Effectively managing excess and obsolete inventory is a critical aspect of maintaining a healthy bottom line for businesses. Whether faced with overstocked goods, outdated products, or a business closing, strategic liquidation can turn full losses into an opportunity to recoup cash.
This article provides an overview to navigating the various avenues of inventory liquidation for those not familiar with the options available to them. We offer insights into maximizing returns, leveraging online platforms, and establishing fruitful partnerships with local liquidators. From aggressive pricing strategies to consignment arrangements and online marketplaces, each approach is examined in detail, empowering businesses to make informed decisions in the liquidation process.
Read on for tips on four options:
- Discount heavily through your established sales channels
- Use liquidation auction websites
- Find local liquidators
- Sell on eBay
Aggressively discount excess inventory through normal sales channels
When you’re looking to sell down excess stock, employing an aggressive pricing strategy through your standard sales channels should be one of the first avenues that you explore.
This approach, though seemingly counterintuitive at first glance, holds significant potential for maximizing returns. It's important to understand that in the liquidation landscape, recovering a mere 1-2% of the Manufacturer's Suggested Retail Price (MSRP) is the industry standard. Therefore, offering a substantial 75% discount through your primary sales channel can net a better return than opting for traditional liquidation avenues.
Though it can net better returns, it also comes with significant drawbacks. Of course, your team will need to continue to do the work of marketing, selling, and filling orders. Since you consider the inventory excess, you likely want to move your business on to other priorities. This extra work and effort will also eat into the revenue that you make, potentially wiping out any chance at making a profit.
In particular, if you’re paying for Cost per Click (CPC) advertising and if you’re paying the shipping cost of your product, you’ll almost certainly lose money on each sale at the discounted rate. If you can draw down your advertising spend and if you’re not paying for shipping, though, you likely will have wiggle room to discount the products and come closer to breaking even.
Our advice: test the impact of a deep discount on your sales velocity over a short period of time, such as one to two weeks. Evaluate the results with clear eyes. In particular, you’ll want to know:
- With the new sales velocity number, how long will it take for me to completely dispose of my excess inventory?
- What’s my marginal profit (or loss) on each sale?
- To what extent is my team still focused on selling the excess inventory, and to what extent were we able to “set and forget” the sale and focus on our new priorities?
- Is this sale cannibalizing sales from new product lines?
Some teams will find that they’re able to deeply discount their excess products and move on from them quickly while breaking even; if you’re able to do so, we’d highly recommend it. For most products, traditional liquidation channels will not net a positive return, so a neutral outcome on excess inventory is actually a big win.
Most, though, will find that this approach falls short on one or multiple metrics. The sales could be too slow, they could be incurring significant loss, and the lingering focus on excess inventory could be distracting energy and cannibalizing sales from more important products. To move more quickly, you’ll need to work with secondary markets for excess inventory.
Leverage liquidation auction websites
Liquidation auction websites like Bstock.com, Liquidation.com, and Hibid.com can dramatically speed up your effort to efficiently move surplus inventory. On top of that, with good products you can net well more than 1-2% of MSRP for your products; 5-10% is more common though results vary widely.
These platforms are marketplaces where buyers actively seek bulk lots of various products, and they welcome and search out the opportunity to get great deals on excess inventory. Leveraging their expansive reach and competitive bidding environment can lead to higher returns compared to traditional liquidation methods.
On the other hand, there are two significant drawbacks to working directly with these websites: first, you’ll have to spend a considerable amount of time learning the ropes of the sites, and second, returns are highly variable.
In this section, we’ll provide an overview of how to approach liquidation auction websites like a pro, and then we’ll go deeper into why you might not want to spend the time dealing with them yourself.
How to maximize your return on liquidation auction websites
Getting started on these platforms requires a thoughtful approach.
Begin by thoroughly researching the specific requirements and registration process for each website. There are many specialized auction websites, and your choice of a website or websites has a huge impact on who sees your inventory. Some are specialized for consumer products resellers, others focus on electronics, and others work with heavy machinery (to name a few). You’ll want to focus on putting lots up on the one or two websites that are best suited for your excess inventory. Sites’ rules for who can sell on their platforms vary dramatically as well; while it’s easy to sign up for some, others can cost thousands of dollars to make an account.
Just as when working with consumer-facing marketplaces, when creating listings, it's essential to provide clear and detailed information about your products. Accurate descriptions, including specifications, condition, and quantities, are crucial to attracting the right audience. High-quality images further enhance the appeal of your offerings, instilling confidence in potential buyers. Images don’t only include those that you’ve likely taken to market and sell your product online to consumers; buyers at liquidation auctions also want to see pictures of how the products are packaged, how they fit into cases and pallets, and their condition.
Unlike consumer-facing sites that generally offer one product at a time, you should consider grouping similar items together or creating themed lots of your products. These can attract buyers with specific preferences or needs – many, for instance, might work generally with apparel. If you’re looking to offload 50 different apparel SKUs that all fit within a particular theme (e.g., winter clothing), you could bundle them all together into a winter clothing lot.
Pricing on liquidation auction websites is tricky. Data on previous auctions of similar products can be sparse or nonexistent. Even if you do see that products like yours have done well in the past, your results can vary significantly because the marketplaces are much less liquid than consumer sites. Generally, though, you want to start with prices quite low. This increases the number of buyers that notice the listing, and they’ll usually either place a small bid or bookmark it if they’re interested. Successful auctions tend to have a bidding frenzy on the last day, when all of these interested buyers return to try to seal the deal.
If you’re uncomfortable with the uncertainty of the auction process, some sites let you set “reserve prices” – if they aren’t met by the end of the auction, you can pull the listing without penalty. Others allow you to simply pull auctions without penalty.
Maintaining an active presence on these platforms is key – even though you’ll be selling large lots of inventory at once, you likely won’t be able to get rid of all your excess in one go. You’ll need to regularly update your listings, monitor what price points and groups of inventory garner the most interest, and promptly address buyer inquiries to demonstrate professionalism and reliability. Engaging with potential buyers in a timely manner will increase their trust in your offerings and increase the likelihood that they bid for your auctions. If you don’t answer their questions with direct, clear information, they likely will stay away.
Last, most auction websites provide advertising opportunities such as featured listings or special events. If you’re struggling to get traction as a new seller without reviews on a platform, you can advertise your listings to get more eyeballs on them.
Why auction websites are difficult for non-experts to manage
While liquidation auction websites can net great returns on excess inventory, they can be difficult for experienced professionals to navigate – let alone new sellers.
You can significantly speed up your excess inventory sales velocity by selling in large quantities on these sites, but on the flip side, you’ll have to devote time, energy, and resources to learning the ropes of the sites in the first place. That valuable focus could be directed towards your company’s new direction instead of being spent on the old inventory.
On top of that, the auctions do require a decent amount of babysitting once established. To reach their full potential, they need a smart bundling strategy, a measured approach to metering listings onto sites, and potentially marketing spend.
After all of that, results are still uncertain on marketplace auction sites. The highs are high, but the lows are low, and a listing that sells well one month can drop off a cliff the next month based on what buyers are looking for.
All told, it’s a powerful option, but not one that’s easy to get right.
Find local liquidators that buy excess inventory
In the realm of inventory liquidation, local liquidators can be hidden gems for businesses seeking efficient and cost-effective solutions. The market for liquidators is deeply fragmented, offering a diverse array of potential partners. Exploring this avenue can be highly time-consuming and frustrating, but the right partner can yield unexpected opportunities and establish mutually beneficial relationships.
Begin by conducting a thorough search for local liquidators in your area. Why local? Two reasons: first, an economic explanation. By focusing on local options, you eliminate the need for expensive long-distance shipping, potentially reducing costs for both parties involved. Second, meeting your liquidator in person helps build trust, which is crucial in the secondary market. Scams, tough-to-fulfill promises, and tricky contracts are unfortunately common in the space, and shaking a hand can help bridge the trust gap.
How to think about recovery rate with liquidators
When approaching potential liquidators, it's important to have a clear understanding of your inventory and its potential value. Provide detailed information about the products you're looking to liquidate, including quantities, conditions, and any unique attributes. This transparency helps potential partners assess the fit for your inventory within their own operations.
Engage in open and honest discussions with prospective liquidators. Communicate your goals and expectations, and be receptive to their insights and expertise. When it comes to your expectations for recovery rate, consider that it’s a tradeoff dictated by time. If you need a lot of cash back (say, 20-30% of the retail value of the product), then the liquidator will need months – if not years – to sell your products one by one on sites like eBay. If you’re willing to accept 2-5% of value, then a liquidation partner may make you a buyout offer and get you your cash on the spot.
Of course, the market for your products also dictates your ultimate recovery rate. Different categories of goods see wildly different resale values on the secondary market, and attributes like recognizable brands help products retain value. For example: new-in-box electronics still under warranty will fetch excellent returns. On the other hand, apparel and consumer goods from small brands are difficult to move at all, and when they do move, they fetch low returns.
How to sell excess inventory through liquidators
Contracts with liquidators usually take one of two forms: either buyout or consignment. In a buyout agreement, the liquidator purchases the inventory outright, assuming full ownership and responsibility for its sale. This option provides the seller with a quick and guaranteed influx of capital, making it an attractive choice for those seeking immediate cash flow or looking to swiftly close out a business.
In contrast, consignment arrangements involve the liquidator taking possession of the inventory but without an immediate transfer of ownership. Instead, the goods remain the property of the original owner until they are sold. This option can be advantageous for those willing to wait for potentially higher returns, as the seller maintains a stake in the final selling price. However, it also carries the risk of a longer sales process and potential disagreements over pricing and terms. Choosing between these two contract types requires careful consideration of individual priorities, financial needs, and risk tolerance.
If you choose to go the consignment route, maintain a collaborative and ongoing relationship with your chosen liquidator. The liquidator has a wide range of options available to them to sell your inventory on consignment, from eBay to liquidation auctions to selling direct to discount retailers. Each will have their own average recovery rates and times to value, and you need to make sure that you and your liquidator are on the same page with regards to what you’ll accept and what you’re not happy with. Agree up front to the approach – for instance, if you need higher recovery, you could even write a reserve price into the contract below which the liquidator can’t sell the inventory.
Sell excess inventory in small lots on eBay
Selling surplus inventory in small lots on eBay is a venture that demands time and patience. While it requires a more protracted timeline than the option above — potentially spanning months or even years—the potential return on investment can be significant.
If you’re already an online seller, you should have all the information that you need to create fantastic listings on eBay. If not, begin by cataloging your inventory, ensuring accurate descriptions and high-quality visuals for each item. Attention to detail here can make a substantial difference in attracting the right audience and maximizing your final sale prices. Great product photography (not just stock images) goes a long way towards building trust on the platform.
Consider grouping related items into thematic lots to appeal to specific niches or interests. This targeted approach not only simplifies the buying decision for potential customers but also increases the perceived value of the lot. For example, bundling complementary products like accessories or creating curated sets can entice buyers looking for a comprehensive solution.
Engage in market research to understand the demand for your products on eBay. Explore completed listings to get a sense of the competitive landscape and the price points at which similar items are selling. Armed with this knowledge, you can set competitive yet profitable pricing for your lots.
Regularly monitor your eBay store and adjust your listings based on performance metrics. Pay attention to factors like click-through rates, conversion rates, and customer feedback. This data provides valuable insights into the effectiveness of your listings and allows you to refine your approach for better results.
Maintaining a responsive and professional customer service presence is paramount. Timely responses to inquiries, prompt shipping, and accurate item descriptions contribute to positive buyer experiences. This, in turn, fosters trust and encourages repeat business and positive feedback—a critical factor in building a credible eBay presence.
Consider employing promotional strategies, such as offering limited-time discounts, running special promotions, or leveraging eBay's sponsored listings feature to increase visibility. These tactics can help elevate the visibility of your listings and attract a larger audience.
Building a strong eBay seller profile through consistent, high-quality service and a positive track record will not only enhance your credibility but also position you as a trusted seller within the eBay community. This trust is a crucial factor in establishing mutually beneficial relationships with buyers, increasing the likelihood of repeat business and positive word-of-mouth referrals.
In conclusion, while selling surplus inventory in small lots on eBay requires a patient and strategic approach, it offers the potential for a substantial return on investment. By investing time in meticulous cataloging, targeted marketing, and responsive customer service, you can tap into eBay's expansive global marketplace to find the right buyers for your products. Remember, trust in the process, and over time, you'll establish a reputation as a reliable seller, fostering mutually beneficial relationships with buyers on this platform.
Wrapping up
Navigating excess and obsolete inventory requires a thoughtful and strategic approach. Each avenue of liquidation offers unique benefits and considerations. Aggressive pricing through standard sales channels can yield immediate returns, albeit with additional operational effort. Leveraging liquidation auction websites provides the potential for higher returns, though it demands a learning curve and variability in outcomes. Local liquidators present hidden opportunities, but require thorough vetting and trust-building for successful partnerships.
Ultimately, the choice of liquidation strategy hinges on a business's specific circumstances, objectives, and risk tolerance. Whether through buyout or consignment agreements, or by employing online platforms like eBay, a clear understanding of inventory value and market dynamics is essential. By carefully weighing these factors, businesses can turn surplus stock into valuable opportunities, optimizing their financial standing and setting the stage for future success.
Amplio’s solution for excess inventory
Many business owners and supply chain professionals don’t have the time to pursue the strategies we’ve listed above to the maximum extent, but they also need to earn money back on their excess inventory. The best answer for them is to find a liquidation partner, but how do you choose?
Work with Amplio for a streamlined and data-driven solution to maximizing the value of your excess, surplus, and end-of-life assets.
Backed by Koch Industries, Amplio leads the industry with its specialized expertise in maximizing the end-of-life value of assets, ranging from excess inventory to outdated equipment. Our comprehensive turnkey approach encompasses every aspect of the liquidation and recycling process, sparing clients the complexities and time-consuming efforts often associated with handling the challenge in-house.
Our unparalleled combination of speed, data analytics, and networking set us apart in the industry.
Unlike conventional liquidators, Amplio employs a dynamic asset valuation system that leverages real-time marketplace analytics for optimal reselling strategies. Our intelligent dispatch system, comprising a network of over 50 specialized liquidators nationwide, consistently achieves recovery rates that surpass industry standards by up to 200%. Moreover, Amplio places a strong emphasis on eco-friendly practices, ensuring that the liquidation process leaves a minimal environmental footprint. This commitment to sustainability distinguishes Amplio in an industry that has historically faced criticism for its environmental impact. By choosing Amplio, businesses not only benefit from higher recovery rates, but also contribute to a more responsible and sustainable approach to asset recovery.
