On my blog and training courses, I mostly talk about brand new stock sourced from wholesalers or imported from China. But what about liquidation and clearance stock? Can you make money by buying and re-selling such stock on eBay? In today’s post I’ll share my thoughts on this subject to help you make a more informed decision before you venture into such business models.
First of all, let’s get clear on the terminology related to this kind of stock. There are various types of stock that I would put in these categories:
- Real liquidation stock. As the name suggests, this stock comes from the liquidation of shops/companies. For example, when a shop closes down, the stock that’s left after the final sale gets sold in bulk or smaller lots as liquidation stock. Usually, these goods are brand new (can be off shelf, with price tags attached).
- Clearance stock/overstock. These are goods that can’t be sold as planned, which business owners simply want to get rid of to clear shelf space and improve cash flow to order new stock. Again, this is usually brand new stock, in original packaging and can come with or without price tags, depending on the stock type and whether it was displayed in a retail shop or stored in a warehouse.
- Customer returns. These are simply products customers have returned for various reasons – they didn’t like the colour, model, the item was defective or for whatever reason they simply used their statutory rights to return goods within 14 days of purchase.
While liquidation, clearance and overstock goods are usually brand new and come in original packaging, customer returns are generally classed as used goods and can come in various conditions:
- Tested & working. This means that the return has been tested and the item is in working condition. Boxes will most likely be opened and have some signs of use.
- Un-tested. Stock like this means it hasn’t been tested so you can’t know if products are in working condition or not. In most cases, this is faulty/damaged stock that can only be re-sold as parts OR as used goods if you can fix the problem.
- New, boxed & un-opened. This means that product is still in its original, un-opened packaging. Sometimes boxes themselves can have some slight signs of wear (like scratches etc.) but in general, this stock is like brand new and usually sells for almost the same price as wholesale.
Many companies will use their own grading system, for example Grade A stock, Grade B stock etc., with an explanation on what each grade means. The important thing here is to understand that NOT ALL customer return goods are the same and you have to be very careful when ordering such stock to avoid the disappointment of receiving items that cant’ be re-sold.
Where to buy such liquidation, clearance and customer return stock?
While many smaller companies may deal with such stock by themselves, e.g. selling it off on eBay or liquidation stock marketplaces, most big high street retailers will use a middle man to get rid of such stock quickly and with no hassle.
These ‘middle men’ are often called liquidation houses, clearance houses, wholesale clearance houses and various other fancy names. They all basically mean the same thing – these companies buy truckloads of stock from high street retailers and catalogue companies and re-sell them in smaller lots or pallets to eBay, market sellers and even the general public.
Here’s a list of some the largest and most popular wholesale clearance companies in the UK:
You can find many more such companies in this free trade directory.
Some companies have their own clearance departments, like Argos with its popular Argos Clearance auctions:
There’s another type of ‘middle man’ in this business – online companies/websites that work pretty much like eBay, just in the wholesale clearance niche. What they do is allow companies to list their clearance stock as auctions or buy it now listings. Buyers can then bid on auctions or buy stock directly from these BIN listings.
Here are some popular platforms in the UK, USA and Europe:
By the way, eBay also has a Wholesale & Job Lots category where you can find thousands of daily deals for liquidation, clearance and customer returns stock. If you’re just starting out with this concept, eBay is actually a good place to begin as most of you are already familiar with how it works plus on eBay you can find very small, cheap job lots you can start with.
Another place where you can find various deals for clearance stock is The Trader magazine. There you’ll find contact details for clearance houses as well as ads for one off deals in the classifieds section.
So finding items is really not the problem – there are so many companies dealing with this type of stock that you always have plenty of fresh offers to choose from. The biggest problem is finding the BEST stock that can be re-sold for the BEST prices on eBay!
How to buy clearance stock for resale on eBay!
Most clearance stock sellers are very smart and often take advantage of uneducated, newbie eBay sellers.
They sell pallets of mixed goods showing crazy RRPs (recommended retail prices) and the ‘huge’ discounts they offer. It’s not unusual to see a pallet being advertised with a RRP of £2000, selling for just 10% of that – £200.
Very often these are un-tested customer returns (basically faulty goods) with inflated RRPs. Obviously; you won’t be able to make any profit from such deals unless you’re able to repair the goods yourself or you buy them cheaply enough to sell as spare parts.
So the first thing you want to master is how to separate good stock from bad stock.
In my opinion good stock is ONLY:
- Tested, working goods that can be re-sold as used;
- Un-opened, brand new goods in original packaging.
With this type of stock you can make calculated decisions based on buying and selling prices.
I would recommend staying away from any un-tested goods, especially if electronics are involved. It’s simply not a viable business model to buy such pallets and hope to find a few items that are in working condition.
Next, you have to learn how to check products’ REAL prices. By real prices I mean prices these products are currently selling for on eBay or Amazon. Don’t take supplier’s word for granted! The RRPs they usually use are inflated, outdated and simply do not reflect a real life situation.
So what you do is take a product and do some basic Terapeak research to find out what kind of price you can re-sell it for. If you don’t have a Terapeak subscription, simply do a search on eBay and Amazon to see the average selling price for this product, based on its condition (used or new).
When buying MIXED pallets (pallets with various goods), make sure ALL GOODS are clearly listed so you know exactly what you will receive. It’s not enough that the description says – 10 LCD TVs! You want to know the exact brand and model for EACH product in the pallet!
DO NOT buy pallets that don’t come with a FULL list of contents and a description of the goods’ condition!!!
That is unless you want to gamble. I’m not a gambler so would never recommend anyone buying mystic pallets with God only knows what in them.
Most wholesale clearance companies will have good deals in place with shipping companies and will offer you delivery of pallets to your door, at added cost. Prices start from around £50-£60 per pallet but go down as you buy more.
Just make sure you add delivery costs when you do your calculations. If there’s just 10 items on a pallet and it cost you £60 to deliver it, it means £6 added on to each item’s base cost.
Alternatively, in most cases you can arrange your own delivery or even pick up goods from the warehouse on your own. Check where the company’s warehouse is based on Google Maps and if it’s not that far away from you and you have a suitable vehicle, save some money by picking the goods up on your own. Sometimes it’s even cheaper to rent a van for a few hours, if the location of the warehouse is within a short radius of you.
So, to get the full picture of potential profits, you create a simple spreadsheet that will have information about:
- Cost of goods;
- Target selling price;
- eBay & PayPal fees;
- Shipping fees;
- Packaging fees.
You can and SHOULD make these calculations BEFORE you order any goods!
To make your life simpler, use 15% as a ballpark figure for eBay and PayPal fees. Shipping costs will depend on the item’s size and weight and you can check prices for smaller items on Royal Mail’s website and for larger items; check some of the courier comparison sites like ParcelMonkey.co.uk or Parcel2Go.com as these will usually offer better prices.
What kind of profit can you make? Totally depends on what you can buy from these wholesale clearance companies. I wouldn’t go for anything lower than 20% in terms of ROI for items cheaper than £50 and maybe as low as 10% for more expensive items (£100+).
ROI (return on investment) is very easy to calculate – you simply divide your target profit by the item’s cost price and multiply by ten.
For example – if an item costs you £10 and you can make clear (NET) profit of £2 after all fees and shipping costs, your ROI is 20% (£2/£10 x 10 = 20%)
You should be confident that you’d be able to re-sell ALL the items you purchase otherwise your ROI will be altered vastly (in a negative direction!). Try to stay away from seasonal and trendy products if you’re not 100% confident you can move them quickly. If the price is very good, you can of course deal with such goods too as with a low price on eBay, it will be very easy to sell them off.
Selling on eBay
Ideally, you should be a Top Rated Seller on eBay to deal with clearance stock, as TRS status will give you an advantage in search results over your competition. If you’re not a TRS yet, check out my guide on how to become a Top rated Seller in 30 days here!
Besides TRS, there are a few other important things you want to keep in mind when re-selling clearance stock on eBay:
- Create an outstanding listing. Yes, even if you’re selling used goods. Check out my eBay listings anatomy guide here and my listing formatting tips here to learn how to create fantastic looking listings that increase sales in no time.
- Take good product pictures. This is actually more important with used goods than it is with new goods. When people buy something brand new, they expect perfect condition, as it should be. When someone buys a used item, its condition is a HUGE factor in the buying decision process. Help your customers and ease their worries by having multiple, high quality images that show off the product in various angles, including a few close-up pictures. Check out my Product Photography tutorials for more tips.
- Describe goods accurately. If there are scratch marks on an item, don’t try to hide them! Make an image and clearly describe any defects the product has. Not only will this avoid negative feedback problems later on, it should also increase conversion rates as buyers will see that you’re honest and don’t hide any facts about the product up for sale.
- Warranty. By law you don’t have to provide a warranty but if you really want your buyers to feel confident about purchases and increase conversion rates, I would recommend providing a 30-day warranty even for used items. This is in addition to the 14-day returns policy.
As to which listing format to use – BIN or Auction – ideally you want to use Buy It Now (BIN) format as then you know for sure you’ll reach your target profit when an item sells. But sometimes it may not be possible, especially IF you’re not a TRS or the item is in a very competitive market.
In cases like these, you can still use auctions, auctions with a reserve price (not recommended) or auctions with a starting price that is close to or the same as your target selling price. This means the first bidder will actually reach your target price and you’ll make your pre-calculated profit.
As I said, ideally you should be a TRS and use BIN listings for these items so you know exactly how much money you’ll make once an item is sold.
Can you make this work? You bet you can!
Is it easy? No, it’s not.
Is it viable? Yes, but only if you’re prepared to work long hours for relatively small profits.
There are some problems with this concept:
- You’ll always have to look for new stock to sell, constantly;
- You’ll have to take a lot of pictures and write many descriptions as stock will change on a regular basis;
- It’s hard to up-scale this business model as you won’t be able to buy in multiples and will always be working with small quantities for each product;
- Very difficult to make this work outside eBay, unless you concentrate solely on one product group (like clothing, shoes, handbags etc.)
This concept can be good for people who don’t have enough money to import from China or buy from real wholesalers but still want to start selling on eBay and hopefully make some money along the way.
Risks are relatively low AS LONG as you stick with the general guidelines covered in this post and use common sense. Never buy un-listed stock in an unknown condition. Always do calculations of costs and potential profit BEFORE you buy any stock.
Alternatively, you can also start a profitable eBay business with used goods! This in essence is a very similar concept to clearance stock and in my opinion actually gives a far better return on investment.