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2017 Annual Liquidation Sourcing Issue – How Does Liquidation Sourcing Work?

The eBay & Amazon Seller's News ~ May 2017 ~ Volume 18, Issue No. 8

Tips, Tools, News and Resources for eBay, Amazon and Independent Online Sellers
by: Skip McGrath

In This Issue:

Musings from and about eBay, Amazon and The World Wide Web

  1. 2017 Annual Liquidation Sourcing Issue – How Does Liquidation Sourcing Work?
  2. The Wholesale Pallet Buying Craze ~ the Pros and Cons of Liquidation Sourcing
  3. Amazon Continues to Repackage Seller’s Returns and Sell Them as New
  4. Tips to Sell Liquidation Products on eBay or Amazon
  5. Liquidation Wholesale Sources for eBay & Amazon Sellers

"Have no fear of perfection - you'll never reach it." ~ Salvador Dalí


Musings

This is Our Annual Liquidation Sourcing Issue

We have several articles about the liquidation market including the pros and cons of this market. Sourcing liquidation products can be insanely profitable as long as you understand the market and how to source from it. Otherwise it can be a real profit killer.


eBay Sellers, are officially invited to eBay Open 2017, from July 25-28 at the MGM Grand in Las Vegas. This is an opportunity to meet with eBay employees, invited experts and other eBay sellers. More information coming soon. Watch your eBay Announcements


Jordan Malik has just released new software for Amazon sellers: Check Permission - a guaranteed time saver for Amazon sellers. CheckPermission tells you INSTANTLY if you're approved to sell any Amazon product. It displays your permission on any Amazon product page AND - if you use Inventorylab to list your products - it shows you an alert while you're in Inventorylab!

Jordan has a special offer for readers of my newsletter.  Enter coupon code skip50jm at checkout to get 50% off.  Note that this coupon will expire on 5/25/17.


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Amazon is building a new corporate HQ in downtown Seattle - and the weird design is causing comments from Seattleites. Click here for a peek . When the building is complete, Amazon will open a shelter for homeless in the main building. (If you've always wanted to visit Amazon, this might be a way to do it).


Would you like to tour an Amazon Fulfillment Center (Warehouse)? If so, Amazon is now offering tours to sellers at six of their fulfillment centers strategically located around the United States. The centers are: Chattanooga, TN; Chester, VA; Jeffersonville, IN; Middletown, DE; Phoenix, AZ; and San Bernardino, CA. Tours are available on the first and third Tuesday of each month at 10 a.m. and 2 p.m. local time.

Click here to learn more, and to schedule a tour.


Amazon Merchant Fulfilled sellers; when you ship a Merchant-fulfilled (non-FBA) order using postage you bought from Buy Shipping Services in Seller Central, You do not have to worry about tracking and Amazon will take over any claim where the buyer claims the order wasn't received.

You won't receive a notification on your Manage Returns page and your Order Defect Rate won't be affected. Log into Seller Central first then click here to learn about Buy Shipping services.


Amazon resets FREE Shipping back to $25. If you recall, it was not long ago when Amazon raised their minimum order to get free shipping from $25 to $35 -and then not long after, Amazon went to $39. This was a real blow to sellers who saw their sales drop -especially for those items they sold for between $25 and $39.

Well here is more proof that competition works. The one company that is seriously competing with Amazon is Wal-Mart. Since Wal-Mart is only charging $25 to get free shipping, Amazon has reverted to that rate.

Here is the announcement from their Amazon buyer's Help Files (I can't find any notice they made to sellers. I guess they want to keep it a secret from us).

All orders of $25 or more of eligible items across any product category qualify for FREE Shipping.

With free shipping, your order will be delivered 5-8 business days after all your items are available to ship, including pre-order items.

To place an order online, do the following:

  1. Add at least $25 of eligible items to your Shopping Cart. Any item with "FREE Shipping" messaging on the product detail page that is fulfilled and shipped by Amazon is eligible and contributes to your free shipping order minimum.

  2. Do one of the following:

    • To place the order using the shopping cart:

      1. Proceed to checkout.

      2. Ship your items to a single U.S. address in one of the 50 states.

      3. Select Group my items into as few shipments as possible as your shipping preference.

      4. Select FREE Shipping as your shipping speed.

    • To place an order using 1-Click®:

      1. Click Review or edit your 1-Click orders on the 1-Click® confirmation page.

      2. Click Change next to Shipping Speed.

      3. Select FREE Shipping as your shipping speed.


Karon Thackson has written a wonderful blog post - Amazon Optimization: 10 Quick Tests to Improve Rankings, Traffic & Sales. Click here to read the post.


Did you know that Wal-Mart also has an online shopping site where third party folks like us can sell? You do have to be approved, but if your eBay and/or Amazon account(s) is in good standing and your metrics are good, then you will be invited. Click here to apply.


A recent survey by the National Retail Federation, revealed that average retail spending on Mother's Day 2017 will increase by $12 per Mom, from $172.22 to $186.39, This year's total of $23.6 billion, is up from $21.4 billion last year -an increase of $2.2 Billion. We should know how it turned out by the next newsletter.


eBay just released their annual Spring Update -and this week alerted sellers that a Summer Update will have more policy changes. We will cover those when they are announced.


I wanted to let you know that I’ve updated some articles on my website:


Lets get started with this month’s newsletter:

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1. 2017 Annual Liquidation Sourcing Issue – How Does Liquidation Sourcing Work?

You have all seen the stories - "Buy famous brand liquidation products at 5¢ on the dollar, and make a killing." As my late Grandfather used to remind me, "if something sounds too good to be true -it probably is."

Can you make a killing with liquidation products? -of course. But, like many things, the devil is in the details. So let's look at some of those details now.

First of all; What do we mean by liquidation products?

Generally speaking, liquidation products are goods (merchandise) that is, or can no longer, be sold by retail stores. In fact, most liquidation companies get their merchandise from retail stores and chains. There are several different types, and it is important to know the difference.

  • Shelf Pulls - Shelf pulls are products that were once on the shelf in a retail store, but were never sold to a customer. In general, these are good products, unused and new with tag, but they can show some customer handling

  • Returns - There are three types of returns:

    • Clean returns - These are products in perfect condition (many times still with a retail box and tags), that were returned because the buyer couldn't use them (unwanted product, or wrong color, size, etc.).

    • Damaged or broken returns - These are returns whereby the product had something wrong with it (pulled yarn in a sweater, a device that doesn't work or something that had a tear or stain).

    • Warranty returns - This is obvious. These are returns that were somehow damaged or broken that were returned to the manufacturer for repair.

  • Bankruptcy Products - These are products that were in a retail store when the store claimed bankruptcy. The liquidation may be voluntary or court-ordered. The type and quality of the goods can vary.

  • Seconds - Seconds are products that have a minor flaw that was discovered during manufacturer. The flaw is usually very minor and does not interfere with the operation of the products.

    Here are two examples:

    My niece worked for a company that built smokers. These were top of the line smokers that sold for around $1,100. She called me one day and said they had four units of their most popular smokers that had very minor scratches -many in areas that could not even be seen. Nevertheless, company policy was they could not sell them as new. So they were offering the smokers for $300 including shipping. I told her to send me one. It has been happily smoking away, sitting on my deck for the last 4 years

    The other example is once I was in a Van Husen Outlet store and they had a table where their top of the line dress shirts were selling for 75% off. When I looked closely, there was a sign that said they were seconds.

    I picked out 3 shirts in my size and carefully looked them over. On one of them I saw a defect on the shirttail that you could not see when the shirt is tucked in. I could not find anything else wrong with the others.

  • Remanufactured Products - Remanufactured goods are products that were returned for warranty reasons and went to the manufacturer. The manufacturer repaired the items, put them through their quality control process and is selling them with the full manufacturer's warranty intact. These can be great bargains when you find them. Another name for this is Factory Reconditioned. These goods typically sell for a large discount off of the normal wholesale price.

Now that we understand the types of products lets look at how we should treat them.

Shelf pulls in general are a good type of liquidation merchandise to buy. There are several types of shelf pulls. The best type is overstock, or excess merchandise left over from the season. When seasons change, retail stores need to make space for new products. Another good reason is that a product is replaced by a new model and the store has to get rid of the old models.

The one type of shelf pulls you want to be careful of are products that were pulled because they just didn't sell. If you think they would benefit from a lower price, then you can take a chance with them. Otherwise I would be careful.

Be very careful of returns. I never buy returns. I have tried it twice and the box of returns I received contained so much junk, I just couldn't make money on them. I sold most of them As Is for parts and managed to recover my cost -but that was about all.

Bankruptcy Products can be a mix of things. Usually the number of shelf pulls is high but there are usually some returns, seconds and just damaged goods in with the mix. I prefer to buy those types of products at a physical auction where I can inspect the goods before buying.

Buying Seconds can be one of those things where you can make a killing or lose your shirt. The key is to really understand why the product is a second. If it's a minor issue, then it's probably OK. This is one of those situations where you want to contact the liquidator to fully understand what you are getting.

Remanufactured Products can be an excellent source of goods if you buy them right. There are generally three ways to buy these.

  1. Direct from the manufacturer. In my opinion, this is the best way because the manufacturer will stand behind the product.

  2. Liquidators - This is a grey area. On one hand you want to be careful that the products are genuine and come with a manufacturer's warranty and in the retail packaging. On the other, I have seen some remanufactured goods that were completely bogus.

  3. Remanufactured dealers/distributors. There are some liquidators who specialize in remanufactured goods. Some of them may even have an exclusive with a brand. In general, it is OK to buy from these companies.

So when you are ready to do your fist liquidation deal -take your time and examine what you are about to do very carefully.

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2. The Wholesale Pallet Buying Craze ~ the Pros and Cons of Liquidation Sourcing

This article is by Rob Cyr, the author of The 2017 Liquidator's Guide . I have mentioned Rob's guide before, and I heartily endorse it. Like almost all of the products and services I recommend, Rob Cyr's guide comes with a no-nonsense guarantee.

The guide itself is a masterful work that explains and educates you about the liquidation industry. It comes with 5 excellent bonuses:

  1. 36 Page Clothing Supplier Source Guide

  2. Private Membership Site where we offer product sourcing audio lessons, industry webinars, and additional downloadable guides and worksheets

  3. Manifest Analysis Tutorial showing you how to review merchandise before you buy a pallet or truckload.

  4. Private Facebook Sourcing Group for members

  5. Brand Protection Analysis protects you against intellectual property complaints (cease & desist letters) from brands and department stores

Robert shares his experiences with you, and gives you access to his personal Black Book of direct source contacts!

He also provides Liquidation contact information for department stores like Amazon.com, Nordstrom's, Victoria's Secret, Macy's, Bloomingdale's, Kohl's, Groupon, Best Buy, Target, Target.com, Walmart, Walmart.com, Costco, Sears, Kmart, QVC, HSN

One of the biggest misconceptions about liquidation sourcing is that you need thousands of dollars to do that. This is just not true and Rob explains that in his book.

Here is Rob's article:

The Pros and Cons of Liquidation Sourcing

By: Rob Cyr

I think It's safe to say those who are reading Skip's newsletter are doing so because they're currently engaged in some form of online selling, or perhaps at least investigating the opportunity. The two biggest marketplaces, Amazon and eBay, offer sellers an opportunity to build a bustling business from home.

In addition to Amazon and eBay, there are a host of other online marketplaces for sellers to sell including Mecari, Bonanza, OfferUp, LetGo, Varagesale, and the new Facebook Marketplace, options are almost endless.

Sellers have countless options to set up their virtual shop, but the biggest problem quickly becomes inventory sourcing.

The concept of product sourcing has been a stumbling block for countless sellers over the years, in fact, we now see a barrage of YouTubers producing what are called "Unboxing" videos that either promote, or warn fellow resellers, about the perils of the wholesale pallet buying craze.

I say craze because it almost seems like a goal marketplace sellers have---buying a pallet. I see all kinds of comments and posts within countless Facebook Groups about purchasing liquidation merchandise.

Liquidation merchandise is available in every consumer merchandise category, and is often categorized and sold based upon product conditions:

While sourcing liquidated department store goods such as overstocks, shelf pulls, and customer returns can be profitable, the allure of the opportunity often finds resellers jumping in feet-first before they fully understand liquidation sourcing.

Shelf Pull Items - describes items that have been merchandised within a retail store. Big-box stores liquidate shelf pull items for various reasons including seasons end or to make room for new inventory. Shelf pull items may exhibit a minimal amount of damages because of consumer handling/inspection, trying on, or simply open box items.

Overstocks - Overstocks, sometimes referred to as closeouts, describe an excess quantity of new merchandise that is being liquidated by a retail stores, e-com retailers, distributors, or manufacturers. By industry standards, overstocks and closeout goods are in new condition with or without retail packaging.

Customer Returns - Here is where liquidation sourcing becomes tricky; consumers return merchandise for various reasons including remorseful purchases, damaged or broken upon use, and wrong color/size/model purchased.

While a large majority of returned goods are in sellable condition, customer returned lots and pallets will contain damaged goods and throw away items. There is no industry standard that defines a certain ratio of damages to expect with any customer returned lot purchase. Customer returns can be profitable, but the buyer must be willing to repair or replace missing parts and deal with compromised or often missing retail packaging.

Salvage - Defined as customer returns that have been inspected and deemed broken or needing extensive repairs. Most salvage loads are purchased to be reconditioned or sold as parts. Yes, broken items can be sold for parts on eBay! There are tons of salvage buyers who prefer to buy broken items to sell on eBay. Don't take my word for it, perform a completed item search using keywords such as broken camera or broken PS4.

Let's review a few Pros and Cons of sourcing the liquidation industry

PROS

Liquidation sourcing gives the reseller access to name brand merchandise without meeting specific distributor and/or manufacturers minimum order requirements. Let's face it, branded goods outsell lessor known or non-branded merchandise probably 10 to 1.

Liquidation merchandise can be purchased for nickels and dimes on the dollar. With a low acquisition cost, liquidation sourcing offers an opportunity for higher profit margins. Liquidation lots, pallets, and truckloads are often sold based upon a small percentage of original wholesale pricing.

CONS

Damaged merchandise - As discussed above, customer returns and salvage merchandise pose some unique challenges for the reseller. Customer returns and salvage goods are typically sold at a lower cost overall making profitability possible for those who are willing to (1) fix/repair broken items; (2) sell "as is" for parts; and (3) order replacement parts from brand manufacturers to make items fit for resale.

Multiple resell channels are necessary -Those who purchase liquidation merchandise will need to utilize multiple resell channels to move merchandise. Again, because liquidation lots and pallets are a mix of assorted goods, there will inevitably be a mix of product values, sizes, and conditions. Small, higher value items are best suited for Amazon and eBay, while big and bulky items are easier sold through local sales channels, i.e. Facebook Groups, Craigslist, and flea markets.

Sourcing the liquidation industry can be extremely profitable, but I encourage all newcomers to understand there is a bit of a learning curve that can only be gained after a purchase experience. Please start small and keep your expectations below the clouds.

Go here to learn more about Rob's training, The 2017 Liquidator's Guide .

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3. Amazon Continues to Repackage Seller’s Returns and Sell Them as New

I have written about this before, but it continues to be a serious problem. If you look on your reports in Seller Central under fulfillment, you will see a report that says FBA Customer Returns:

If you bring up that report you will see something like this (Sorry this looks so messy - but I blanked out my product names by hand):

Click here for a larger image

In the second and third columns from the right, you can see the Disposition and reason for return. In the last column to the right, you can see the status. I am sorry these images are hard to see on the website, but if you look closely, you can see the status on every one of these returns is Unit returned to inventory. So what does that mean exactly?

This is something I have been watching for some time, and it's a real problem for sellers.

When you see a returned item of yours that says Unit returned to inventory that means when the product was returned, an Amazon warehouse worker (who knows nothing about your products), looked at it -and said to himself: "That looks OK - I think I will just return it to the seller's inventory."

If all of the products were indeed fine -then that could be a good thing. But, in so many cases there is actually something wrong with the product -or the retail packaging looks fine on the outside -but not on the inside.

Here are some situations I have personally experienced:

  • A customer broke the inner seal on products inside a retail packaging box that they opened and reclosed carefully. So, when the Amazon worker looks at the retail box, they think it looks new and they put it back into your inventory.

    The problem is, when the next buyer opens the retail box, they see the internal packaging has been opened, and they send a complaint to Amazon that you sold them a used item and demand a return which costs you money AND puts a black mark on your Amazon account.

  • One product I have -the retail package is a zip-top plastic bag with a product card inside and the parts of the product are loose. What has happened here is the buyer either received a broken part -or broke it when they tried to install it. They do a return to Amazon claiming the item was defective (this way Amazon pays for their return shipping and charges you).

    When the product arrives back at Amazon, a worker looks at it. He or she cannot tell that one of the many small parts is broken and it looks like all the other products in inventory, so they put it back into your inventory as resalable. Now the next person who buys that item actually does receive a broken item. Now the complaint and return process starts again (and perhaps a poor review or negative feedback as well). Once again, this costs you money.

  • In one case a customer returned an item where the product was OK -but the retail packaging was damaged. Apparently, Amazon just sealed this in a polybag and put it back in stock. The problem was the next buyer wanted it for a gift. (My listing said the product came in a box suitable for gift giving). So here comes another return and complaint.

  • One of my readers just emailed me that her listing for a vitamin product had been suspended for safety reasons. Why? Because the seal was broken and the buyer complained it was used. Since she only sells new product direct from the manufacturer, it is obvious this was a customer return and the “highly trained” Amazon warehouse worker didn’t notice the other products in the bin were all sealed and placed the return with the broken seal in the same bin with her new product.
     

Myself (and several other sellers) have opened support tickets and complained about this, but Amazon's answer to all is: "This is not a problem because our warehouse workers who do this are specially trained."

The only solution Amazon suggests is to do a removal order for all items of inventory under that SKU. They suggest this even if you have 20 items or more in stock and only 1 return that has been put back into inventory.

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4. Tips to Sell Liquidation Products on eBay or Amazon

I am always asked by readers if it's safe to sell liquidation products on eBay and/or Amazon. The simple answer to that question is: Yes, as long as you take a few precautions. Here are a few Best Practices to follow:

  • Even though a liquidation product is technically new, not all can be sold that way. If the retail packaging is perfect, (including all seals are intact), then yes, go ahead and sell it as new.

  • If the retail packaging has anything wrong with it whatsoever (including you can tell its been opened), then I would sell it as Used Like New on Amazon and just Used on eBay (eBay will not let you use the words like new in your title or description, but you can say Brand New - Never Used).

    When I write a listing, I explain the product is New and Unused and I am selling it used because there is some minor damage to the retail box. When I do this, I usually charge about 10% to 15% less than I would if the product was new. Since you can buy liquidation products well below the normal wholesale cost, this should not be a problem.

  • Be careful of UPC numbers and product descriptions. One of the problems I have had in the past is that the manufacturer changed the product (new features or specs), but did not change the UPC code.

    What happens is, you type the UPC code into eBay or Amazon and their automated system uploads a photo and description of the new model. It looks identical to the one you are selling, but if you compare the descriptions word-for-word you will see minor differences -this means, the one you have is the older model that you got from a liquidation supplier -and not the new current model tied to that UPC code

  • Always describe what you are selling accurately and in detail. The buyer should get exactly what they are expecting. If you are selling something broken, or just for parts - be sure and say that with the words, As Is - Sold for Parts Only, in large Boldface type near the beginning of your description and again at the end.

    You would be amazed at how many people simply look at the image and the first few words of the description -and click the Buy button , thinking they are buying a brand new item -then when they receive it, they file a complaint with eBay or Amazon that the product was "not as described."

  • If a product is a warranty return that has been repaired -Always explain that in detail.

  • If a product is remanufactured, be sure to explain what that means. If the product includes the manufacturer's warranty, you can also state that prominently.

Follow these tips and you should be in good shape, and avoid excessive returns and bad feedback comments when you sell surplus and liquidation items.

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5. Liquidation Wholesale Sources for eBay & Amazon Sellers

Before you dive into these sources -let me say a few word about them. Just because they are printed in my newsletter, that does not mean I endorse them. I research these sources to see if they have a reputation of being reliable. Unless I have personally bought from them several times, there is no way to really know how good they are, which is why I don't personally endorse them.

This is especially true of the surplus and liquidation sources. When dealing with any of these sources you can assume they are legitimate (I have checked out their reputation), but nevertheless, Caveat Emptor (buyer beware) is still good advice when dealing with ANY wholesale source (no matter where you found them).

Via Trading is a Leading Wholesaler of Liquidation Merchandise with lots that start as low as $100.

Liquidation.com is a favorite liquidation supplier to eBay and Amazon sellers. One word of caution - they are an auction (like eBay) that allows you to score great deals, but the deal you get, is only as good as the seller you are dealing with. Be careful of deals that include the seller's shipping arrangements. I suggest you take this precaution with any liquidation auction.

Bulq is a liquidation source that specializes in small, low cost lots.

Jacobs Trading is a direct wholesaler of customer returns, shelf pulls, excess, and overstock inventories. They tend to favor large purchases.

The Official Wal-Mart Liquidation site offers a wide variety of goods from Wal-Mart (all types) and operates in an auction format.

B-Stock Sourcing is another large liquidation source that operates in the auction format.

R.G. Riley is another large and well-known liquidation dealer that works in small low-cost lots.

Genco may be the largest liquidation dealer around today -and one of the oldest. They have lots in various sizes.

Direct Liquidation is not one of the older liquidators, but they are very fast growing.

United Jersey Wholesalers specializes in the wholesale distribution of closeouts, overstock, liquidations and store returns. As the name suggests, they are located in New Jersey -but they sell all over the United States.

Rhino Mart is a wholesale distributor of closeout merchandise. They sell closeouts, overstock, customer returns, surplus and liquidation merchandise.

OK - that is enough of liquidators. Let's look at some regular wholesale resources.

House in the Country Fine Art Prints sells an extensive line of prints and decorative accessories.

WholesaleArt sells a wide variety of art supplies, including paints, brushes, canvas, drawing supplies and frames.

Scent-Sations Inc. carries a nice line of soy candles, body soap, and makeup

SKULLWEAR provides a large variety of headwear including skullcaps in American Flag designs and many others.

Persona makes and sells a wide variety of charms of all types.

VIP Home and Garden sells a very nice line of vintage-style garden design products

Alynn Neckwear Inc. is a maker of fine quality conversational neckties & accessories.

Trend Wedding & Events sells wholesale to businesses in the wedding, special event/gift industries,

So that’s it for now. See you in a couple of weeks.

Skip McGrath
The eBay & Amazon Seller's News

P.S. If you missed the last issue, click here to read it.


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