You can also review pallet unboxing videos on YouTube, but be wary. As a YouTuber, I would always recommend that you watch unboxing from multiple YouTubers, from the popular YouTubers to the lower sub count content creators, to get a feel for the consistency of those loads.
5. Think About Establishing a Reselling Business First
By “having an established reselling business”, I don’t mean regularly selling things on Facebook Marketplace or having regular garage sales. These skills can help you, but when it comes to buying liquidation, you’re going to need more than that.
When you source your inventory in other ways the main problem to solve is “Where do I find new inventory?”. You make the decision in store, deciding and hand picking what you want to resell. In the liquidation world, the question is entirely different– “how do I sell my new inventory?”. You don’t get to hand pick things that will sell well on your platform. You get what you get and you won’t know until you’re processing that pallet. You’ll need to solve the problem of being able to get the most profit and getting that item in front of the people who are likely to buy it.
Any experienced reseller will tell you that there is a learning curve to any platform that you use to resell. There are terms of service, fees, and listing techniques that vary from platform to platform. If you’ve never utilized ANY of these platforms before, you’re putting the pressure of figuring out the unique platforms that you’re wanting to sell on, as well as learning how to move a pallet of inventory. It’s a recipe for overwhelm.
Start by establishing an online platform that you like. Learn the tips and tricks for selling there. Get some customer feedback build up that will boost your listings and help your sales, too. This step is not necessary, of course, however keep in mind that your learning curve will be a lot longer if you decide not to. Be prepared!