In 2021, 2.8 million people reported fraud to the U.S. Federal Trade Commission, and it’s likely that millions more were not reported. Fraudsters are always on the lookout for new ways to make a profit at someone else's expense.

Considering that the liquidation market has doubled in size in less than 20 years, it's no surprise that liquidation businesses have become a new area of focus for criminals looking to commit fraud and scams. If you're a new liquidation buyer, spotting the warning signs of scams and effectively using liquidation review information and other data to vet sellers can help you avoid becoming a victim.

How To Find the Right Liquidation Seller for You

Once you've completed all the other steps needed to start a liquidation business, finding the right liquidation supplier is one of the last things you need to do to get your startup or side hustle off the ground. To ensure the success of your business, you need to choose a seller that is reputable and the right match for you.

Choosing the wrong liquidation supplier could mean:

  • ending up with inventory that you're unable to move
  • having nowhere to turn if you encounter a problem
  • dealing with manifests that have more than the normal amount of inaccuracies caused by poor record-keeping practices, leaving you in for an unpleasant surprise as you sort through your pallet
  • receiving bad reviews from your customer base if you ship out subpar inventory, which could hurt your business in the long run
  • becoming a victim of a liquidation scam

Although you may be eager to officially become a liquidation buyer by making your first purchase, take your time and thoroughly vet the sellers you’re looking to buy from. This will ensure your business has a better chance for success early on.

How To Avoid Liquidation Scams

Many people who are new to the liquidation business ask, "Is pallet buying legit?" The general answer is yes. There are reputable liquidation sellers that allow you to buy pallets or truckloads of returned merchandise to resell through various channels, such as online marketplaces and flea markets. However, not all sellers offering pallet sales or truckload sales are legitimate, trustworthy businesses. Scams are all-too-common in liquidation sales. Knowing the most common liquidation scams can help you avoid them.

Unsolicited DMs

Once you start talking about liquidation sales in online spaces, be wary of anyone who suddenly sends you direct messages and offers you a deal.

In some cases, the scammer will strike up a conversation and then offer you access to an exclusive pallet. Other times, the scammer simply spams links to sale sites. Both approaches are suspicious.

The liquidation business is big right now. Reputable sellers typically don't need to find buyers. Although there may be exceptions, be wary of suppliers who use direct messages to market, especially if you notice other red flags.

Too Good to Be True Products

Fraudsters try to entice victims with offers of high-end merchandise at a very low price. For example, they may offer pallets that only contain high-end items like electronics or power tools or in-demand name brand merchandise like Nike sneakers, Apple computers, or Louis Vuitton handbags that are free of damage.

Sellers making these claims may not have any inventory at all and will never ship despite receiving payment. In other cases, they may be trying to pass off counterfeit goods as the real thing.

New Profiles

Many criminals go through a cycle with victims. They create a new account, lure in a liquidation buyer, ask to be paid with a risky method of payment like Venmo or CashApp, and then vanish. They close their account to shield themselves from a bad liquidation review, create a new profile, and start looking for their next victim. As a result, it’s best to avoid doing business with anyone with a new profile on a social media site.

Fake Online Stores

Some scammers create a fictitious online store and then claim to have customer returns or excess inventory to sell via pallet or truckload. The truth is that the business doesn't exist, and the so-called store has nothing to sell. You may run into ads for these websites in social media goods for liquidation buyers, so use caution when clicking links.

Look at previous client reviews to see if anything comes up about the store that may seem suspect. No reviews are also a sign that the store may be fake. Sometimes, scammers will go so far as to write glowing reviews on their own or pay someone else to do so. Checking the profiles of reviewers can help you spot fakes.

Phony Liquidation Groups and Websites

A newer scam is the fake liquidation website or Facebook group. The scammer sets up a site or group advertising their liquidation pallet sales or auctions. In some cases, the scammer may actually have some inventory, but it's not accurately described to the liquidation buyer or contains only counterfeit items. Other times, there is no inventory at all.

Check out the infographic below to better understand how to avoid liquidation scams.

How to avoid scams infographic.png

Finding the Right Liquidation Broker

In addition to avoiding any of the possible scams listed above, there are tips and best practices you can follow to protect yourself from scams while finding the right liquidation broker for you.

1. Google the Liquidation Supplier

Place the name of the seller in quotation marks to cut down on irrelevant results. Then click on every link. Read any liquidation review postings on their Google Business page and on sites like the Better Business Bureau. Look for videos, reviews, and posts from satisfied liquidation buyers describing positive attributes, such as good communication, a desire to build a relationship, an easy-to-use website, and diverse inventory.

2. Conduct a Phone Interview

Don't communicate with the seller strictly online. Find the company's phone number and place a call. . If the person who answers has a thick accent or doesn’t seem fluent in English, you may be speaking to an international scammer. Google the number to find out if it is a landline or a cell phone. While some liquidation suppliers may use their cells for business, a lack of a landline could be a red flagAsk the following questions:

How long have you been in business, and how did you get started? This question can quickly weed out scammers because they may not have a convincing story or will be reluctant to answer.

What are your company's assets? Real companies will have established assets, such as real estate, vehicles, warehouse fixtures, computers, and office furniture. As a part of their financial reporting process, they must calculate their total assets and should be able to name a few of their assets for you. If a liquidation seller seems confused by the question, avoids answering, or claims to not have any assets because it's a startup, look elsewhere. In the event that the seller does have a startup, the business may be reputable. However, they are unlikely to have the connections and financial capabilities to resolve issues with loads if they arise.

Do you have any reviews or references you can provide? Reputable companies should be able to provide you with some satisfied customers who you can speak to or have liquidation reviews already on their website for you to peruse.

What types of customer support do you offer? A company should be able to tell you how they assist customers with issues. They may have an online chat service or phone number for you to call. If they don't have an established customer service team, reconsider doing business with them. Communicating by phone also allows you to vet the communication practices of the seller. A company that doesn't call you back quickly or seems to be dodging your calls is unlikely to provide the level of customer service that you should expect.

3. Talk to the Liquidation Community

When researching a potential seller, ask for feedback from other liquidation suppliers. Make a post in the Reddit group R/Flipping, on Quora, or in well-established Facebook groups. Be sure to describe the payment terms of the offer, so members can alert you to any red flags that you may have missed.

4. Check with Organizations and Agencies

Look to see if the company is registered with the Better Business Bureau. Most reputable companies will be.

You can also contact the Office of the Secretary of State in the state where the company is headquartered for assistance. The office should be able to direct you on how to search online to ensure the company is registered or licensed.

After the vetting process, some legitimate liquidation brokers still may not be the right match for you. When selecting a supplier, you need to determine whether their business model and inventory are the right match for your business goals.

Consider the following when deciding what broker to use:

  • What they're selling: Are you interested in selling the type of inventory they have available? Do you have enough knowledge to sell it effectively?

  • Their customer service: Does the company communicate in a way that matches your personal style? For example, if you feel more comfortable getting help by phone, you wouldn't want to buy from a seller that only offers email-based support.

  • Their website setup: Is their website organized in a way that is easy for you to navigate? Can you find what you're looking for without wasting your time? Do they provide the basic information that you need to compare pallets?

Trust BuyLow Warehouse As Your Liquidation Partner

Since the liquidation business is growing so rapidly, it can be hard to pick out scams and unreputable sellers who can hurt your venture. Remember that:

  • liquidation scams come in all forms, including direct messages, fake online stores, and Facebook groups

  • conducting internet and business searches and reading reviews is an important part of due diligence

  • the liquidation community is a valuable resource when vetting sellers

  • sellers' inventory, communication practices, customer service methods, and their website should all factor into your decision on who to buy from

If you're new to the market, BuyLow Warehouse is ready to partner with you to help ensure the success of your new liquidation business and create happy customers who will frequent your establishment. We offer fair, transparent pricing and take a hands-on approach to service, which means you'll get honest advice and always have someone there to make things right when you have an issue.

Check out our current inventory.

Meet the Author

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.