Profits with closeout merchandise?

One of the best sources for profitable inventory is the Closeout Industry, products can be purchased for a fraction of the original wholesale/retail value. There are plenty of companies out there ready to provide you with merchandise, but knowing which company to deal with can be very tedious. Most of the time sourcing reputable closeout Companies/Brokers comes at the expense of trial and error.

There are two types of closeout companies; the warehousing company that actually owns the merchandise and the merchandise brokerage company that acts as an outside sales rep for merchandise that is owned by another individual or company. Brokers represent merchandise, set up the sale and arrange for delivery of the actual product.

Many closeout companies on the internet are brokering merchandise. A broker offers a valuable service much like a stock broker. They research product sources, assist buyers in determining appropriate merchandise for their market and many times arrange shipment. Brokers work for a percentage of total merchandise sold. Their fee is built into product price and is well justified for their knowledge and transaction assistance.

There is absolutely nothing wrong with purchasing merchandise through a reputable brokering company. It happens all over the world, everyday. It is best to establish whether or not the broker you are dealing with is actually representing the actual source of the merchandise. Let me explain it this way, there are many Brokers out there who are actually Brokering other Brokers merchandise. This is a problem simply because each Broker is marking up your merchandise by a fixed percent (His/Her actual profit). If your purchase is sourced through more than one Broker, you are paying too much. By the time your merchandise arrives at your door it will hardly be worth the price you have paid. Unfortunately, many times merchandise sold through more than one Broker also has a tendency to be misrepresented. Compare this scenario to that of a rumor floating around an office…The rumor begins with two people; after a day or so the details have been “Lost in the translation” because the information has been passed through many hands. Brokering works this way, as well; too many middlemen and the merchandise will not be honestly described. This happens all the time.

For example: I have a product that I want to sell at $2.00 per unit, without many contacts I might enlist a Broker to promote my $2 item and hopefully have Him/Her arrange all of the details of the sale. The Broker would market my product through various venues such as his companies website. He would then mark my $2 item up to $3; that doesn’t sound like much, but if I have 4-5,000 of this item that would represent $4,000-$5,000 dollars in his pocket for moving my inventory.

Now, here is where trouble can begin. When this broker allows another Broker to sell my inventory now my $2 item will go up to $4.00�. Money is made by turning inventories quickly, so why would the Broker representing me turn down an “outside sales Rep” for help in moving the merchandise? They wouldn’t. By the time my item is purchased and received by the end consumer it is not worth what they paid.

This happens over and over in this industry and it stems from both parties (Consumer & Broker) not doing their homework. It has happened so many times that there are many Business owners out there wondering if it is even possible to find merchandise that has been represented honestly and is actually being sold at below wholesale pricing.

There are great deals to be found everyday, but you must first take the time to protect your interest. Find everything out about the company you are going to deal with, ask for actual references from customers. Talk to everyone who has purchased from this company in question. If you cannot get references, walk away; period. When you do get contact information inquire and ask as many questions as possible. Hopefully the references will be of value with constructive, non-biased information.