Starting a Liquidation Business

Honestly, the best part of what I do is answer questions from our blog readers and those that purchase our manual, Liquidation Secrets. I had an email come in from a woman who has many questions, as do most who are new to this idea of buying pallets of name brand merchandise below wholesale. Here is a portion of her email and my answers:

Do you have to have a business license?

From a standpoint of being able to buy pallets and truckloads, no. If you are opening a store you will need a business license and possibly an occupancy permit, both can be obtained from your local municipalities.

I am trying to open a store with items people can afford and so I am starting out at our local flee market to build capital and I need inventory so I am looking for the best price for me so I can give them the best price so kids can still have the things they need and the parents can afford to buy it for them. I am mainly looking for clothing and shoes.

There are a many sources for both apparel and shoes. It really depends on the quality of merchandise you want to resell. Apparel can be purchased from many direct sources including departments store and catalog companies. It is possible to source higher end shoes from stores like Macy’s or mid quality from retail stores like JC Penney’s

Do you have any contacts in Colorado?
At the present time, no I have no contacts in that State

Do the lots that people would get from stores are they everything or just certain Departments?

Most stores that liquidate will break loads into specific categories so if you are looking for just apparel you do not have to buy luggage or home décor items.

What is the average size of purchase?

This will range all over the board and is hard to answer. You can buy smaller lots 100-500 pieces from reputable liquidators, but most direct purchases from actual departments stores or reclamation centers will require a larger spend. It is not uncommon to see pallet(s) loads ranging from $3,000 – $10,000.

Do they make you pay for everything they have available or can you pick and choose from the lots they have available?

Many stores will offer a manifest, which will give you some idea of what you are buying beforehand. Other stores will just give you a piece count and original wholesale or retail cost and you pay a percentage top buy the entire load sight unseen. There is no picking and choosing. If you want to pick and chose you should buy fro ma traditional wholesaler at a higher cost per unit/piece

What do you think the average per piece is that you would pay?

Depends. Lower end apparel from stores like Sears .70 – $1.30 per piece. Higher end stores like Macy’s will range from $2-$6 per item, but again remember: some stores sell based upon a percentage of vendor cost. So, for example, if you are paying a higher price per unit you can infer that the item has a higher value. Have I confused you? Let me say it this way: A load of all high end denim jeans will have a higher per unit value as you purchase based upon vendor/wholesale cost. The next load may be lower average retail items and therefore your cost per unit will be lower.

I see on your web site and the information you provided do you still work on all of this or are you just a consultant now?

I do both, I love helping those who are just getting started in the biz. I also work ongoing with several large exporters selling merchandise worldwide. This is where I have found my sweet spot. A few deals every month or two offers a generous annual income.

Did you ever sell at flee markets or on the internet?

Yes, I have sold over the internet, but on a wholesale level (I do occasionally sell on eBay as well). My first year internet sales topped $200,000 and both my wife and I new the liquidation industry would be the key to our financial future. It has been very good for us!