A Closer Look at Secondary Markets and How Liquidators Can Benefit From Them

If you have just recently entered the liquidation business and industry, you may not be aware of the secondary market. The truth is that if you are not buying from this market, you are probably not getting the lowest prices. However, before getting into the details, you need to know exactly what the secondary market is all about.

Defining the Secondary Market

The secondary market has only recently become directly accessible to liquidation buyers despite existing for almost as long as merchandise and goods have been sold. In a nutshell, the secondary market consists of customer returns, surplus inventory and other products which did not sell the first time they were showcased.

As a liquidation product buyer, if you are shopping at discount stores, you are probably buying secondary market products. Since the discovery of the secondary market, it has been used by liquidation business owners such as you to buy products, fix them and resell them. Other wholesalers also buy this merchandise and resell it to discount retailers or flea marketers who manage to make a huge profit by selling them to you for a less than the original price.

In a way, this secondary market is beneficial for everyone, be it the retailers, manufacturers, wholesale liquidators, liquidators or small businesses and bargain shoppers. However, you should know that there are some wholesalers who have started to cut out middlemen and instead sell their secondary market items directly to consumers using the internet and that too for a lot less.

The good news is that even though these rock bottom price deals were made available just recently for wholesalers, you can now get the same deals that have no retail markup or overhead.

How Does the Secondary Market Work

According to a research conducted in 2008, 8.7% of all the goods purchased were eventually returned. As a result, the goods returned amounted to $219 billion, which is a little less than half of the goods that could be used for the secondary market. Manufacturers and original retailers of products call customer returns and surplus items as distressed inventory and always try to get rid of it quickly.

This is because storing the items in their warehouse costs them big money; and the longer they stay in their warehouse, the lesser their value (a product loses 10% of its value after every month). Because of these two reasons, retailers and manufacturers often sell these products for as little as 5% of their original price.

The Benefits of Buying from the Secondary Market

If you are wondering how you can start to benefit from the secondary market, here are a few pointers to tell you exactly why you should invest in this market.

Quality Products to Sell

Because the items sold in the secondary market are often accompanied with terms such as ‘salvage’ or ‘liquidation’, they are thought to be bad in quality. Since they have been owned previously, people dismiss them as items that are not really useful.

However, as someone who owns a liquidation business, you must understand that for the most part, these quality products consisting of electronics and other such merchandise are highly functional and can be used for a variety of purposes. In fact, you will find that some of these products are still in their original packaging or have barely visible scratches on them.

Lowest Prices

Your main goal as the owner of a liquidation business is to buy products for a lower than the original price and sell them for a profit. In this regard, the secondary market is the best option for you because no matter where you look, you will never be able to find items that are as inexpensive as those in the secondary market.

However, you must be careful about where and how you shop for your secondary market items; more about this will be discussed in the next section

Constant Flow of Products

Another benefit of buying from the secondary market is that you will have an almost never ending supply of products. As long as you are careful about the products you are buying and the sources you are buying them from, you will always have something to offer to your customers. Therefore, unlike your competitors who are sometimes left with no lots or merchandise to sell to their customers, you will always be able to keep your customers satisfied.

The reason for this constant flow of products is because no matter how many good and brand new products in the market, there will always be customer returns, surplus items and slightly damaged or unwanted merchandise that will enter the secondary market.

Even though buying from the secondary market is extremely beneficial for you at different levels, you must not start investing unless you understand the steps you need to take. Like any other business, putting your money in this area will be risky if you do not know everything that you need to do.

Secondary Market Buying Tips

Now that you have an idea about what the secondary market has to offer, it is crucial that you learn some tips and tricks that will help you in getting the best and most reliable deals. Remember: most of the methods mentioned here are used by experts, so you must make sure to consider them all when searching for and buying secondary market items. Here are a few of the most important factors that you will need to think about.

Choose the Websites Very Carefully

Prices are not the only thing that you must consider when choosing a website that sells secondary market items. In fact, the biggest concern that you should focus on is trust. If you are not dealing with a reputable company, you can never know if the low priced items are actually even worth selling to your end customer. When it comes to deciding whether you should trust the company or not, there are four steps you should take.

1. Research the sellers extensively over the internet and make sure that you read any reviews or testimonials that have been written about them.

2. Always opt for websites or companies that label their merchandise according to their quality and condition as this will help you in choosing.

3. Even though the freight and other costs are mostly handled by the buyer (you), you must still ask them so that you can understand who is paying for the shipping. Remember: this is crucial because it will have an impact on your total price and profit.

4. For the best results, take some time to read the company’s ‘about us’ page so that you know how long they have been doing their business and assess their overall reputation and popularity in the market.

Read the Terms and Conditions Thoroughly

One of the biggest mistakes you could make when buying from secondary market sources is not reading the terms and conditions. Even though you may think that no one really needs to read these terms, it is a need which you cannot ignore, especially when you are investing large amounts of money. Even though every retail website will have its own terms and conditions page, this is the most important for the secondary market because the devil is in the details.

Therefore, if you want to avoid any surprises and risks, you will need to learn what sort of services and return (or no return) policies the seller offers. However, if you are on the terms and conditions page and do not understand each of them clearly, it is time for you to move ahead because this is a sure sign of a bad company or source.

Understand the Product Qualities

Before you start buying from the secondary market, you need to make sure that you understand the various product qualities carefully. You should also ascertain that the website or company that you are buying from states these properly. Even though there are various types or qualities of products, four of the most common ones are new, open box, as is and refurbished.

• New: These items are rare in the secondary market; they are sealed in their original packaging and may be returned to the seller if they are not in the condition that has been described.

• Open Box: Items or lots that are labeled as open box are those that have been taken out of their original packaging, but have been re-taped and are have near perfect when it comes to functionality. However, because these items were opened, they may have been used, which is why there may be evidence of slight use.

• Refurbished: The most commonly conditioned items that you will find are those which have been refurbished. These are items which have been restored to factory settings and tested to ensure their full functionality. These items may or may not come with their original packaging; and even though they are operational, they may have external damages such as scratches or scuff marks.

• As Is: The second type of items which you will find in the market is the ‘as is’ merchandise which are customer returns. Even though these items may be working perfectly, they are not tested or powered up to verify their functionality. These items are the ones which are most deeply discounted because they may have faults that have not been corrected.

Consider Your Buying Price, Testing and Profit

If you are buying products from the secondary market and these are labeled as ‘as is’, you will need to consider all your costs, including those which you will spend on testing. Because you will need to sell the best products to your customers, make sure that you inspect the items which you wish to buy and correct them if they lack in functionality.

Though these are items that will give you the biggest discounts and savings, you must spend some time thinking about the benefits of buying the product. Here are a couple of tips that will set you on the right path.

Ask What is Wrong with Them

When you are in the liquidation business, the merchandise that you buy is one of the most important aspects that you will need to think about. This is why before you end up buying something which will not bring you any profit, make sure that you ask the seller what exactly is wrong with the item. If you think that the cost of testing and repair will not surpass your profit, go ahead and buy it.

Decide What is Important to Your Customers

Every liquidation business will have a specific target market that consists of a certain type of people. So if your target market or customers are those who prefer functionality over appearance, you are probably safe. On the other hand, if your consumers focus on the appearance rather than the functionality, you will want to pass this deal because most items found in this category are cosmetically defective in one way or the other.

Re-Read the Terms and Conditions Again

Even if you have already read the terms and conditions section of the secondary market product provider, you must do so again. This will be helpful in cases such as if the seller is ready to take the products back in case of non-functionality. That way you will not lose a lot.

Final Thoughts

The secondary market is really a great source when it comes to providing your customers with the best quality products. In fact, the secondary market is so beneficial for you and your customers that you will not even need to think about going to other sources.

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