Businesses exist to make money. Closeout distributors and wholesalers selling closeouts exist to distribute merchandise for a profit. That's not a particularly shocking or controversial statement, but it still bears repeating. We buy and sell excess merchandise to help businesses get rid of too much inventory and at the same time, allow us to make money. Inventory liquidators are in the business of buying excess inventory for cash, and selling to closeout websites or other closeout companies who can sell the discounted products at extreme discounts. Every company has its eyes on its bottom line and, in turn, is mindful of its profit margin — the most definitive metric of how successful your sales efforts are, relative to your expenses. It take the right mix of closeouts at the right prices to be profitable, and every excess inventory buyer understand these are the most important components of running a successful liquidation company.
Here, we'll take a closer look at how to increase closeouts profit margins, go over what typical profit margins look like when selling dead stock and inventory liquidations. This way you will see how you can gauge how solid your margins and profitability are. If you need to liquidate inventory it is likely in an effort to raise cash because your margins are too low. This will leave you with too much inventory in the warehouse and not enough cash in your pocket. Inventory liquidators are buyers for inventory that cannot be sold through regular distribution channels. They will make you a cash offer to take dead inventory off your hands and re-sell it to closeout brokers, closeout distributors and discount dealers who will get rid of it at discounted prices in a secondary market.
Markdowns are notorious profit-killers, so avoid them whenever possible. How do you do that? Start by improving how you manage your inventory. This should eliminate the need to sell excess merchandise to surplus buyers and excess inventory buyers who will only be able to pay a portion of your regular cost. You should always have a handle on the merchandise you have on hand so you don't accumulate too much inventory sitting in the warehouse. This will help you make better decisions around purchasing, sales, and marketing to reduce slow moving inventory that would otherwise be sold to liquidators. When you sell excess merchandise to off price buyers, they have to buy it cheap enough to make a profit and still resell it to other closeout distributors and closeout websites.
It’s interesting to see that cosmetics retailers have some of the best margins in retail. Normally, there isn't a need to get rid of old inventory unless it has expired and is no longer sellable. Closeout distributors don't all buy cosmetics for exactly this reason. They may only prefer to buy closeouts of categories that don't expire. Think closeout toys, closeout housewares, excess inventory of home accessories, leftover inventory from promotions, etc. According to experts, one reason behind this is the fact beauty and cosmetics brands excel at creating personal and emotional connections with customers. This means there is always demand and generally no need to sell slow moving products. One of the best ways to keep your inventory at the appropriate levels is to offer closeouts on slow moving categories and shut down 3PL warehouses where inventory is selling slowly. Keeping old merchandise in the warehouse is too costly and takes up too much space in the warehouse.
If you find margins are low and you need to increase profitability, first, cut overtime and excess staffing as much as possible, then focus on areas of waste. Minimize supply: spend as little as possible, and ditch the fancy printed shopping bags, tissue fill, and excess packaging wherever possible. If you’re not using an efficient point-of-sale to tie inventory, sales, and marketing under one system, consider making a switch to a low-cost system. You can also get rid of old inventory that can be converted to cash. Inventory buyers are easy to find by doing a simple Google search using terms like closeouts, sell excess merchandise, inventory overstock buyers or liquidating excess inventory. These actions will make your entire store and staff run more efficiently.
This may seem like the most obvious way to increase your closeout company’s profit. Simply increase the price of a product, and you’ll make more off every sale, right? Maybe, or maybe not. It is challenging to simply raise prices for closeouts and liquidation stock because this category of excess inventory is so price sensitive. Chances are you or your team already researched the market extensively when your company first introduced the product to consumers, to determine the exact pricing. Consumer demand for closeouts will only remain strong as long as pricing is low. Higher prices lead to slowing demand for overstock, closeouts and excess inventory in every category across the board.
Another great way to streamline your closeout operation is to automate specific tasks in your business. By putting repetitive activities on autopilot, you can reduce the time, manpower, and operating expenses required to run your business. This may not be easy with closeouts or discontinued inventory, but it is possible. Keep in mind, every inventory is different and closeout buyers are not bringing in the same product day after day. One day may be closeouts of hair dryers and the next day you may liquidate a sporting goods company. Closeout merchandise changes all the time and the only constant is buying liquidations cheap for resale to closeout websites, closeout brokers and inventory liquidators.
This step more or less enables you to address every other one above. You need to take a thorough, comprehensive look at how you're spending money on the closeout process, what you are paying for your product or service, your acquisition and retention strategies, and any other crucial factors that impact your revenue generation or production costs. 3PL warehouses can be very costly and if you have excess inventory in a 3PL warehouse you may want to consider looking for closeout buyers and liquidators who can buy everything. Sometimes it makes more sense to take your loss and get out of long term storage costs. Liquidation buyers want to buy inventory cheap, but it can be better than keeping old merchandise in the warehouse taking up warehouse space.
Consider outside companies that are involved in your business, like the people who come in to do your machine maintenance. Is anyone on your team evaluating the value these services provide and if they’re worth it? If they are, can these rates also be re-negotiated?
Your COGS total can be found on your company’s income statement. Buying and selling closeouts should allow you a profitable return on investment. Liquidation buyers have a good handle on operations and costs. Companies in liquidation for sale often end up there because they did not have a good understanding of what it was costing to run their business. Have your accountant break down the related charges for you, then assess where you think you might have some wiggle room for cutting these types of expenses.
Pore through your expense reports to pin down any frivolous or unnecessary spending. Overstock inventory buyers run lean no-frill operations to save as much money as possible. Surplus inventory buyers want to buy and sell closeouts, and distribute them as inexpensively as possible. All extra cash can be re-invested into more excess merchandise and closeout deals. Evaluate your marketing strategies and look for ways to reduce costs so you can invest further in liquidation stock to buy. Overstock closeouts are part of running any wholesale business but you can always have a liquidation sale.
Merchandise USA is an inventory liquidator in business 37 years. We are closeout liquidators for excess inventory of sporting goods, toys, housewares, Surplus inventory buyers can help if you are shutting down your warehouse and liquidating housewares,