Find Wholesale Products to Sell on eBay in The Secondary, Surplus and
Liquidation Market
Surplus or liquidation merchandise are goods that didn’t sell and are
returned or sold at large discounts to the wholesale price by stores and
online merchants. This market is a huge source of supply for eBay sellers.
Here is a great article by Tom Schmidt from Liquidation.com that explains
the liquidation and surplus –or what is called the secondary market, in
detail. This is a pretty long article but it bears reading if you are
interested in the highly-profitable segment of the eBay marketplace.
Building a Profitable eBay Business with Secondary Market Merchandise
By: Tom Schmidt
eBay sellers are under constant pressure to not only have the right
inventory to sell, but to acquire it at a cost much lower than the price
that eBay buyers are willing to pay.
With over $63 billion of goods, the secondary market can be an eBay seller’s
“gold mine” for finding the right inventory to stay competitive. As you
scale your eBay business, it is important know how to locate quality sources
of products as well as how to effectively resell the goods to eBay buyers.
What Drives the Secondary Market?
The reverse supply chain – which encompasses the flow of retail customer
returns, overstock products and end-of-life merchandise – is a rapidly
growing industry that fuels an estimated $63.1 billion dollars in the
secondary markets (D.F. Blumberg Associates, 2005) – and ultimately into the
hands of professional buyers such as eBay Powersellers.
Stores with liberal return policies, product innovation, supply chain
inefficiencies and even regulatory policies fuel the secondary market. The
bottom line is that ANY corporation or government agency that manufactures,
distributes, sells or uses finished goods has a need to dispose of these
items on a recurring basis. As such, goods in the secondary market mirror
the U.S. retail supply chain. Everything from consumer electronics,
computers, sporting and athletic apparel, house wares, hardware and building
tools, jewelry, and even vehicles can be found in the secondary market. This
is a large source of merchandise for eBay sellers.
A few interesting examples of why the secondary market is growing include:
- 4-6% of retail merchandise sold per year is returned to brick-and-mortar
stores and about twice that is returned to online merchants. Following the
holiday season there is a slight surge in returns. In 2006, NRF reported
that almost 9% of holiday purchases would be returned.
- Product life cycles have shrunk from years to months or even weeks in hot
consumer electronics categories.
- Studies show that the average consumer in the U.S. will struggle for 20
minutes to get a consumer electronic device working before giving up and
returning it to the store.
- The federal government disposes of an average of 10,000 computers per
week.
Locating Quality Sources of Secondary Market Merchandise
Big box retailers, Online eTailers, department store chains, service and
warranty companies, manufactures, distributors and federal, state and local
government agencies are large contributors to the secondary market.
Traditionally, buyers have had limited access to these large sellers,
relying instead on a personal network of industry contacts and fixed-site
auctioneers to locate, evaluate and purchase specific items of interest. As
you scale your eBay business larger, it’s important to find sources that
have solid relationships with these sellers and have the resources to
facilitate the sale of these items through an easily accessible sales
channel.
Through the development of e-commerce auction marketplaces targeted to the
business purchaser, buyers now have global access to a huge volume of these
assets through centralized and professionally managed marketplaces. These
marketplaces are able to develop high-value relationships with key sellers
and can thus provide a continuous flow of merchandise. In addition, the use
of online marketplaces creates an efficient and inexpensive sourcing process
for eBay sellers to quickly purchase the goods they need.
Liquidation.com
is an example of an online auction marketplace that
specializes in providing professional buyers a quick and easy way to source
inventory from top retailers, eTailers and manufacturers as well as
government agencies.
As you evaluate potential inventory resources, the following tips will help
you identify the best venue for your needs.
- Look for providers that have established relationships with large sellers
and can provide a consistent flow of quality inventory.
- Remember, you don’t have to have a huge budget to take advantage of these
marketplaces. Flexibility in package size and product conditions is also
important for buyers. Finding sources that provide the right products, from
single packages to full truckloads, in mixed or single lots, and multiple
condition categories allows buyers the pricing and quantity flexibility to
meet specific needs.
- Superior product information such as detailed product descriptions,
digital images, shipping dimensions and extensive technical information
enables more informed purchasing decisions.
- Be positive you understand the terms and conditions for every purchase. If
you have questions, contact the marketplace for clarification.
- Information about products, shipping, and transaction settlement are
critical, as well as the ability for buyers to ask questions or moderate
dispute resolution.
Types of Secondary Market Merchandise Categories
It is important to understand not only what types of merchandise are flowing
to the secondary market but also consider why the goods are moving away from
the end-user.
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Did the consumer just not like the product? |
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Was it defective? |
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Or perhaps the store just wasn’t able to sell everything they
purchase? |
In general, goods flowing from the retail community occasionally have minor
damage such as scratches or damage to the packaging. Typically the product
is in good working condition with only minor cosmetic damage, but goods can
range from new in the box to salvage.
In some instances you’ll have product that is pulled from the retail store
shelf that is brand new in the box and is being sold surplus because it is
not current technology or current season. Every three to six months
technology leap frogs what is currently on the store shelves and that
replenishment of technology drives a lot of valuable merchandise out of
stores and into the secondary market.
Of course, other condition categories are present in liquidation channels
and the reverse supply chain such as opened box return items, shelf pulls
where there has been some handling of the item, damaged or defective items
which are appropriate for a buyer with refurbishing capabilities, and even
salvage merchandise which would typically be used for parts. Buyers with the
right expertise can reutilize those parts for refurbished products but you
want to be careful buying these types of goods unless you have to repair
capability. Sellers of returns or non-working goods tend to have low
feedback on eBay even when they are thoroughly honest about the merchandise.
As you fill your specific niche within the eBay marketplace, it is critical
to note the condition code of the inventory you are buying and reselling.
The definitions will help you get a good idea of what to expect:
New
- New assets are in original packaging and possess all of the
characteristics/qualities/features as advertised by the manufacturer.
Traditionally, they are overstock items that were never offered for sale in
a retail environment or used in any way. They often still include the
manufacturer’s warranty cards.
Refurbished - Refurbished assets are used but have been inspected, tested,
and restored to full working condition. They sometimes come in original
packaging and contain documentation or any additional parts and/or
accessories –but sometimes they don’t. Due to their operational history,
refurbished assets can possess noticeable cosmetic defects and blemishes,
including but not limited to dents, scratches, and signs of age.
Shelf Pulls
- Shelf pulls were previously available for sale in a retail
environment but were never sold. They usually possess one or more price tags
and/or stickers, indicating multiple markdowns, and have been exposed to
some customer contact.
In addition, since most of these items are sent through a reverse supply
chain (e.g. from a retailer back to a centralized warehouse), they can show
signs of further handling. Accordingly, Shelf Pulls may exhibit a wide range
of individual product and package conditions that can differ substantially
from the original manufacturing.
Used - Used assets were previously sold and put into use. They possess
noticeable cosmetic defects and blemishes, including but not limited to
dents, scratches, and signs of age. Since these assets are usually pulled
from a working environment, they rarely come in original packaging and
rarely contain any documentation, additional parts, and/or accessories. They
are minimally tested to meet only the most basic requirements of
functionality (such as the power turns on and off). Used assets therefore
may not be in optimal working condition and may require additional
maintenance and repair.
Returns - Returned merchandise was sold to a customer, who then either
physically brought the item back to a store or mailed it to a specified
location. Reasons for returning a product may not have any correlation to
its usefulness (i.e., size, color, model, etc.), and as a result that
product may be in fine working order.
The majority of returns, however, often have operational and/or cosmetic
problem. Depending on a company's return policy, these items may also
reflect a measurable amount of use. In addition, since most of these items
are sent through a reverse supply chain (e.g. from a customer back to a
store or a centralized warehouse), they can show signs of further handling.
They generally do not come in original packaging and often do not have any
of the advertised documentation or additional parts and/or accessories.
Accordingly, returns can exhibit a wide range of individual product and
package conditions that can differ substantially from the original
manufacturing.
Salvage - Salvage assets have been identified as defective for reasons
concerning their functionality, appearance, or both. Salvage assets usually
can only be used for parts.
How to Source These Goods and Maximize Profit Potential
eBay sellers have to be savvy in knowing how to spot goods that can be
purchased inexpensively and then “cleaned up” in some fashion to create a
higher per unit sales price from eBay consumers. When sourcing bulk
inventory from bulk auction marketplaces like Liquidation.com, consider the
following:
- Review the history around individual products that you’re purchasing. Can
you look at historical auctions to see how much those goods have sold for in
the past that helps you develop a purchasing strategy?
- Try to estimate the ultimate resale value you will achieve for individual
items and how much profit you need to make. From this information, a buyer
can easily back out the highest amount they are willing to pay for the
auction.
- Make sure you are purchasing the right quantity of goods for your needs.
It is typical that larger lots provide lower costs per item, but you don’t
want to purchase more than you can sell.
- It is important to calculate shipping costs into your total budget. To
reduce these costs, look for sources that have warehouses or distribution
centers near your geographic region and will either allow you to pick up
your goods or will provide discounted rates on regional shipping.
If you must source from farther away areas, look for sources that have
negotiated rates with major shipping carriers. In addition, always obtain
the shipping estimate prior to deciding how much you are will to pay for the
merchandise. The less you spend on shipping, the more you can pay for the
goods. One last tactic is to ask if they can combine purchases into one
shipment.
Tips for Selling
The holiday season is just around the corner – making your inventory
sourcing decisions more important that ever. As you gear up for holiday
sales and make plans to grow your business throughout the year, consider the
following tips:
- Source quality merchandise that is attractive to your customer and target
market – KNOW YOUR NICHE
- Avoid impulse purchases – don’t purchase anything simply because it is a
“great deal”
- Avoid buying too deep in any given product category – You don’t want to
compete with yourself by offering too much supply.
- Develop targeted merchandising strategies
- Add value to each individual item where appropriate – clean, test or
refurbish items such as consumer electronics, house hold gadgets, etc.
- Benchmark what the market will bear in terms of pricing (original retail
vs. secondary market)
- Understand what the competition is selling. If there are a lot of sellers
for a hot item such as an MP3 player, consider selling the accessories
instead.
As you constantly work to improve your eBay business, remember that
inventory sourcing is the most critical element to setting yourself up for
success and that secondary market channels are a gold mine for all your
purchasing needs!
Tom Schmidt is EVP and General Manager of Liquidity Services, Inc Asset
Recovery Division.
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