How to Start a Liquidation Business (2024)

If you want to be your own boss, starting your own liquidation business is a great, doable option. Plus with the rising rate of inventory available, the ability to get your hands on quality, brand-name merchandise at bargain-basem*nt prices, has never been easier. While companies liquidate their merchandise when they’re about to shut down, liquidation is also a smart part of any retailer’s or manufacturer’s reverse logistics business plan. And this is great news for anyone wanting to start a liquidation business.

There are a couple of key highlights in starting your own liquidation business. First, you don’t need a huge chunk of money to get started. In fact, you can begin with a fairly small amount of capital. Second, you can find brand-name liquidation inventory at a low price. With the availability of different lot sizes and product conditions, you can find pallets of goods to fit your budget. Finally, with the right resources in place, it’s easy to turn a profit. In this article, we’ll break down what you need to know along with the right steps to start a liquidation business.

Steps to Starting a Liquidation Business

Retail arbitrage…have you heard of it? Simply put, it’s the process of buying goods at a discounted price and selling them higher, for a profit. While many people do this as an independent practice, entire businesses such as flea markets or off-price stores, like TJ Maxx and Ross, are built on this business model. So whether you want to resell online, open a discount store, or become a flea market vendor, this list will help you to start acquiring inventory and begin your liquidation reselling business.

Decide between liquidation vs. wholesale

In your search to find inventory to start a liquidation business, you’ve likely come across the term ‘wholesale.’ While liquidation and wholesale are similar, there are definitely key differences. For example, wholesale is the sale of goods and merchandise to resellers and businesses. The wholesale price is usually fixed and the amount of product can vary substantially. On the other hand, liquidation typically means an organization is trying to turn excess, overstock, or obsolete goods into cash, quickly.

When it comes to buying liquidation merchandise to resell, the opportunity has never been better. Many retailers are bypassing traditional liquidation methods and launching customized B2B online auction marketplaces that connect returned and excess merchandise directly to business buyers. This creates a level playing field for all buyers, big and small, to compete for the inventory. What’s more, the inventory is generally listed at a fraction of MSRP.

Find reputable liquidation sites or wholesalers

Do your homework on the different companies offering liquidation and wholesale inventory. Decide whether you’d rather source direct liquidation or from a wholesaler. Additionally, decide what type of merchandise you want to source. Is there a particular category (home & garden, apparel, consumer electronics, etc.) of goods you’d like to sell? Is there a specific condition (ie. brand new/overstock vs. refurbished vs. salvage for parts) you want to specialize in? When you’re just starting out, we recommend sticking to brand new inventory as it’s usually easier to resell. And when it comes to sourcing inventory options, A Guide to Liquidation Sites is a great article comparing top companies.

Become an authorized reseller

The first thing you need to do to begin sourcing liquidation inventory is to become a legit company. Once you’ve registered your business, you need to obtain a resale certificate. This certificate exempts you from paying taxes when you purchase the goods to resell. Nearly every reputable, large liquidation or wholesale company requires a resale certificate to purchase pallets of goods.

Buy liquidation pallets

A great way to begin buying liquidation pallets from retailers is to shop their online B2B liquidation marketplace. Most big-box stores like Target, Walmart, The Home Depot, Macy’s, and more, have private online marketplaces. Registered business buyers can purchase retailers’ overstock, customer-returned, and other liquidation inventory directly from them –– eliminating a middleman. Typically, online marketplaces use an auction-based format, allowing you to browse current auction lots for sale and bid the amount you feel comfortable with. Dozens of retailers and manufacturers (including nine of the top 10 in the U.S.) use online auction sites like B-Stock to offload their liquidation merchandise –– for pennies on the dollar.

Resell items

So you’ve got your goods and you’re ready to resell! Hopefully, you’ve already researched and scoped out potential sites to sell your goods. And think carefully about which marketplaces your items might fetch the best prices on. Some individuals reselling eBay clothes or purses, for example, take to selling on Poshmark. Since Poshsmark is very apparel-focused, this is a logical choice. Some other options include Amazon, Facebook Marketplace, and B-Stock Supply for reselling a variety of items. If you want to take your business offline to eliminate shipping costs, you can always sell at flea markets, thrift stores, or in a brick-and-mortar shop. Don’t miss 21 Resale Business Tips You Should Knowfor a deeper dive!

How to Sell Online

So you’re moving your merchandise and reselling successfully online –– that’s awesome! But, are you turning a profit? To make sure you’re actually making more than breaking even, let’s talk about liquidation business strategy. Here are nine things you should do to help beef up your bottom line:

Create a business plan

You’ll want to know your costs of doing business. Account for things like acquiring new inventory, shipping expenses, new equipment needed, extra help, etc.

Conduct market research

Doing some market research helps to determine who your customers are. Know your audience and market to them accordingly.

Understand your selling options

If you’re going to sell on multiple platforms, familiarize yourself with the rules, processes, fee structure, etc. of each one.

Learn new skills

Gain knowledge in things like online marketing, photography, and SEO to boost your sales.

Research your competition

See what they’re selling the same or similar products for. You must be competitive to move your inventory.

Establish a reputation

It’s simple, provide a great customer experience and you’ll get good reviews! If you’re consistent, responsive, and engaging, people will want to buy from you.

Try advertising

You can use ads to promote your business. This can be as simple as Facebook boosted posts, which start for as little as $1 per day, or a radio spot that will cover your local area!

Create a return policy

Return policies are a good way to establish customer trust and keep them coming back. Mistakes happen—however, you don’t need to be caught off guard without a solid return policy. For more help, read .

Looking for more inventory to resell? We’ve got you covered…

How to Buy Pallets of Returned Merchandise

If you’re ready to ramp up the business and start purchasing liquidation pallets regularly, here are a few last tips you will want to note.

Check Amazon returns and other popular retailers’ returns

As we mentioned, big retailers like Amazon and Walmart sell their returns on online auction platforms. Customer returns come in all shapes and sizes — we recommend reading A Guide to Buying Customer Returns before you go this route — and can be extremely worth your while. Oftentimes, it can still be like-new condition inventory!

Read the manifests

Understand what you’re potentially buying before you place a bid. Use the manifest to research current pricing on items and to see what sizes, models, colors, conditions, etc. are included in the auction lot.

Learn condition codes

Since each retailer categorizes their product conditions a little differently you must read the retailer’s condition codes before placing a bid.

Factor in shipping

Whether it’s buyer arranged or binding shipping, this will be in addition to the final bid price. Be sure to read Buying Basics: Auction Lot Shipping Methods to learn more.

While this may seem like a lot of tasks to get your liquidation business off the ground, it’s actually pretty straightforward. Your first step is to create a registered business and get a resale certificate; the rest you can tackle one step at a time. To keep step-by-step reselling information handy, be sure to bookmark our ultimate playbook, How to Buy Liquidation Merchandise.

How to Start a Liquidation Business (2024)

FAQs

Is liquidation business profitable? ›

If you're looking for a profitable business opportunity, buying and selling liquidation goods can be a great option. With a little research and effort, you can find great deals on high-quality products and make a good profit.

How do I start my own liquidation business? ›

Steps to Starting a Liquidation Business
  1. Decide between liquidation vs. wholesale. ...
  2. Find reputable liquidation sites or wholesalers. ...
  3. Become an authorized reseller. ...
  4. Buy liquidation pallets. ...
  5. Resell items. ...
  6. Create a business plan. ...
  7. Conduct market research. ...
  8. Understand your selling options.
Dec 2, 2021

How do liquidators make money? ›

Once the liquidator is assigned, they will then take over control of the person or organization's assets. These are then pooled together and sold off one by one. Cash received from the proceeds of the sale is then used to pay off the outstanding debt held by unsecured creditors.

How much money can you make from liquidation pallets? ›

How Much Can You Expect to Make with Liquidation Pallets? Selling liquidation pallets can be quite profitable, especially when you work with big retail brands in the US. Selling products from pallets gives you a profit margin around 30-40% per sale.

What gets paid first in a liquidation? ›

In general, secured creditors have the highest priority followed by priority unsecured creditors. The remaining creditors are often paid prior to equity shareholders.

Is liquidation risky? ›

Liquidation risk is the possibility of losing your entire trading position if the market moves against you and your margin level falls below a certain threshold.

Why is liquidation so cheap? ›

At a liquidation discount store like Treasurez For Less, customers are able to find discounted items purchased from either wholesale stores or warehouse stores in bulk and then resold for a fraction of the retail price.

Who pays for liquidation? ›

Who Pays the Costs of Liquidation? In a voluntary insolvent liquidation, the costs of liquidation are typically covered by the company's assets. Should these assets be inadequate, the directors or shareholders of the company may be required to pay the remaining liquidation costs.

What is the average cost of liquidation? ›

However, as a ballpark figure, expect to pay around £4,000 - £6,000 + VAT for a straightforward liquidation of an insolvent company with minimal debtors, few assets, and no ongoing litigation action via a Creditors' Voluntary Liquidation (CVL). More complex cases are likely to result in higher fees accordingly.

Is buying liquidation pallets worth it? ›

Cost savings: The best part about buying wholesale liquidation pallets is the low price. Since the store is trying to get rid of the excess inventory, they will sell it for much cheaper than they normally would. This means small business owners can get a lot of products for a great deal.

Can you make money selling liquidation items? ›

Flexibility and Focus on Profitability:

Not every product in a liquidation pallet will be profitable, and that's perfectly fine. You only need a few profitable products to make money. Remember, even a single profitable item can contribute to your overall success.

What are the pros and cons of liquidation? ›

Advantages and Disadvantages of Liquidation
  • Relatively low cost of implementation. ...
  • Debt written off. ...
  • Investment funds retained. ...
  • Company closed. ...
  • Directors conduct investigated. ...
  • Overdrawn directors current account and guarantees called in. ...
  • Teams and synergy of employees lost.

Does Amazon have a liquidation site? ›

Amazon Bulk Liquidations Store sells palletized lots of Amazon or third-party seller items. A lot is defined as a group of items offered for sale as a single listing. Lots are composed of either overstock (new and unopened) or damaged items (returned by customer or damaged during processing).

Is liquidation a good business? ›

The typical gross profit for a liquidation business is 75%. It is tough to estimate the typical gross profit for a pallet liquidation business because it really depends on which of the 4 business models that we discussed above you fall into.

What pallets pay the most? ›

The Size of the pallet

Industry standard sizes, such as the 48×40 pallet used in grocery stores or the 48×45 pallet used in automotive, will hold a higher value than odd-size or custom sized pallets.

Can you make money from liquidation? ›

Many of these products are brand name goods from companies whose names are very familiar with consumers. Making money this way is possible because of the nature of liquidation, which is why more and more people have considered starting their own liquidation business.

What is the downside of liquidating a company? ›

Liquidating your business means all employees will lose their jobs. This can be particularly difficult if you have a loyal and close-knit workforce, making it a painful aspect of the process. Suppliers and creditors are likely to lose money, as they may not recover all amounts owed.

Are liquidation sales worth it? ›

Liquidation sales are great opportunities for bargain hunters because they offer deep discounts on a wide range of products. This allows shoppers to snag high-quality items at a fraction of their original cost, making it a great opportunity to save money while still getting quality products.

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