Liquidation Merchandise – Reselling Restrictions?
If you have been following my posts here on the WholesaleU Blog and ToptTenWholesale you probably know by now that buying wholesale liquidation merchandise in the form of pallets and truckloads can be very profitable for your retail or auction business. Buying liquidation merchandise is a great way to source top name brands from some of the largest Big Box retailers.
I want to address the issue of “Brand Restriction Agreements” for end resellers that must be signed and adhered to prior to purchasing liquidation merchandise. If you are buying wholesale liquidation merchandise with the intent to profit from reselling then you are the “End Reseller”.
When purchasing wholesale liquidation merchandise direct from a department store or a contracted reclamation center you must make sure that you follow any reselling restrictions including brand protection instructions.
Why is this a big deal?
All written contract restrictions share one common theme that you must take very seriously….”End User Returns”. Lets say you buy a pallet of DVD players and you are able to offer them to your customers at 50% off of original retail. Sounds like a great deal, huh? What happens when your customer buys a DVD player from you at a great price and then attempts to return it to the original store for full retail credit? The store will come back after you with fines and/or a lawsuit for breach of your reselling contract.
You must take all precautions to avoid this from happening. Delabaling and defacing merchandise will protect you as a reseller of liquidation merchandise. If you follow all of the original stores guidelines for reselling there should be very little if any problems with store level returns.
Make sure prior to buying that you carefully read all written requirements making sure that you can fully comply with reselling terms. You will be asked to sign a contract with your merchandise source before a pallet or truckload will be sold to you. This is one area which you should not take lightly.
Some retail stores will not allow you to resell liquidation merchandise within a a certain mile radius of an actual store. For example Kmart liquidation merchandise cannot be sold within a 50 mile radius of an actual store (Kmart). If you live within a large city this could pose a problem as most larger US cities do in fact have a Kmart or Super Kmart.
To give you better idea of what an agreement might look like I am going to list a few of the requirements for reselling liquidation merchandise purchased from the Target Corporation. Target is a large chain department store, which operates stores throughout the United States selling general merchandise, electronics, home decor, apparel, jewelry and in some states grocery items.
Delabeling and Defacing Agreement for Target Salvage Merchandise:
- All warranty cards to be discarded and destroyed
- If warranty is included with product information, the warranty section must be removed with exception of sewn in labels
- All tags of clothing, both Target and licensed brands to be removed with exception of sewn in labels
- Black out all sewn in labels
- Discard all hang tags and tags
- Remove all Target brand products from boxes and packaging from the Target box unless packaging is necessary for the product
- Black out all UPC codes
- Black out all reference to the Target name
You can see from just a few of the above requirements that there is work involved in reselling liquidation merchandise. Whether you buy direct from a liquidator or buy from the actual store you must follow all reselling requirements. Again, make sure you fully read and understand all reselling restrictions before buying a pallet or truckload of liquidation merchandise.