Finance: How Do Liquidations Work?

Finance: How Do Liquidations Work?

By Adam Smith | Finance Contributor on January 13, 2019
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When consumers think about liquidations, the first thing that comes to mind are those huge everything must go signs you see when retailers are going out of business. But, liquidations are not only for retailers that are going out of business. They also include returns from popular stores and overstock. Retailers often liquidate these products to direct liquidators. The direct liquidators will then liquidate the products for the buyer by auction. Small business owners benefit from these auctions and are able to sell top brands from top retailers for a reasonable price and still make a profit.

Products

There are typically three different types of products sold in liquidation sales, brand new, refurbished, tested and untested. The brand new products have never been open and have perfect packaging. Refurbished products are typically rebuilt products. Refurbished products have three grades; A, B, and C. The differences in the grades of refurbished products are dependant on the amount of cosmetic damage done to the product. Refurbished products can have a range of damage beginning from scratches and dents to large scale damage that will affect the aesthetics of the product but not the overall functions. Tested and untested products are typically customer returns that have been either tested or untested for their functionality.

Sellers

Liquidation sellers are usually, retailers, manufacturers, wholesalers, distributors, and corporations. Depending on the liquidation platform, a small fee is usually charged to sell products at auction. Liquidation platforms can liquidate a wide variety of products in bulk for the seller, including food! This platform is great for retailers who need shelf space to stock new products or even get rid of overstock from the holidays! Some liquidation platforms even allow the seller to sell their products privately to screened consumers.

Buyers

Liquidation buyers are typically exporters, wholesalers and distributors, off price and discount retailers, and even flea market vendors. Buying from a liquidator is a safeway to buy products fast and convenient. Most liquidators have already sorted through the merchandise, and you’re able to buy exactly what you want to sell in your retail outlet. Many liquidators sell by the carton, pallet, LTL, and even by the truckload! This is the perfect place to buy products for vendors of all sizes.

Auctions

There are a variety of auctions available for liquidations, including online auctions as well as in person auctions. The most convenient auction for both the seller and buyer are online auctions. Online auctions don’t mean that you won’t get to see the merchandise, you can still view pictures and manifests. Items for most auctions are tested for quality assurance in order to make the transactions smoother. Some auctions have a minimum bid which is set by the seller. This ensures that the seller isn’t losing money by auctioning their products. If the minimum bid is lower than the sellers minimum, the buyer has the option to meet the buyers minimum or the sale will not occur. Shipping is typically done through a third party company or arranged by the buyer. There are some liquidators that work with a third party company to provide financing options. This is good news for small businesses that are just making their mark on the retail platform.

Liquidations can actually help companies be profitable and move more merchandise. This works in both favors for both the seller and the buyer. Liquidation platforms are the best way to sell unwanted products by the bulk, sell customer returns and buy items for retail outlets for a reasonable price. If you’re starting a new business or even looking to get rid of some stock to free up shelf space, check out liquidation platforms!  



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