As retail stores approach the end of the year, they have to deal with a few common problems, such as customer returns, closeouts and excessive stock. These retail stores don’t want to declare a complete loss on these products, of course, so they will try to recoup as much of their money as they can. They do this by selling the merchandise to vendors who then repackage it into liquidation pallets and sell them at discounted prices to other retail stores as returned merchandise for sale. Sometimes, these vendors will sell the merchandise directly to retail customers. As an entrepreneur, you can take advantage of these sales to get cheap inventory that you can later resell online or in your brick-and-mortar store.
The Promise and the Expectations
The hype out there is that you can make a lot of money when you buy pallets of returned merchandise from a wholesaler and then sell it on sites like Amazon or eBay. It sounds pretty straightforward – a simple case of buy low and sell high.
Despite how deceptively easy it sounds, there is a process to it, and it takes a bit of knowledge and experience to do it just right. First, you have to find the right niche in the market to exploit. It should preferably be something that is undersupplied, and that can move fast. Once you find that, you need to look for a reliable supplier.
Most retailers will turn to wholesale liquidators and suppliers as they tend to give low prices and high quality if you find a trustworthy and reliable one, that is.
Where to Buy Liquidation Pallets?
Third-party wholesale liquidators and suppliers will buy returned or overstocked merchandise from different retailers and then bundle the merchandise into pallets. They could bundle them according to different criteria. One of these is the type of product, with pallets containing nothing but TVs, or T-shirts, for example. They could also bundle them according to the product category, such as electronics, furniture and so on.
There are lots of such third-party sellers all over the country, including American Merchandise Liquidators, Via Trading, GENCO and others. Some retail stores may sell pallets directly to their customers, as well. However, most of the time the customers have to negotiate the terms of the sale with the individual retail chains and stores.
How Does It All Work?
Most of these liquidators and wholesalers have websites where they advertise their products and services. They usually sell the pallets either individually or in large trucks through auctions. The buyers need to open an account and sometimes have to accept a credit check as part of the process. After their accounts are approved, they can bid on products either by the pallet or by the truckload.
Some sellers even afford buyers the opportunity to skip the bidding process altogether and buy the pallet up front. Once the sale has been made, the buyer can arrange with the seller to either come and pick up the pallet or have it delivered to them. When the pallets are in truckloads, the sellers can sometimes insist that a specific company be used for delivery.
A Deeper Look
It is profitable to get in the business of reselling items. However, if you’re going to be successful at it, you need to know which steps to take.
For starters, you should consider the quality of the merchandise. The hype out there will have you believe that all the products are high quality, just waiting to be resold. However, you should understand that, by its very nature, returned merchandise can and often does contain bad batches that have nothing but unsellable items.
Most liquidators and wholesale suppliers will promise you high-quality products. However, only the most reputable ones will offer genuinely high-quality products. Returned merchandise is pretty common. Companies like Amazon and Walmart have lots of pallets of this stuff.
There are plenty of reasons why a customer would want to return what they bought. They might have made a mistake and ordered a product they didn’t really want. On the other hand, the seller may have failed to ship the right product to the customer, or they sent the right product with an incorrect feature, such as the size or color. The customer can also return a product because it wasn’t functioning as advertised. These are just some of the reasons why a customer may want to return a product. The point is that such products usually cannot be resold by the retailer as new and must be considered a loss. To minimize that loss, the retailer sells them off to wholesale retailers.
Some of these products don’t even ever get opened, and are returned in pristine factory condition. However, because the retailer is not allowed to resell it unless they relist it as either refurbished or returned by the customer, it will have to be considered returned merchandise.
Beware of Scammers
Just like with any other kind of business purchase you make, you must do your due diligence when buying pallets of returned merchandise. Pallet sellers who are trustworthy and legitimate, even the ones who do their selling online, will provide comprehensive information on how to contact them, including their customer-care email addresses, phone numbers and physical addresses.
Legitimate pallet sellers will also give detailed descriptions of what is contained in the pallets they sell, including the total number of items, the individual products and their prices.
You can also find out more about the businesses you are dealing with by checking with the Better Business Bureau and the Federal Trade Commission. If the company you’re dealing with is legitimate, you’ll find information on their track record and legitimacy using these resources.
Things You Should Consider
As a buyer of pallets of returned merchandise, you should remember that the cost you incur per pallet or per truckload is only just the beginning. You should also consider other costs you will incur before you ever sell a single product, such as the cost of transportation and delivery. If you’re going to pick the pallet yourself, then you need to either own or rent a vehicle with which you will carry the pallet. Pallets can be pretty large, with some of them being taller than five feet and weighing hundreds of pounds.
If you’re going to have the pallet delivered to you, you should expect to pay some hefty shipping fees to the trucking company that delivers the goods to you. These companies typically charge based on weight, and so you could end up paying a lot.
Another thing you should consider is the very nature of the products you are buying. Keep in mind, most of this merchandise is returned merchandise, which means it might be damaged or not function at all. It might even be in a state where you cannot sell it at all. You should, therefore, factor in some potential losses from unsellable products and consider that when you’re counting your costs and pricing your items.
Nicky is a business writer with nearly two decades of hands-on and publishing experience. She's been published in several business publications, including The Employment Times and Business Idea Factory. She also studied business in college.