As the world seemingly gets the coronavirus problem under control, the United States is at the front line of anticipating a new post-pandemic future. With the lockdowns and business shutdowns being a thing of the past, the next problem we have to deal with is nurturing the economy back to health. But we are faced with yet another new challenge – rising interest rates. Businesses that sell closeouts, overstock inventory and surplus products may be forced to make some changes to how they operate. Liquidating inventory is more challenging in an environment of rising rates Although fundamentals of the closeout process don’t change, there may be adjustments to prices liquidators pay and how much inventory they can liquidate.
Everyone is excited that the cases of COVID-19 are coming to a stop. According to a survey the next phase in this recovery is the gross domestic product, which is poised to boom beyond the pre-pandemic period. However, despite the expectations, inflation is real, and it is coming at the US and global economy faster than anticipated. The cost of goods and services has gone up and has stayed there , and it may worsen before it gets better. In addition, the cost of shipping goods and processing orders has increased exponentially There will be a lull before the storm, and small businesses are presently weathering its greatest brunt. The closeout process during inflationary times is different because banks may not lend as easily and companies may not have as much free cash to purchase closeouts and overstock inventory. The amount of liquidation stock for sale will likely increase as bankruptcies and defaults become more commonplace. Liquidating inventory will also become more competitive with rising interest rates because there are more sellers and fewer buyers for distressed inventory.
If you run a business, you must anticipate the economy’s performance and appreciate the long-term effects of inflation and a roaring economy, and how this will affect selling overstock inventory and closeouts. This post will dive deep to analyze the most likely long-term effects of the post-pandemic economy and how your business can manage the closeout process and liquidating inventory if you are closing a business or shutting down your 3PL warehouse. Selling surplus inventory does not have to be difficult or stressful , as long as you work with reliable closeout partners who liquidate items or unwanted inventory into the secondary market. In looking back over time, the closeout industry has been through many ups and downs, low interest and high interest periods for liquidation of overstock, and different economic climates for having inventory liquidation sales. Companies that liquidate inventory are going to be subject to what the market is doing at the time they are shutting down their business or liquidating
Inflation is a period when the cost of goods and services shoot up. Inflation often begins with a shortage of service or product, leading to businesses increasing their prices and overall costs of the product going up. This upward price adjustment triggers a cycle of rising costs, in the process making it harder for businesses to reach their margins and profitability over time. This can lead to an increase of inventory sitting in the warehouse and businesses having more inactive or dead stock. In these times, it is more important than ever to liquidate slow moving products and convert them into cash. Forbes has the most straightforward clear definition of inflation. It defines inflation as a rise in prices and a decline in the currency’s purchasing power over time. Therefore, if you feel like your dollar does not take you as far as it used to before the pandemic, you are not imagining it. The effect of inflation on small to medium-sized businesses may seem somewhat insignificant in the short term but can quickly make an impact. This is the reason dollar stores and extreme value retailers do well in recessions. Big box outlets like Ross, TJ Maxx, Burlington Coat Factory Dollar Tree, Dollarama and Ollies all do well in tough times. When businesses liquidate excess inventory they can either sell to closeout wholesalers and closeout distributors, or they can try to get more money by going direct to retailers.
Reduced purchasing power means that businesses will sell less and potentially have lower profits. Lower profits mean decreased ability to grow or invest in the closeout business. Since most companies with fewer than 500 employees are started with the owner’s savings, it puts them at significant financial risk as inflation rises and the cost of buying and selling closeouts and overstock increases. You may already feel the pressure of inflation as an entrepreneur, but its full impact is yet to be felt. Inflation is not linear; it ripples through an economy differently, at different times, and affects closeout businesses differently. One of the most immediate impacts is a shortage of supplies that may prevent the completion of production goods. When manufacturers cannot get all the raw materials, they need to produce finished products, the entire market hurts. While Just In Time manufacturing was developed to address such a potential problem, the inter-connected market leaves many entrepreneur’s funds tied up in inventory-in-process, accumulating extra inventory and losses while driving demand and prices higher. If you want to sell your inventory it is always best to do a simple Google search looking for buyers. You can search terms including liquidation companies, selling obsolete inventory, sell inventory, closeouts and closeout wholesalers.
On top of all of that, the economy is experiencing inflation, with a steady increase in goods and services pricing over time. It devalues units of currency (like the USD and EURO), resulting in consequences like a higher cost of living. Pandemics are friends to inflation. Do you want to revert back to your normal life or turn it into something better? We can start to align the understanding of inflation with our life routines through data analysis and facts we face every day. Inflation creates more excess inventory in the market and can make selling closeouts more difficult. You might want to turn to closeout websites and buyers for liquidation stock because these companies are specialists in navigating the discount market.
The risk of inflation has returned to the radar screen of operators and authorities. After six months in negative ratings, the annual inflation rate took position to increase by 0.9%, which is 0.4% higher than expected, though some would say less and others say more. The estimates for the next few months are oriented toward an upward trend. The Fed has plans to raise rates for the next few meetings, or until inflation is under control. Overstock buyers should prepare for an influx of inventory as the economy slows down and there is more excess inventory on the market for closeout buyers to choose from.
When labor wages can't keep up with the rate of retail prices, inflation, the purchasing power of those wages, decreases. Low-income families face it like nobody else; any price increase can have serious consequences. Dollar stores and discount stores that sell closeouts will do well in these conditions because the consumer will demand more for their money. Workers' demand for wage increases can lead to a labor costs downturn, resulting in lower profits for businesses. All this can create a high uncertainty ratio into the system, leading to decreased investment from entrepreneurs. Again, all these things lead to more excess inventory in the market as 3PL warehouses shut down, businesses close and liquidate entire inventories, and even bankruptcies climb. Overstock closeouts will become much more prevalent in these conditions.
Not all entrepreneurs face the same challenges, and not all countries and communities do either. Restaurants, hotels, housing, tourism, fashion retail and any other form of street vending and business that needs interaction between people have suffered due to government restrictions and safety limitations. But not all faced such a downfall: online retails, workspace solutions, supermarkets, digital entertainment and medical/pharma commerce entities have done well. Closeout distributors and closeout buyers have done well because they handle overstock merchandise that fit well into these market conditions. For many companies, increasing production and supply has not been or is not synonymous with a good turnover: Not all that glitters is gold and more and more companies will have liquidation sales to get rid of their excess products. Closeout companies specialize in helping companies get rid of their excess merchandise products that may be slow sellers on Amazon or other ecommerce sites.
Merchandise USA specializes in warehouse liquidations of excess inventory and liquidation stock. We buy closeouts of home accessories, housewares, toys, sporting goods, lawn and garden closeouts and more.