Every year over half a million businesses are created in the United States. Approximately one third of these start-ups are retail businesses. A large portion of these businesses will focus on the “Secondary Market”. This marketplace offers great advantages and high rewards but you need to be well prepared. Finding the right supplier to source products from is critical.
Secondary Market products consist of Closeouts, Surplus Goods, Customer Returns, Liquidated Items, and any product that is not sold after its initial manufacture. Many companies specialize in secondary market purchases and reselling. Resellers might experience some level of unsellable merchandise in these types of wholesale orders but not always. Retailers will be hard pressed to find a cheaper source of merchandise than secondary market items and these products can be a great way to turn a profit.
Working within the Secondary Market is more than knowing just your product niche; you also have to know how to sell products with a variety of quality conditions. Getting creative is essential for moving not only the good products but also the less desirable ones. A good strategy is to start small by purchasing a few pallets and working your way up to buying full truckloads. If buying smaller loads is an obstacle, you might need to consider your source. Remember, where you get your products is just as important as what you get, especially when sourcing surplus goods.
To gain additional insight into this industry we spoke with Michael Lawrence of DirectLiquidation.com. His company represents one of the fastest growing marketplaces for Surplus Merchandise.
“In the past, online liquidators pawned off “as is” and “salvage-grade” merchandise to buyers as the best value available in the wholesale marketplace. Product misrepresentation, low-grade items, and a narrow assortment of tier-2 or 3 brands were commonplace. The ability to purchase small loads or retail-ready products was virtually unheard of. In addition, if you were “lucky” enough to win one of their auctions you could expect a further 7-15% “buyer premium” charge for the privilege of buying their junk inventory. – Michael Lawrence”
Michael went on to explain how Direct Liquidation can solve these problems, they offer buyers an incredible range of products, tier-1 brands sourced from their exclusive relationships with top national retailers and manufacturers. Smaller loads are available so buyers can test customer demand without depleting resources. Having an ability to test demand could be the difference between a good bottom line and a bad one.
Large liquidators buy huge volumes of surplus merchandise and returns for literally pennies on the dollar. They process and sort this inventory and make it available to the smaller buyer. Generally liquidation lots are sold “as-is, meaning there is no guarantee of lot quality and usually no return on purchase. Understandably, this comes with the deeply discounted prices on these lots, typically well below wholesale. But “as-is, doesn’t necessarily mean poor quality. Frequently a large portion of the inventory is in new or like-new condition. Fact is, buyers can and do make a healthy profit reselling this merchandise.
Here are several tips to follow when diving into the Secondary Market.
- Manifests are GOOD. A manifest is a document that details the products, quantities, and original cost of items. Knowing what’s in a lot prior to purchase has clear advantages.
- Always include freight cost when evaluating the profit potential of a purchase.
- Licensed or branded merchandise should be inspected, unfortunately the faux product industry shows no signs of slowing. Get samples if possible and inspect to make sure you have the real McCoy.
There are many fish in the wholesale sea. You do not have to rely on one source for your inventory but finding a really good one certainly won’t hurt. Even if you develop a wonderful relationship with a wholesale company, and chances are you will, keep your eyes open to new opportunities and sales offered by other wholesale companies. Use common sense whenever dealing with a new supplier.
GetThatWholesale works with literally thousands of companies, companies like Direct Liquidation that have been pre-qualified allowing our buyers to make a more informed decision. We want you to be prepared so that your business is successful. Rely on your knowledge and instincts of your customers and industry trends to guide you, but keep your eyes open for new avenues of learning such as seminars at trade shows. Remain flexible, penny-wise, and innovative – chances are your store will not only still be in business five years from now, but will have blossomed. We encourage you to always do your market research, the fact that you are here reading this article means you are pointed in the right direction.