What Does Liquidating Inventory Mean?

If you’re looking to start a side business, then you’ll need to source your products from somewhere. And you can benefit from learning about the various ways that companies liquidate their inventory.

In some cases, inventory liquidation happens when a company is going out of business or shuttering several locations. For other companies, liquidation is a constant and ongoing event in which consumers can purchase used or repaired retail items at a fraction of the cost. Read on to learn more about the liquidation process.

One-time inventory liquidation

After a company files for bankruptcy, they give notice to the public that their inventory will be liquidated. Sometimes, by the time the public finds out about it, the best deals are gone.

Inventory liquidation is not just about retail products: furniture, equipment, display shelves, artwork or store decorations, and many other items can be part of the event. In some cases, you can find odd, unusual, or antique items for companies that have been in a community for a long time, such as when locations contain intact fallout shelters, old bank vaults, or dusty attics.

Real estate and things like heavy duty equipment can end up at auction in the later stages of corporate liquidation. In addition to private companies that hold property, industrial, commercial, and business auctions, various branches of the government also hold auctions of seized property when companies or company owners have broken the law.

Companies may suddenly liquidate inventory for reasons other than bankruptcy as well. One of the most common reasons is unexpected market volatility. If market prices tank after a natural disaster or economic hiccup and companies are left holding a large stock of inventory, they may choose to liquidate all or part of that inventory directly before taking on newer items.

If you pay attention to market trends and look for these types of “fire sales”, you might be able to save big on routine purchases.

Ongoing inventory liquidation

Retail stores will always have to deal with occasional surpluses, customer returns, and repairs. And one of the ways they recoup their losses on these items is to sell them back to the public for a fraction of the price.

In many cases, the warehouse and overhead costs to store surplus products is too prohibitive to bear. So the decision to get rid of some products is a business decision rather than anything related to problems with the product.

Instead of managing this process through the retailer’s business, a wholesale distributor takes the material and manages the auction process. From there, eBay enthusiasts, DIY-ers, and re-purpose specialists can take a crack at turning a box store’s loss into a regular revenue stream. Some sell items online, others sell items at local antique shops, and others still find useful parts and supplies for their businesses.

The liquidation wholesale process usually begins when returns or unsellable items are collected in lots or sorted into cases, pallets, or even truckloads. Pallets or lots are then auctioned off to the highest bidder, who either has to pick up the purchased goods or arrange shipment to their location.

There are so many ways to use these goods. People who have experience with soldering and electronics repair can either fix lots of electronic goods or use them for parts. Some charity organizations purchase clothes, baby supplies, and even dry goods that can be used to help economically disadvantaged people.

The best practice is to stick with what you know, so that you can clearly identify a good opportunity to either save money on a purchase or start a robust side business.