Thanks to the Internet and globalization buying stock lots, discontinued items and closeouts from overseas sources is easier than ever. Sourcing products overseas, however, offers both risks and rewards. Some of the downsides can include increased legal issues and import restrictions, language and cultural barriers, lengthy lead times, and complex payment and shipping terms. The upside, of course, is that your costs can be lower, and you can find unique products not available anywhere else. As the world economy comes closer together you can buy and sell excess inventory around the globe. There are also factories in China in need of consolidating or shutting down a warehouse which offers even more opportunity to buy deals.
Brokers and freight forwarders can help you find factories that want to sell excess inventory and get rid of closeouts. With the legal and regulatory issues involved in importing products, they can also figure out the cheapest ways to ship products and buy stock lots or discontinued items that factories need to move. A good broker can also handle delivery of the goods, including paying duties and getting products through customs checkpoints without delay. Many customs brokers and freight forwarders will also have relationships in China that keep them in touch with any factories shutting down a warehouse or getting rid of closeouts. In these situations brokers can identify leftover and obsolete inventory that needs to be sold at a discount. The industry association related to your products is a good place to start looking for customs brokers or freight forwarders to help with closeouts, discontinued items and opportunities to sell excess inventory. Keep in mind there will always be buyers for these closeouts in the United States.
Sourcing a portion of your business’ closeouts and stock lots from overseas certainly has its benefits when it comes to cost and availability, but the United States’ recent tariffs on Chinese imports have shown us how quickly outsourcing closeouts can backfire. The pandemic and all it’s related issues have also demonstrated how fragile the closeout supply chain is. It’s important to prep for such circumstances so your business doesn’t experience too heavy of an impact from sudden regulations or social change. Due to the increased demand and competition, many smaller factories are shutting down warehouses and either consolidating their closeouts and discontinued items in larger facilities, or shutting down their business.
Cash flow issues can crop up since advance payments for closeouts usually take longer with overseas suppliers. You may need to send cash out earlier for advanced payments and have it tied up for longer, which can affect your liquidity and working capital. When factories sell excess inventory to clear stock, generally they prefer to be paid in advance. They are selling discontinued items at a loss so these factories are not interested in extending terms. In addition, if they are shutting down a warehouse there will not be enough time for them to ship overseas and wait for payment.
It is also important to keep in mind that the origin of your goods can affect the level of duty you pay. Some goods attract a preferential rate of duty, so check the source of your supplier's raw materials. The price you agree to pay for any closeouts does not include shipping, handling and duties.