One way to increase your inventory and reduce your purchasing costs is to buy the surplus inventory of others. This can include buying excess stock from manufacturers, retailers, wholesalers or distributors. Knowing the basics of finding, selecting and making offers on surplus stock can help you find products you can sell for a bigger profit than if you used traditional purchasing methods.
The first step in buying surplus stock is to find the sellers of excess goods. One way to do this is by contacting wholesalers, distributors, liquidators and sales representatives of manufacturers. Contact retailers directly, asking about their surplus stock situations. Charities often receive donations of excess inventory and might be willing to sell to you because they aren’t set up to vend everything they receive. Look for merchant going-out-business sales, liquidation sales, public auctions and local or regional business-to-business exchange services. Chain stores might be required to return excess stock to a main warehouse, so independent retailers might be a better target for you. Search online at websites such as eBay, Craigslist and Overstock.com. To find items sold at government auctions, visit the website of the U.S. Small Business Administration and navigate to the Buying Government Surplus page.
Research What’s Available
After you have gathered information on the types and quantities of surplus stock that’s available for purchase, compare and analyze what will work best for you. Determine if any items you are considering buying are close to or past their expiration date. If you are buying discontinued items, consider whether they will still be under warranty or will be obsolete before you can sell them. Compare available items with your target customer and determine how likely your customers will want the items, what they’ll be willing to pay for them and if you have competitors selling these same goods. If you’re purchasing from a manufacturer, find out if it will be selling more of this inventory in your area or if you can get an exclusive distribution agreement. Determine if you are legally allowed to sell the inventory you plan on buying. Some items, such as food and medicine, will require one or more licenses.
Once you know exactly what inventory you want and are willing to pay for it, make counteroffers to sellers. Try to negotiate lower prices than the original asking price -- remember these goods are often items the seller can’t sell and may be willing to dump at very low prices. Ask about free shipping or if the seller will store some of the items until you finish selling them. If you are short on cash, offer to sell the items on consignment, paying the seller as you sell the excess surplus, returning what you can’t sell. If you can’t get items on consignment, negotiate the longest payment terms you can. For example, if you think it will take you 60 days to sell enough of the excess inventory to pay for the original purchase cost, ask for 70-day payment terms. Ask manufacturers to extend warranties or customer service to surplus you buy from them.
Research Donation Deductions
In some cases, you will have to buy more surplus stock than you want in order to get the items. If you can donate what you can’t sell, the tax deduction might give you the extra financial cushion you need to make the purchase work for you. Contact an accountant versed in charitable contribution deductions to determine exactly what write-off amount you will be able to take on items you donate. Not all nonprofits qualify for tax-deductible donations -- find a qualifying charity that will accept your goods before you rely on a donation strategy.
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