Major retailers announce liquidation sales throughout the year as a means of eliminating excess stock, typically items left behind from last season. These sales offer an additional opportunity to make a profit on items that would otherwise go to waste by allowing interested parties to bid on surplus stock.
Retailers such as T.J. Maxx or Marshalls are known for acquiring surplus goods from name-brand retailers and selling it in their own marketplace. Customers flock to these liquidation outlets as a means of getting high-quality goods for a lower price.
Unlike some other stores, these resale shops often focus on selling new merchandise rather than damaged items or customer returns. Stores will often keep the original brand tags intact alongside their own tags so customers can see how much they stand to save by heading to a resale shop.
Self-Employed Resale Opportunities
Anyone is welcome to participate in liquidation auctions, allowing those interested in selling surplus merchandise for them to create an online business. There are many individuals selling items from liquidation sales on eBay or in private shops throughout the U.S.
Some focus on selling items with minor defects such as cosmetic damage or packaging that has been opened. Others re-sell customer returns that are still in good condition but lack original tags. However, it is certainly possible to find shelf-ready products at auction that can be re-sold for a profit.
Acquiring a Reseller’s Permit
Those who plan on starting a self-employed business selling items from liquidation are encouraged to acquire a reseller’s certificate. This may be referred to as a Certificate of Authority, Seller’s Permit, Sales and Use Tax Permit or Sales Tax License based on the state where the application is being filed. Those selling surplus items in Oregon, Montana, Alaska, New Hampshire or Delaware will not be required to acquire this permit.
Reseller’s permits are necessary for those setting up a liquidation business because they will render these individuals exempt from taxation on these items. Instead, individuals will treat any resale items as merchandise and pay taxes on the profits from the sale. The process for acquiring a reseller’s permit will vary by state, but sample forms are readily available at business application websites for reference.
Types of Resale Merchandise
Liquidation sales are often divided into two categories: customer returns, and overstocks. Overstocks are items that have been sitting on the shelf with original tags and packaging but could not be sold. There is a risk here because it is implied that there was little demand for these products initially.
Customer returns are items that have been opened and returned. This may simply have been because the customer did not care for the item, but there is also a risk here because it could be revealed that the item contains defects. Seeking out suppliers that reveal any defects before selling a palate of merchandise to a resale business is encouraged to reduce this risk.
Finding a Quality Resale Supplier
In order to create a continuing business model, it will be essential to find high-quality surplus dealers that will provide a steady stream of goods. Trade shows are considered an ideal way to acquire merchandise from liquidation sales because the items can be inspected before purchase to ensure quality. There are many online auction venues that can act as a reliable retail supplier.
This is often the best method of acquiring customer returns or merchandise with minor defects. It is crucial to inspect the contract offered from these venues carefully to ensure that any unsatisfactory merchandise can be returned. Also, research the shipping policy on any surplus pallets to ensure that high prices will not cut into the potential profits from resale.
Types of Suppliers
There are three major types of suppliers that self-employed resale businesses grow to rely on:
Manufacturers may sell customer returns to small businesses, flea markets and other sellers at a discount. These businesses can be contacted directly to learn about potential resale opportunities.
Importers will bring in items from liquidation sales overseas. In order to take advantage of these sources, it may be necessary to apply for
Distributors will offer a variety of goods with discounts on bulk purchases. However, the prices for items offered by these suppliers are often higher than purchasing directly from a manufacturer.
It is often advised for growing businesses to select multiple channels for selling surplus items they have acquired. This will provide an opportunity to learn which websites or shops attract the most customers and offer the largest profit margins.
Some resale shops that welcome private sellers take a percentage cut from each sale that can eliminate the potential profit of selling items from liquidation sales. Selling in multiple venues also allows small businesses to invest in more surplus product without the risk that it will pile up and increase storage costs.
Developing a Turnkey Business
The development of a turnkey liquidation business depends on developing an ongoing relationship with surplus providers. Once a business has developed an ongoing relationship with reliable suppliers, it will be possible to buy resale items by the pallet, stocking a resale shop for a full season.
Pallets may be purchased with pre-set pricing recommendations containing full sets of merchandise in different colors and sizes. Auction websites will often recommend similar products, ensuring that buyers can select a full line of products to stock their resale shops, ensuring a complete line for upcoming seasons.