Once you have determined who is selling the pallets that are a good fit for you and your business, you’re ready to choose a pallet of merchandise to buy from them and sell for a profit. The pallet you pick can determine how much money you’ll make from the purchase. That’s why it’s important to learn some strategies to help you choose the correct pallet for the best return on your investment.
How To Pick the Best Pallets To Buy
When deciding which pallets are best to buy from a particular supplier, consider the following questions to help you choose.
Does Broken Product Equal a Loss?
This is an important criteria to look for when purchasing a pallet; you want to have as few broken items as possible. It’s not an issue if some of the items are broken, but those should be the smaller, cheaper items (not the bigger, more expensive items that create more significant profit gains).
Unfortunately, this is something that you have to learn through experience. You can ask your supplier for guidance, but ultimately, breaking down multiple pallets and keeping track of what sells and what doesn’t will help you better understand profit gains and losses when buying pallets for your business.
What Is Your Plan for Selling the Merchandise?
Many people jump into buying pallets without thinking about how they plan to sell the merchandise. Do you have an outlet to sell a large quantity of small, less expensive items (e.g., lip balm cases)? If so, you can make twenty-five cents per item and see large profit margins if you’re flipping 5,000 pieces.
However, if your plan is to sell on Facebook Marketplace and eBay, that pallet may not be the right fit for those sales channels. In this case, you need to find a pallet with fewer, larger items so that you can focus your efforts on selling 20-40 items from a pallet (instead of 5,000). It’s important to consider your sales channels and the amount of effort and expense you will put into selling your items before you choose a pallet of items.
Has the Pallet Been Processed?
Unprocessed pallets are great if they contain the type of merchandise you need. Don’t get lured into thinking you should only buy unprocessed pallets though. Even if they are generally less expensive because no labor has been used in processing, there is more risk associated with the purchase.
What happens during processing (i.e., sorting out high-priced merchandise) should not be a major concern if you see the product, like the product, and can make money off of the product on the pallet that you are purchasing.
Is the Manufacturer's Packaging in Good Condition?
The more damage the manufacturer's packaging has sustained, the harder it is going to be to sell the item. Try to choose pallets where the manufacturer's packaging is in really good condition.
As a side note, if you do have seriously damaged packaging, do not try to sell the item in the original packaging. Instead, take the item out of the original packaging and report that the package was damaged in the listing.
Is the Reward Worth the Risk?
Think about investing legend Warren Buffett's two rules of investing:
“Rule number 1: Never lose money. Rule number 2: Never forget rule number 1.”
With some pallets, you can assume you will get your money back due to the merchandise makeup. This assurance provides less risk. These pallets will not be the pallets that you hit a grand slam with though (e.g., $4,000 camera that you buy for $50).
To reduce risk, find pallets where you know that even if you get a bad one, the chance of you losing money is small.
What Are the Best Liquidation Pallets To Buy?
There is no single best liquidation pallet for all sellers. The trick is to find the one that best fits your needs. There are several different types of merchandise in this business. Learning more about your options in the marketplace before you start buying pallets is key.
This is the most general division. Most truckloads and pallets will come from a specific retailer. This will immediately tell you if you are receiving the type of merchandise and brands that you feel comfortable with.
For example, you know immediately that Target merchandise is more expensive and will contain more softlines than Dollar General merchandise.
Different Retailer Programs
The next thing to be aware of is that each retailer does not produce just one kind of load. They are divided into “programs.”
Truckloads and pallets coming out of the same program (which will also be coming out of the same facility) are generally going to contain the same type and condition of merchandise.
Case packs, overstock, shelf-pulls, damaged packaging, store returns, online returns, store damage, salvage, refurbished — there are many different conditions of merchandise you’ll need to know about before you purchase the merchandise.
Different Sized Items
Truckloads and pallets are sometimes categorized into loads of only larger items and smaller items. The retailer has their own reverse logistics processes that they are running the merchandise through. This causes the merchandise to be categorized in certain ways.
Different Merchandise Categories
Apparel, tools, HBA, food, electronics, mother & baby, sporting goods — these are just some of the general categories that merchandise may fall into. Learn what categories work best for your market so you can choose a pallet that features those items.
Manifested vs. Unmanifested: Which Is Best?
You’ll need to decide between manifested and unmanifested pallets when you’re buying full truckloads. If a load is manifested, it means the merchandise has gone through a sorting process where labor has been invested into the load. This labor expense has to be recouped by the manifester in some way and may result in the buyer paying a higher price for the load. It can also mean that higher-priced or better-conditioned items are reclaimed from the load to be sold somewhere else.
In addition, if it is not the retailer that manifested the load, then the load had to be shipped to a third-party facility, and there is now an additional cost of shipping that will be rolled into the final sales price of the load. None of this means the load is a bad purchase, but it does change the risk profile of purchasing that specific load and should be considered.
Unmanifested loads sell for less money due to the lack of labor investment and uncertainty of the type of products it contains. These loads may contain higher-valued merchandise, or these unmanifested loads can also contain no high-priced items, which means they may be a dud!
If you decide to purchase an unmanifested load, you will need additional sales channels to move all of the different categories of products included in the load. Buying unmanifested truckloads is a game of averages. However, what you receive should even out over multiple truckloads. Unmanifested truckloads are not as risky when buying in volume (compared to buying a single load from the program).
Understand the Liquidation Business Better
Are you looking to learn more about choosing the best liquidation pallets? Whether you are a beginner or an experienced seller, our eBook will prepare you to make better decisions for your liquidation business. Download your free copy today.