Liquidation Merchandise


March 16th, 2009

Many of the intended readers of this blog may currently be participating in the ASD/AMD Show in Las Vegas this week (3/15-18).  I wish all of you the greatest success at an event that continues to be critical to general merchandisers in the US and beyond. For those of you interested in developing new business, as you may know already, there is a growing demand for home/gift, general merchandise and new categories by apparel retailers who are looking for that one niche product that will get new customers into the store and allow their apparel lines to sell themselves. Accordingly, our team at the Off Price Specialist Center is launching a new salon area at our August Off Price Show called “HOME.”  HOME @ the Off Price Show is designed to be a home/gift, gen merch and new product “incubator” for apparel retailers looking to add more excitement at their stores. It is a ground level opportunity for vendors in these categories to make a significant impact at the largest and perhaps ONLY Off Price Show in the apparel industry.  Our apparel “jobbers” or off price specialists (the newer, more politically correct term) have become known as heroes to struggling apparel retailers who have found excellent values at our semi-annual trade show – which is the offical Off Price Show of the multi-venue/concept Las Vegas Fashion Week. Home/Gift, Gen Merch / hard goods are not new to the Off Price Show.  My good friend Larry Manus (who is at ASD this week) has been bringing his hard lines to the Off Price Show since its inception in 1995.  “I meet entrepreneurs and savvy retailers who already got the message about the need for diversification.”  His New Jersey-based company, United Auction LLP, has been wildly successful at our show in hard goods, as has St. Louis off price specialist CWC Inventories.  And as long ago as 2003, when I was first involved with the Off Price Show as its outside marketing agent, I met candle and gift vendors in the second last row of the show who were doing cartwheels because they were writing orders like crazy from aggressive retailers looking for new products. Now that I have been more directly involved with the show for the past 5+ years, it doesn’t surprise me that there is a great fit for home/gift and gen merch vendors at Off Price.  Our concept is known to many of our seasoned buyers as “the treasure hunt” because you are sure to find 1-2 new products (not on your pre-show shopping list) that could make your whole season or year.  The show is not arranged by category because of the nature of the off price business.  Our vendors carry either all categories or they specialize in one or two, plus they may come across an opportunity in a new category or product line that they know (based on their years of experience) could be a winner for their retail customers or prospects.  For Home/Gift, Gen Merch and new category vendors, we are making a more centralized HOME salon area to accommodate our largest retailers (who serve on our retail advisory board) who have been begging us for this kind of centralized space so that they can go back to their offices and – mind you they are all CMOs, CEOs and other executive types) tell them about the great values they found in bed & bath, table top, home decor, gift and other non-apparel categories that could be real winners for their chain. I invite all who are interested to contact me at the Off Price Specialist Center at either 262.754.6910 or dbrowne@offpriceshow.com.  I feel that this is an exciting opportunity for these vendors to develop new business that happens right on our show floor.  If you need further assurance, talk to my good friend Jason Prescott, President of JP Communications, whose TopTenWholesale.com is an official sponsor and media partner for the Off Price Show and has been since 2001 (I think).  Jason is a real visionary who’s very big on building bridges online for wholesalers and retailers, and takes advantage of the onsite connections at the Off Price Show to transcend this message across apparel retail lines.  Thanks, Jason, for this wonderful blog and for all the great things you do to support our respective industries.

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June 22nd, 2008

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.

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June 7th, 2008

 

Everyone can relate to the seeing a movie and walking away either ready to cry or put on a cape and save the world. Those of you that are old enough to remember the movie “Rocky” with Sylvester Stallone will understand what I am talking about.

Spending money can be a real emotional experience for many people.  When shoppers buy based upon an emotional feeling they will spend more money.

Ok, for fear I am loosing some of you lets look at some examples of emotional spending:

Buying a new car - Taking that test drive…ah that new car smell, the acceleration and the fact that you look very cool in a new ride! Pure emotion. The dealership shark salesperson understands that if you are involved emotionally…a sale will take place. You will hear him say things like, “How did it FEEL driving down the freeway” or “Wait until your friends see you in this ride!”

Buying an engagement ring – This very act has emotion written all over it. The buyer will typically experience FEAR that if a large enough diamond is not purchased the receiver will not feel LOVED. When love is involved, money is never an issue….right?

The above examples are large purchases and may be a bit extreme, but emotional spending occurs with smaller purchases as well. If you have a retail store of any size you should use the power of emotion to increase sales and cash flow.

“Ok, makes sense…how do I implement this emotional marketing in my store?”

I am so glad you asked…

Retail advertising phrases like, “Inventory Reduction” or “Final Markdown” create a sense of urgency and emotion in retail shoppers. Combine this emotional advertising  with products at a great price and watch your sales go through the roof!

 

Large Big-Box retailers will heavily advertise extreme discounts to bring shoppers through the front door. I have been in large department stores and watched the sales staff open new cartons and cases of merchandise that is already marked “clearance”.

Did you catch that? Here it is again…new retail merchandise already marked down before it hits the shelf!  Why? Consumers want  to feel as though they are saving money. Happy shoppers spend more!

I would suggest that you maintain a particular area in your store for Liquidation merchandise…ongoing. People love to save or feel like they are saving money!

I like the phrase: emotional retail marketing…as a retailer you should as well. Appeal to the emotional side of your customer base offering products at unheard of pricing and your average sales ticket per customer will increase.

When ordering inventory plan on ordering merchandise to liquidate as apart of a liquidation promotion. Ask your wholesaler if they are “closing out” any merchandise or better yet find a wholesale liquidation company to start buying from. Bring merchandise into your store with the intent to liquidate it. Wholesale liquidators specializes in selling name brand closeout merchandise at a fraction of the original retail and/or wholesale price!

Sourcing merchandise from a liquidator allows you, the retailer, to stock your clearance shelves with fast selling, low priced merchandise. Make it a habit to buy merchandise on a regular basis and hold “Final Markdown” sales events.

Get emotional!

Your customers will love shopping at your store!

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May 27th, 2008

What are your payment options when purchasing wholesale and wholesale liquidation merchandise from a supplier, or should I say what are the payment requirements? Many on line vendors who distribute wholesale merchandise accept the traditional forms of payment including Visa, Mastercard, Discover and American Express. There are many companies that will also accept payment via Paypal, which is a way to electronically send money to an individual or company by way of an email address.

You may have run across some companies who list, “wire Transfer” as a payment method. In fact most companies who distribute wholesale liquidation pallet and truckloads require that your purchase be paid for with a bank initiated wire. A wire transfer is an almost instantaneous electronic transfer of funds from your bank account to the receivers bank account. You must have the payee’s full business name, bank name, routing and account number to send a wire. A wire transfer is issued from just about any bank and takes a few minutes to complete while in the teller line. Your bank will charge a fee to process a wire transfer. Fees will vary, but average around $15-$30 for an outgoing transfer.

Although wires are immediate, it can take 12 to 24 hours for payment to arrive in the payee’s account.

In my experience it is an industry standard when purchasing large quantities of liquidated merchandise to use a wire transfer. When you are buying liquidated inventory direct from “Big Box” retailers..this is your only option for payment.

Wire Transfers are final, there is no recourse. You can charge back a credit card purchase, but a wire is unstoppable. Once funds hit your payee’s account…it is a done deal. Make sure you fully understand what you are buying and who you are buying merchandise from before you initiate a wire transfer.

Before you make any large purchases using a wire transfer make sure you have investigated the company you are about to buy from. Check references and ask as many questions as you can before making an investment.

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May 22nd, 2008

Are you Investing in the stock market or buying a new home? Chances are you will use a Broker to complete either one of the transactions. Maybe your scheduling a much needed vacation or getting a new auto insurance policy…you might use the services of a Broker here as well.

Being a professional Broker is a well-respected career unless, of course, your talking about liquidation Brokers. Why does the term, “Liquidation Broker” leave such a sour taste in the mouths of so many? I have been on both sides of the transaction when it comes to brokering liquidation merchandise. I have acted as and facilitated hundreds of brokered wholesale purchases and prior to becoming a Broker myself; I purchased pallets and truckloads from Brokers.

A wholesale liquidation Broker locates merchandise for sale and then actively looks for a buyer.

A broker makes a profit in one of two ways:

  • Broker finds 100 Cell Phones for $10 each and agrees with seller to a 5% selling commission. The Broker then advertises the cell phones, completes the sale and the seller receives proceeds. The seller then would issue a check to the Broker for 100 x $10 = $1,000 x 5% = $50

  • The Broker finds another 100 Cell Phones for $10 each, but this time the seller will not offer a commission. The Broker will then advertise the cell phones at $13 each, adding his markup/commission of the “front end” of the transaction. Assuming in this scenario the phones sell for $1,300 the Broker would then pay the seller $1,000 and arrange delivery of the phones. Here the Broker has made $300


The second example represents how most brokered transactions are set up. Be cautious when purchasing from a Liquidation Broker:

  • Brokers cannot accurately describe the merchandise they are selling because it is not in their possession
  • Brokers tend to offer “Inflated” claims about the quality/condition of pallets and truckloads of liquidation merchandise they are representing
  • Brokers typically set their own merchandise “markup” and if too high this will decrease your ability to profit from your wholesale purchase. In each transaction you really do not know how much markup or commission you are paying to the broker
  • Brokers tend to be very responsive with purchase inquiries, however once a purchase is made customer service usually becomes non-existent
  • Very few Brokers work for repeat business

The above points represent my personal opinion based upon years of experience in the liquidation industry. As earlier stated, I have purchased pallets and truckloads of wholesale closeout merchandise and have witnessed first hand how a purchase can be grossly misrepresented through a brokered transaction.

If you are new to purchasing liquidation merchandise it is best to inspect the actual merchandise before you make an investment. There are plenty of Liquidators who maintain actual warehouses full of merchandise. You might have to research your particular State and plan a road trip visiting a few companies, but in the end the effort and time invested could save your pocket book tremendously.


What is your experience working with Liquidation Brokers? Share with our community your story…

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