Business

How Does the Liquidation Process Work?

How Does the Liquidation Process Work?

Say you run a large company with tons of merchandise. We’re talking pallets full of computer parts, dozens of car seats, trucks full of pressure washers, and yards of cardboard to carry it all in.

With the ever-changing consumer landscape, you will inevitably end up with stock that does not move.

Storage is costly, so open square footage for the inventory that you know will sell is more valuable than a pile of inventory that you know is not going to move.

What is it that you do, then, if you’ve got to unload a pallet full of supplies? Well, you can always have it liquidated.

 

Reasons to liquidate

You have a few options for getting rid of unsold merchandise.

You could slash prices, bundle “gifts with purchase,” or begin selling on an online marketplace like Amazon or eBay. But if you are really looking to get rid of goods fast, the best way to go is with an online liquidator.

As mentioned before, storage is costly. When estimating the cost of storage, a retail store has to consider the cost of rent, heat, maintenance, insurance, property taxes, and devaluation in inventory items (the slickest television 4k television won’t be so valuable when the latest 8k television is released).

These costs add up quickly, and it is one of the major reasons that stores pursue liquidation.

Whether a retailer calculates their needs by total or by seasonal inventory turnover, the cost of storage and pace of the market often pressures retailers to push products out the door.

 

What do you do?

When a retail store needs to do that, they often contact a liquidator. To “liquidate” assets in retail just means to get rid of them quickly, so a liquidator is a company that helps retailers do just that.

When goods underperform, the liquidator buys them up for rock-bottom prices to sell to third parties.

For years, liquidation has had a bad reputation. Liquidators were known for offering “as-is” merchandise: stuff that was water-damaged, misrepresented, or just of crummy quality.

In other words, this merchandise was not ready to be sold in retail stores.

However, improvements in logistics and innovations in internet sales have given birth to the online liquidation auction, where goods that are tested, re-packaged, and retail-ready go to live second lives.

Imagine a familiar company like eBay, but instead of bidding on a pair of porcelain figurines, customers bid on entire pallets of retail-ready merchandise.

Furthermore, products sold through online liquidation are often purchased at prices below wholesale.

 

Buying liquidated goods

For a consumer, the process is relatively simple. After signing up with an online liquidator and verifying a payment message, they are free to search the online liquidation marketplace and place their bids on products.

If they win the auction, they check out, and the order is shipped within one to 14 business days. A user can arrange shipping themselves, or have the online liquidator ship it for them.

As it turns out, this has been a boon for small and independent retailers. Because liquidation auctions offer below-wholesale prices, the liquidated merchandise can be sold at a profit even if it undersells the local big-box store.

Liquidated pallets also offer a diversity of goods that a small retailer, with its limited web of wholesale connections, probably cannot match on their own.

So, the liquidation process really works to connect two business groups — large and small retailers — in an advantageous synergistic relationship, reducing waste, simplifying logistics, and passing those advantages along to consumers.

Tagged , , , ,

About Shristi Patni

Shristi is the Chief Content Officer at Raletta. She enjoys writing about food, fitness, finance and everything in between.

View all posts by Shristi Patni →