Why You Should Start a Resale Liquidation Business
You have a dream. You want to blaze your own path in a business that allows your skills with people and products to shine. You want to set your own schedule and make your own decisions. A liquidation business may be the solution. If you’re exploring business ideas, you likely have heard of resale liquidation before, but what is it and how do you even begin? Let’s discuss what this business entails and start to turn your dream into a reality.
What Is the Liquidation Business and Why Should You Get Into It?
The resale business is where you, as the buyer, purchase merchandise from a supplier, usually by going through a professional broker like BuyLow Warehouse, and resell it to customers for a profit.
One of the first questions you likely have is, “Why should I do resale liquidation?” Perhaps one of the main benefits is that you get to be your own boss to decide when your store will be open/closed and when you will have days off. You will have control over what items are sold and what sales channels you will use. You will also be able to pick the people who will work with you as the business grows.
Before You Buy: Your First Steps to Beginning Your Resale Business
Understand Wholesale vs Liquidation
Before you can get into the details of the business, you first need to understand the difference between wholesale vs liquidation. Wholesale and liquidation are both the sale of merchandise to resellers and other businesses, but there are major differences.
In wholesale, the amount of product that the buyer can receive varies quite a bit from pallets to full truckloads. The product is all brand new and is purchased in masterpacks, while the price for the merchandise usually is non-negotiable.
On the other hand, liquidation usually means the seller is trying to turn goods that may be out of season, obsolete, or have too large of a quantity into fast cash. Because of this, you may be able to negotiate the price or get goods already marked down with deep discounts when dealing with liquidation. An example of liquidation might be a store that sells seasonal items such as Christmas decorations. When January comes, the excess merchandise will be sold to someone in bulk at a cheaper rate just so they can get the product out of their warehouse to make room for items for the current season.
Conduct Market & Competitor Research
When determining how to start a liquidation business, it’s important to do your market and competitor research. You need to pay attention to the industry and your local market prior to opening a store and putting money on the line. This is the time to learn what is selling in your area or if there is a need for a different product that you can provide. After all, you don’t want to put money toward merchandise that doesn’t fit with the needs of the people you are trying to sell to. Knowing the needs of your potential customers will inevitably lead you to the businesses of your competitors. What are they offering people that you can do better?
Plan to Start Small
In any business, it’s important to start small, and this is especially true in the liquidation business, which requires an investment of not only money but also time and resources. You don’t want to stretch yourself or your assets too thin.
At the beginning, you’ll have the opportunity to sell online and at flea markets or fairs, and if your resources allow, in a storefront or out of a warehouse. You’ll be able to network with other people in the industry to build relationships and secure great prices for your merchandise. You can become a fixture in your community for selling the items your customers need the most. The possibilities are really endless. Just remember that as the saying goes, “Rome wasn’t built in a day.” If you stay true to the course of your liquidation business, you will be able to blaze your own path and your dreams will become a reality.
In the beginning, build up a business with a solid understanding of the needs of your customers and how to meet them. In the liquidation industry, reputation and the ability to follow through on your word is vital to success and will help support future growth.
Obtain a Resale License
Ensure that you’re operating legally and within the requirements of national, state, and local laws. One of the primary things that needs to be done is to obtain a business license and a resale license.
A business license allows you to conduct business in your local community.
A resale license allows a state to identify a business as a collector of sales tax. When a business has a resale license, it usually isn’t required to pay sales tax on the wholesale product purchased for the purpose of reselling. A resale license can go by many names, including resale certificate, sales tax permit, or reseller permit.
If you choose to forgo obtaining a resale license, you may be responsible for paying the sales tax yourself. To learn more about why it’s important to obtain a resale license, read this brief article.
Join Online Liquidation Groups
Now that you’ve researched the market, delved into what your competitors offer, and obtained a resale license, it’s time to learn more about the industry. Online communities on Facebook and other social media platforms can help you do just that.
Joining liquidation groups on Facebook will help you connect with people who have tons of experience in the industry. Get to know them and ask questions. Most of them have been where you are now and are willing to help.
As you’re starting out in this industry, it can be easy to overextend yourself due to your excitement. You might overestimate the amount of storage space you need and lease a warehouse that is too large. Or, you may find yourself risking too large of a percentage of the business’s cash on a single purchase. Beginners may also purchase inventory too fast and lose control.
Keep your business from becoming a source of stress and hardship by staying in control. This is YOUR business. You run it. It doesn’t need to run you. Look for more ways to avoid overextending your business in this article.
Prepare Your Liquidation Inventory
Below is a list of what you should do before you start selling your merchandise. It’s not an exhaustive list, but one that will change and grow as you delve deeper into the liquidation business.
Listen to the needs of the people in your online or local community. For example, if your area is inundated with home decor stores but doesn’t have many stores that sell the tools to put up the home decor, make the latter your focus. You want your customers to need your product. The ideal scenario is when they think of that product, your customer will immediately think of you. This is a marketing concept called “top of the mind awareness.” I always hear of successful entrepreneurs that sell home improvement because they are 1.5 hours away from the nearest Lowes and Home Depot, or that are successful selling general merchandise because the closest Walmart or Target is an hour away. These are examples of entrepreneurs filling a niche in their local community.
Research Where to Buy Your Liquidation Product
When it comes to where you can do your liquidation buying, you have several options. Be smart about who you choose. You don’t need to buy from someone who promises you a “perfect load” because “perfect loads” don’t exist. Pay attention to:
- Do they have an established business that is accredited by reputable organizations?
- Do the majority of people have positive things to say about them?
If the same few people are vouching for this person while others are wary, dig deeper. You lose nothing by being cautious. The same can’t be said if you aren’t.
Professional brokers, such as BuyLow Warehouse, offer a unique service to their customers. They have the connections and move the volume in the industry to be able to offer you competitive prices on loads and freight cost, while being there for you if something goes wrong. Most quality brokers work hard to set proper expectations and educate the buyer on what to expect prior to completing the sale. Having someone in your corner when you are new to the liquidation business is a form of security that should be used whenever possible.
Just make sure you use a broker that actually will have your back if needed. Your customers are looking for dependable, honest transactions. Expect the same from your broker.
It’s important to note that as a beginner in this industry, you typically won’t be able to buy directly from the retailer. Retailers work mainly with larger businesses through contracts and don’t have the time to get to know every individual smaller buyer. These are some unique cases where a retailer may handle their own liquidation, but as a general rule, this doesn’t happen often.
Create a Business Plan
You may be completely new to the liquidation business, or you may have some prior experience in the liquidation world. Either way, creating a business plan is going to be crucial.
A business plan forces you to think through your ideas and to perform the research to make sure they are viable before you spend any money. It will lead you to do a thorough market analysis, think through the product lines that you will be selling, and how you will market and sell the merchandise. Surveys have shown that a business plan enables companies to be about twice as likely to succeed as opposed to those companies that don’t have one.
In addition, the plan will help ensure that you have thought through issues like the quantity of inventory that you have to store. It will require you to figure out your start-up costs for equipment, manpower, storage space, and starting inventory. Knowing these costs will tell you whether to raise capital or not. Plus, budgeting for these expenses from the beginning ensures that you can focus on building relationships with your customers and not worry about whether or not you can afford to pay your employees.
Prepare Your Storage Space
Having your tools and resources in place to keep your storage space well organized is important for success. There are a lot of free and paid software programs available to track your inventory. Choose one and use it to stay organized.
Having your liquidation inventory labeled and organized will help you and your employees locate it quickly. Maintaining a catalog of all your liquidation inventory will help you know what you have in stock at any point. You don’t want to promise a customer a product that you later discover you don’t have. Remember: customers are looking for honest, dependable people to work with.
How to Sell Your Liquidation Inventory
Consider Selling in Person
If you live near a town with a thriving flea market, it might behoove you to sell some of your product there. This is beneficial if you also have a storefront or warehouse that you sell from. As you interact with flea market buyers, you can direct people to your main location who might not otherwise have known about it.
As a side note, you can do the same thing with listing items on Facebook Marketplace. Advertising your store at local events can bring in new business and reaffirm your relationships with people you currently do business with. This will allow you to further see the needs of the people in your community, thus helping you adapt your business to better help them. Not only that, but selling at events like flea markets allows you to look at all the items your potential competitors are selling if they are also present.
Start Selling Liquidation Product Online
If you want to reach a wider audience, you can start selling liquidation product online in liquidation groups such as the ones found on Facebook, Facebook Marketplace or through a Facebook auction. You can also use marketplaces such as eBay and Amazon. It’s important to note that selling in groups on Facebook can be a bit overwhelming. There will inevitably be people who will promise to buy your merchandise and never show up to buy it. Take your time, be patient and don’t lose heart. If you have a good product to sell, honest people will want to buy it.
Decide How Much It’s Worth
Along with knowing the best places to sell your product, you will also need to know how much to charge for your product. There are several ways in which you can determine the price of your product. You can look on eBay at similar sold items. You can check Facebook Marketplace to see what the going rate for an item like yours is being sold for. If you don’t have the time for the research, you can always just sell it for X% of the retail price. If you are selling by the liquidation pallet, the Facebook groups mentioned above are a great place to research to see what pallets of that type of merchandise is selling for. If people aren’t buying it for that price, you have complete control to adjust the price accordingly.
Photograph Your Product
A picture really is worth a thousand words. In the liquidation business, photographs go a long way in completing the deal with a customer, especially if you are selling online. It’s important to photograph any defects in the items you are selling. If you are selling more than a single item, such as by the pallet, make sure to take pictures of all sides of the pallet. This also goes for your physical descriptions of the items. You don’t want to mislead your customers in any way. They are counting on you to be honest and open about the product they are buying.
When photographing your merchandise, make sure it’s well lit and sitting on a white background. This will help your product to pop. The item you are highlighting should be the only item in the picture. You don’t want your customers to be distracted or confused by other items in the shot. This is your product’s time to shine and all eyes should be on it.
Strive for Excellent Customer Service
Things are bound to go wrong in the liquidation business. The important thing is to always take care of your customers. If they know that they can come to you with an issue and be taken seriously, you are more likely to have them come back for repeat business. It’s important that your customers feel confident working with you. You can affect this in many ways, such as being responsive to communication.
Open communication, willingness to correct mistakes, and being dependable and honest with your customers will go a long way to ensure that you have a customer for life.
Buy Your First Truckload
Well, here you are. You’ve made it to the end of the article and you are excited to see what is next. You may have your phone out Googling “liquidation truckloads near me.” Let me save you a search. If you are looking for someone who has fair pricing, a quality product, gives honest advice, and can be depended on, then look no further than BuyLow Warehouse. So stop looking for nearby liquidation truckloads and turn to the BuyLow team and inventory to see some amazing deals. You are only one click away from your dream becoming a reality.
You’re Not In It Alone
It takes a lot to succeed in the liquidation business, but you don’t have to figure out how to do it all alone. Liquidation is a big community of like-minded individuals that can be a great resource as you navigate the ins and outs of this business. They can help you vet suppliers to spot scammers and refer you to reliable brokers for sourcing liquidation merchandise. BuyLow Warehouse is here to answer your questions and provide the unbiased advice you need to make your start-up a success.
Download our Beginners Guide to Selling Liquidation Merchandise for more helpful tips.
Find your first liquidation truckload today!
Matt Leavell is the founder and CEO of BuyLow Warehouse. As a passionate business executive with over 20 years of entrepreneurial experience and more than 13 years of operations management experience, Matt's goal is to empower sellers to start and grow their own liquidation businesses the smart way. Matt uses his expertise in business growth, improving efficiency, and liquidation selling to partner with sellers big and small, so they can reach their full potential.
Connect with Matt on LinkedIn.