liquidation pallet buying

Buying Liquidation Pallets: A Guide for New Resellers

Liquidation pallets can seem like a goldmine for resellers, especially with the rise of extreme unboxing shows on TV. However, the reality is often far from what’s portrayed on screen. This article provides a comprehensive guide to help you navigate the world of buying liquidation pallets, complete with industry statistics and practical tips.

The Liquidation Market: A $644 Billion Business

According to data from Colorado State, the liquidation market has more than doubled since 2008, reaching a whopping $644 billion in 2020. This rapid growth is fueled by a rise in returns, filling warehouses with goods from major retailers like Walmart, Amazon and Target. As a reseller, this presents a significant opportunity to source goods at a fraction of their retail price.

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Understanding the Condition of the Pallets

The condition of the items in the pallets can range from brand new to salvage. Most of these pallets are customer returns from major retailers. The reasons for returns can vary from “didn’t need it” to “it’s broken.” Understanding the condition of the items can give you a better idea of the potential profit. Typically, you can either purchase these pallets with a manifest or unmanifested.

Researching the Value of the Items

Before purchasing a pallet, research the value of the items on platforms like eBay. Look at the prices of sold items that are in similar condition to the ones in the pallet. This will give you a general idea of how much you can expect to make reselling items from the pallet.

Factoring in the Cost of Shipping

Shipping costs can significantly add to the cost of the pallet. These pallets need to be shipped by a freight carrier, which can cost anywhere from $250 to $450 per pallet, depending on the distance. Additional fees may apply for residential addresses and lift gates if you don’t have a commercial address with a loading dock.

Considering the Space Required

Liquidation pallets can take up a lot of space. Ensure you have enough room in your home or garage to store the pallets. Overloading your space can lead to logistical nightmares. If you don’t have space to store pallets in your home consider renting a storage locker to get started rather than a full sized warehouse. You can consider moving into a warehouse once you’ve scaled to purchasing full truckloads of inventory.

Sticking to Familiar Items

It’s advisable to stick to items you’re familiar with. This will make it easier for you to understand and test the items. Selling items you’re not motivated to sell can slow down your business.

Be Aware of Extra Costs

Some liquidation sites charge a buyer’s premium, which is an additional fee for the buyer. This fee can add to the cost of the pallet and should be factored into your calculations. A buyer’s premium is an additional charge on the hammer price (winning bid) of an auction item, paid by the winner. It’s a percentage of the winning bid, usually between 10% and 30%.

Calculate Your Buy Price to Ensure Profit

Use the following formula to determine how much to spend on a pallet. It’s a simple yet effective way to ensure you’re not overpaying for a pallet. Here’s how it works:

  • Take the manufacturer’s suggested retail price (MSRP) of the pallet. This is the total value of the items if sold at their full retail price.
  • Multiply the MSRP by 0.4 to get the expected earnings. This accounts for the fact that you’ll likely be selling the items at a discount, and not all items may be sellable.
  • Multiply the expected earnings by 0.4 to get the maximum amount you should spend on the pallet. This ensures that even if your earnings are less than expected, you can still make a profit.

By using this method, you can make informed decisions about which pallets to buy and avoid overpaying. Of course, you can modify these numbers slightly if you see an opportunity you are confident about.

In Conclusion

Buying liquidation pallets can be a profitable venture if done correctly. However, it’s important to do your due diligence and understand the realities of the business. Remember, this is not a TV show; it’s real life, and the goal is to make a profit. With the liquidation market booming and the pallet industry growing, there are ample opportunities for resellers to thrive. However, success in this business requires careful research, strategic planning, and a keen understanding of the market dynamics. By following the tips outlined in this guide and staying informed about the latest industry trends, you can navigate the world of liquidation pallets with confidence and maximize your potential for success.

FAQ for “Buying Liquidation Pallets: A Guide for New Resellers”

1. What are Liquidation Pallets?

Liquidation pallets are large lots of products, often from major retailers, sold at a discounted price. They are typically returns, overstocks, or shelf-pulls.

2. Why is the Liquidation Market Growing?

The liquidation market, valued at $644 billion in 2020, is growing due to an increase in returns and excess inventory from major retailers.

3. What Should New Resellers Consider When Buying Liquidation Pallets?

New resellers should consider the quality and type of products, potential market demand, and their own interest and knowledge in the items they plan to sell.

4. Are There Any Additional Costs Involved in Buying Liquidation Pallets?

Yes, some liquidation sites charge a buyer’s premium, an additional fee that should be factored into the overall cost calculation.

5. How Can Resellers Estimate the Maximum Purchase Price of a Liquidation Pallet?

Resellers can estimate maximum purchase price by calculating 0.4 times the total retail of a pallet and then multiplying that number by 0.4 to determine the maximum amount to spend on the pallet.

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