5 Reasons Closeout Distributors Continue Buying Overstock Toys
Toy industry statistics are pretty much optimistic overall. Despite the coronavirus pandemic, the interest in this type of amusement increases as adults begin to join the creative party too. Closeout distributors have been buying more toys than ever , and overstock buyers are always in the market for inexpensive games, novelties and other similar liquidation inventory. Businesses often have to sell excess inventory of closeout toys, housewares, home accents and other inventory in an effort to increase cash and reduce dead stock in their warehouse. Closeouts of toys have become more popular as online shopping skyrocketed and consumer demand for overstock inventory increased. The market is now more diverse than ever, regarding the offers and the parties interested. At the same time, US toy export figures are truly mesmerizing, both in everyday regular goods and obsolete inventory.
The top dollar growth categories in 2020 were closeouts of sports toys, which includes discontinued stock of roller skates, skateboards, and scooters (+31%); fashion dolls and accessories (+56%); building sets (+26%); games (+29%); and summer seasonal toys (+24%). The top properties of 2020 included L.O.L. Surprise!, Barbie, Star Wars, Pokémon, and Marvel Universe. The top five properties combined accounted for 13% of all toy sales for the year. Overstock buyers and companies that liquidate inventory often bought last years popular items on closeout but there are also cases of bankruptcies and companies closing 3PL warehouses which creates opportunities where overstock buyers and closeout wholesalers to purchase current in line goods at deep discounts. Often when businesses sell excess inventory they don’t realize there is a market for older licenses that are no longer popular. Closeout distributors are familiar with situations where they will buy last years hot items, sell them overseas or into secondary markets, and get rid of the overstock.
Toy industry analysis from 2019 showed that China’s toy industry would generate almost $40 billion that year. As such, China is convincingly at the top of the toy manufacturing food chain as the world’s largest exporter of closeout toys and OEM equipment to global brands. Due to Covid, there are overstock toy inventories all around China from factories that shut down and 3PL warehouses that shut down and getting rid of excess inventory. Many of these businesses also have closeouts of toys sitting in 3PL warehouses in the United States. 3PL warehouses have become very costly and it is often more expensive to keep the inventory than it is worth. This is why so many 3PL warehouses are shutting down and going out of business or selling surplus inventory for cash. Closeout distributors can benefit from this because it creates buying opportunities for overstock buyers in the market for closeouts of housewares, toys, home goods, sporting goods, etc.
Numerous countries witnessed an increase in toy sales during the first half of 2021. For example, in the US, the sales grew by 40%. Germany witnessed an increase of 23%, Canada had 20%, whereas Belgium, the Netherlands, and Russia saw an increase of 19%. Consumer demand was unexpectedly off the charts and toy importers and closeout distributors were faced with an unprecedented need for games, puzzles, toys and other activities to keep consumers engaged while stuck at home on lockdown. Companies that sell excess inventory and other closeout distributors were busier than ever trying to get inventory shipped out in an effort to replenish customers shelves.
Toy industry trends for 2021 showed that games/puzzles, outdoor, and sports toys witnessed the highest growth of 59% and 38%, respectively, followed by building sets (38%), infant/toddler/preschool toys (14%), and dolls (10%). Globally, the closeout and overstock toy market has been on an upward trend since 2015. In fact, 2020 was its highest-revenue year thus far. And although children’s toys are still the industry’s bread and butter, it experienced a surge of new adult consumers as video games are becoming a leisure activity for all ages. With the container shortages and huge supply chain issues that followed the pandemic, there was a need for more closeout wholesalers to bring goods to market. Closeout distributors often do well during recessions or slowdowns in business, but this was the opposite where the entire closeout industry and everyone involved was very busy. Liquidation buyers specialize in buying slow moving products or dead stock.
After the most challenging year the world has seen in over a century, the toy industry managed to not only maintain its momentum, but also to achieve a level of growth that we have never before seen. Amazon sellers had a lot of excess inventory that was disposed of into the closeout market because even though there business was good and they were selling, they weren’t making any money. Amazon FBA sellers want to liquidate inventory because the long terms storage fees are killing them and they cannot make a profit. FBA long term storage fees are too high and this forces Amazon sellers to liquidate inventory. The industry’s resilience is very much underpinned by the reality that, in times of hardship, families look to toys to help keep their children engaged, active, and delighted. Put simply, toys are a big part of the happiness equation. While it will be difficult for the industry to match the unprecedented growth of 2020, 2021 was another strong year for U.S. toy sales. With 65% of U.S. K-12 students learning at least partially remotely***, entertainment venues still shuttered, and a third round of stimulus checks, toy sales continued to be elevated beyond normal sales. 2022 seems to be more active with importers and Amazon sellers wanting to liquidate FBA inventory and shut down 3PL warehouses. The costs of running a toy business today has, in many cases, simply become too expensive leading many business owners to ask “what is the closeout process and how do I liquidate inventory”.
Educational toys, primarily cognitive and motor skills toys, are becoming more popular among young parents, so it’s no surprise that the educational toys market is about to get bigger. The growing demand for innovative and STEM toys will most likely be the main factors that will cause the educational toy industry market size to increase. At the same time, children are encouraged to even manage their own finances with the increasing number of debit cards for kids on the market. Closeout toys from the e-commerce side of things can be redistributed to discount and off price chains in the brick and mortar market. There will always be a need to sell surplus inventory to closeout brokers and closeout distributors who sell old inventory to discounters. Closeout websites have also flourished as a way for companies to get rid of too much inventory.
No toy retailer was ever quite as successful as Toys ‘R’ Us in the US. Namely, the US brand managed to sell 18,000 different toys during its peak. Unfortunately, the brand’s annual revenue eventually dwindled to the point that debt prevented its stores’ expansion and modernization. They were forced to liquidate inventory and dead stock to excess inventory buyers and closeout websites. Outdated stores combined with the meteoric rise of e-commerce were the primary causes of its eventual demise. Had they been able to last another few years, the pandemic may have pulled them through. Instead, they liquidated all inventory and sold excess stock and all obsolete inventory as part of their bankruptcy. Selling old inventory is a good way to keep a lean inventory and make room in the warehouse for new products.
Much of the growth in 2020 was directly correlated to the COVID-19 pandemic and the changing consumer behavior associated with widespread lockdowns and school closures, the disposable income diverted from other types of entertainment to toys, as well as the onset of federal stimulus checks. While toy sales through mid-March 2020 were flat versus 2019, widespread lockdown measures led to an abrupt increase in sales. Liquidation inventory flourished as anything and everything that was available was selling. Companies that had old inventory sitting in the warehouse were able to sell it quickly. Products they were unable to get rid of became valuable again, and closeout brokers were able to sell old inventory easily. This was further amplified by the distribution of stimulus checks beginning in April, resulting in the strongest month of growth for the year in May (+38%). Toy industry growth peaked again in October with an increase of 34% when the holiday season kicked off with Amazon Prime Day along with other retailer deals the same week.
Closeout distributors and closeout wholesalers specialize in buying dead stock and reselling it to liquidation buyers. Merchandise USA has been a closeout buyer for 37 years and we can help you with any overstock inventory or liquidation stock you want to dispose of. We also liquidate Amazon FBA.
