Learn 5 rules to lower your risk and increase your profit in the secondary market from Sue Cessar, VP of Sales for GENCO Marketplace.
Online sellers focus significant time on developing and fine-tuning online marketing strategies and tactics. But a critical aspect of profitable online selling that requires equal attention is the ability to source quality products at a good price.
The secondary market – where buyers can source excess retail inventory, quality store returns, closeouts and other product that didn’t sell the first time around – offers plenty of fuel for your profit engine. While there are great deals to be had, it helps to be an informed buyer. Here are some rules to follow when sourcing product in the secondary market.
1) Source from stable, financially sound companies
There are few barriers to entry in the wholesale liquidation industry. Consequently, you encounter the rare company that wants to turn a quick profit. When evaluating sources of supply, look for companies with a track record of ethical behavior and a long-term strategy that depends on repeat business from happy customers.
2) Deal with companies that have direct liquidation contracts
In the secondary market, it’s not unusual for product to go through multiple liquidators before the final sale. While many brokers provide an excellent service, there are advantages to dealing with companies who hold direct contracts for liquidation with retailers and manufacturers.
Buying direct has the following advantages:
- Lower your risk. Direct liquidators have warehouses where they assess the product condition to ensure the quality of the lot is consistent with how it’s represented.
- Avoid multiple mark-ups as products move through several brokers.
- Deal direct for faster service. For instance, pick-up times can be arranged by calling the warehouse directly rather than working through a middle man.
3) Look for lots accompanied by a detailed manifest
A manifest is a list describing the items for sale in a particular lot. It includes the quantity, cost, and description of all products. In the secondary market, salvage products are often sold without a manifest in unsorted, bulk lots. Such lots can have good profit potential. But, if possible, purchase lots that come with a manifest. This allows you to confirm that what you paid for is what you received. Industry-wide less than 40% of salvage loads come with manifest. Some liquidators, like GENCO Marketplace, provide a manifest for most of the inventories sold.
4) Understand the terms and conditions for reselling products
Many retailers and manufacturers place restrictions on remarketing their products in order to protect their brands. For instance, some require that you remove the brand label from the product. If you don’t clearly understand and follow these restrictions, you risk fines and other legal action. In addition, you’ll lose future opportunities to resell the company’s products.
5) Know your freight costs
As the buyer, you are responsible for freight costs from the liquidator to your location. These costs can mean the difference between profit or loss on the load. Buying from smaller, single-location liquidators may involve hefty freight costs that cut into your profit margin. Larger liquidators typically store products in multiple warehouses throughout the country, enabling you to cut freight costs by sourcing product from nearby warehouses.
Sue Cessar, is vice president of sales for GENCO Marketplace – America’s largest wholesale source for retail closeouts and quality store returns. Buyers can contact Sue at cessarsm@genco.com.
