Liquidation stocks have become a popular choice for entrepreneurs who want to minimise their product purchase prices. It’s a very appealing strategy for sure because you can buy excess retail inventory to warehouse clearance pallets dirt cheap. If you can source the stock at discounted prices and sell it strategically, you can grow your profit much faster than any traditional wholesale strategy.
Doesn’t it sound too good to be true? It probably is, if you’re not smart about your strategy.
Although liquidation deals are highly profitable, they have their own negative aspects. This article will help you understand how to deal with liquidation stock buying strategies rationally and turn them into revenue-generating engines.
Why Liquidation Stock Attracts Entrepreneurs
The biggest plus point of liquidation stock is its accessibility. It doesn’t matter if you’re an online seller, small business, market trader, or a startup; you can easily buy the inventory without worrying about the annoying minimum order limitations.
As an entrepreneur in Australia, you must know how import, freight, and supply chain delays can significantly enhance your overhead expenses. With a liquidation purchase, you can reduce that upfront investment to several degrees. If you’ve been wanting to test some new product categories without signing any lengthy supplier contracts, then buying liquidation stock can be a lifesaver.
If you know how to use liquidation stock deals strategically, you can gain higher profit margins, fast inventory turnover, low-risk product testing opportunities and seasonal or promotional campaigns.
The Risk Behind Liquidation Stock Deals
Sometimes, low-cost deals are too good to be true, and there may be a risk lurking behind them. The liquidation stocks exist for many reasons. Perhaps some items have been overly produced, returned, discontinued, have damaged packaging, or have been left over from a retail closure. Depending on the situation, some stocks may be in good condition while others may be damaged.
The idea of significant savings entices many liquidation stock buyers; however, if not done correctly, buying liquidation stock can turn into an expensive mistake. Buying stock without examining, grade confusion or believing all goods can be sold, can more often lead to stocks that end up lying around in storage instead of generating revenue.
A cheap pallet purchase is only a good decision if you are confident that it can be sold at a reasonable profit.
How to Assess a Liquidation Opportunity
Liquidation buying starts well before you make the payment for the purchase.
The first step should be to assess the condition of the stock. Liquidation companies usually grade their stock under categories such as: new, like new, tested returns, mixed returns, or salvage. All categories have different resell potentials, and therefore, it is important to understand what you can handle and what your customers will buy without hesitation.
The next step is market analysis. Yes, buying an entire pallet can seem very cost-effective. But what if the products have very little or no demand in your local or online market? Your profit potential will drop to negative. It’s best to run market analysis about your potential selling points, what your competitors charge, and the shipping costs you’ll have to pay before making any risky investment.
The third step is ‘accurate landed cost assessment.’ It involves assessing the cost of everything from purchase, freight, delivery, warehouse storage, down to time spent on sorting, testing, and disposal of items that are unsellable.
Lastly, doing a small test buy is crucial. It helps you understand how different elements of the deal work and how they drive the resale cycles before scaling to larger deals.
How to turn Liquidation Buying Into a Long-Term Strategy
Successful entrepreneurs don’t see liquidation as a ‘one-shot’ opportunity, but instead, they develop systems around it. Here’s what they do:
- Build a list of reliable vendors.
- Understand how to read manifests accurately.
- Learn how to track their profits per pallet.
- Focus on product categories that they understand and are confident in selling.
As time goes on, their instincts naturally sharpen, and they are able to make better purchase decisions, thus reducing risks.
Liquidation stocks can lower the sourcing cost by several degrees, but they also come with high stakes. The line between profitable decisions and regrettable mistakes can blur real fast if you’re not cautious. Therefore, you must do thorough research and only invest when profit margins significantly outweigh your risk analysis. With the right approach, liquidation stocks can be a fast track to enhancing revenue and expanding your business.
