A Wholesaler’s Guide to Auctions
Auctions are a great way for liquidators and wholesale dealers to purchase quality merchandise at highly discounted prices. However, not many businesspeople avail all the benefits these auctions have to offer. One of the reasons behind this is their lack of knowledge about these types of sales. If you are still finding your way around the liquidation business, consider this your guide to everything related to auctions.
Know the Difference between an Auction Sale and a Liquidation Sale
If a firm has to recover assets, it has two options to choose from: it can either sell its inventory and offices’ content through liquidation sales or auction sales.
Liquidation Sales
Similar to the principle of a store closing, liquidation sales tends to deal in selling assets in an orderly manner. In addition, the sales can last longer to achieve the highest possible value for the assets being sold. Another thing to know is that the whole process is usually conducted for selling specialized equipment or unique inventory.
Auction Sales
Auctions are the complete opposite of liquidation sales. The whole process can be set and wrapped up within a period of 90 days. Moreover, the sales can benefit from bidder competition, causing the prices to rise. Since time is of the essence, the Internet can play a major role in attracting the required audience for effective sales.
Is Taking Part of an Auction Worthwhile?
If you have not participated in an auction before, you may be wondering what benefits you may reap by being part of one. To be honest, there are actually two benefits that make the wait and hassle of bidding worthwhile.
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Savings – For a liquidation buyer, an auction provides you with a better chance of earning huge savings. Keeping in mind that you are not liable to pay the retail price for the merchandise, you can buy in bulk and get amazing discounts in the process. If you are looking to buy a certain pallet, then it is important to contact the auctioning company or individual to make sure that the item is still for sale. That way you will not count your chickens before they hatch and can avoid future losses that could incur by investing in outdated equipment or goods.
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Quality – Most liquidation or wholesale sellers imagine themselves ending up with broken and malfunctioning merchandise at such auctions. However, this is not the case. In fact, you will be able to take advantage of high-quality merchandise that was perhaps not sold because of lower demand. The trick is to find out why the auction is taking place. If the original seller is getting rid of merchandise to be free from the liabilities that come with keeping it in their inventory, buy, buy, BUY!
Know the Risks of Auctions to Avoid Them
In spite of their numerous benefits, auctions have many risks associated with them. The trick is to avoid falling for the traps auctioneers tend to send your way. To help you avoid being tricked and wasting your money in the process, be on the alert for the following risks.
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Since such auctions assume no liabilities for any problems found in the products, there will be no chance for you to return them once they have been purchased. Therefore you have to make sure that you bid carefully and closely inspect the goods before paying for them to avoid future losses.
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You must also consider payment procedures before taking part in any auction. Basically, auctioneers will require you to make upfront payments using cash or credit cards. Finding out about the service’s requirements is always a good idea as such auctions only cater to serious bidders.
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Always make sure that you do not end up being a part of an auction where prices are driven up artificially. Especially in the case of companies going bankrupt, you need to identify who is actually bidding to buy and who is doing so just to increase the merchandise’s prices and force you to pay extra.
How to Find Liquidation Auctions
Now that you are aware of the advantages and risks of being part of an auction, you may be interested in finding one for your next inventory addition. The most reliable ways of finding auctions are:
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The Classifieds – Because such sales are mostly a part of the public record, they may be advertised in prominent newspapers by their respective auction houses. However, there are some that may be buried in the classifieds, so search for those as well.
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Online Liquidation Marketplaces – There are hundreds of liquidation marketplaces, including DirectLiquidation.com, where you can find assortments of pallets. Some of these sites offer to add you to their mailing list, alerting you the minute a new lot or pallet comes in.
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Word of Mouth – If you have a network of liquidators and wholesalers who are friendly with you, they may recommend a few auctions for you to head to. Even they know that a little friendly competition can do wonders for their business and your relationship.
Learn the Basics of Auctioning
If you think that you are finally ready to be part of the auctions circles, think again. You still lack the basics and required knowledge to be on your own with some of the best liquidators in the business. In addition to ensuring that you remain vigilant and smart while dealing with purchases and sales, keep the following basics of auctioning in mind.
Do Not Restrict Yourself to Local Auctions
Relying on one or two auctions is not enough; you will have to go beyond your comfort zone and try to find more profitable auctions. Thankfully, technology can help in this aspect as it provides various options through the internet. What makes online auctions even more profitable is the fact that you can check a website’s integrity through customer reviews posted on services like Yelp.
Watch Everyone the First Time
Since this will be your first time in an auction house or online marketplace, make sure to sit the first few rounds to learn how people make bids and by what amounts they tend to increase their bids. You should especially focus on observing expert auction goers. In case you are wondering how to identify them, watch how the staff at the auctioning company reacts around them. If it tends to be too friendly, this is not that buyer’s first time.
Thoroughly Inspect What You Buy
Before the auction starts and before you make a single bid, thoroughly inspect each element included in the pallets or lots. Since there is no guarantee on these goods, you will be buying them as they are. However, you can minimize your losses through this step. If you are dealing with an online auction website, consider getting a guarantee to ensure that your money is not wasted on useless merchandise.
Make Quicker Decisions with the Auction’s Condition Report
Rather than having to go through the rigorous process of separating good merchandise from many useless items, you can predetermine the status of the merchandise based on the auction’s condition report. For example, cars sold at auctions come equipped with a marginal condition report. This can be used according to your required parameters to only invest in the cars that will meet your preferences. These reports provide details about the condition and history of the merchandise, so make sure to get your copy or note down its highlights from someone else’s to make the best decision.
Hidden Fees You Should Be Aware of
Even beyond the physical or virtual walls of your auction house, chances are that you may be charged unnecessarily. Since you are going to be spending a good amount of time at these auctions, make sure to ask whether you may have to pay the following hidden fees later on.
Membership Fees
The idea that you may need to become a paid member can be a little absurd, especially since you are paying good money to buy the merchandise. So staying clear from such places is highly advisable. However, the only scenario where membership fees make sense is if you get more services like alerts of the latest offerings, a newsletter with ample information on how to grow your business and any other set of perks that make your membership worthwhile.
Winners Fee
Whether you are online or at an auction house, it is always a good idea to find out about the company or website’s terms and conditions. You should especially be on the lookout for conditions that state that the auction house can charge you a fee for winning the bidding round at an auction. As absurd as it sounds, some service providers can charge up to 5% or more on the winning auction’s price. Therefore, thoroughly read the large and fine print to ensure that you do not end up paying more than you should. After all, lots of high-quality merchandise will never come cheap, so make sure that your money does not end up being wasted on these.
Conclusion
Now that you have a better understanding on how to deal with different types of auction, it is safe to say that you will be able to manage your way around these easily and make smart decisions along the way. Although the whole ordeal is easier said than done, there is always room for improvement and growth based on the basics that have learned while reading this post. However, do not just focus your efforts on auctions alone. You need to remember to diversify your channels to get the most merchandise and add variety to your inventory. So do not quit the channels that profit you the most and enjoy your next auction.