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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