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Products from liquidation companies, or companies that are going to be closed down, are always sold cheaply. This is a huge temptation for ecommerce sellers – should they get such stocks? Are these stocks safe to buy?

As an experienced Amazon seller, Willy is going to offer his opinion on this issue. Learn all about the concept of liquidation, and find out the pros and cons for making business with such products!

In this episode, Willy is going to cover:

  • What liquidation is all about;

  • Why some sellers like to buy liquidated products;

  • The advantages and disadvantages of making business with liquidated products.

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TRANSCRIPTION

A few days ago, I woke up and got multiple messages from my friends telling me to quickly go hoard up stocks from Robinsons. Yeah, that’s right – because this long-standing department store in Singapore is going to be closed down for good. All of their products are on sale. Knowing that I own an ecommerce business, my friends thought this is the perfect time for me to get more stocks, and then sell them off online to earn money.

Well, sadly speaking, I didn’t manage to get anything from the Robinsons sales in the end. But I got something more precious out of this incident – a new podcast idea! So today, I shall talk about this topic: “Is it recommended for ecommerce business owners to buy products from liquidation companies?”

So, first things first, let us understand what the term ‘liquidation’ means. ‘Liquidation’ refers to the process of businesses closing down so that they can sell their assets, or products, to pay their debts. The goods being sold by such companies are known as ‘liquidated products’, and as you may guess, these goods are going to be sold off very cheaply. Why? Because the reason these companies are selling off their goods now is not to ‘earn money’; it’s to sell off as many goods as possible QUICKLY, so they can get back some funds to pay off their debts. This is the companies’ last attempts to reduce further damage – and that’s what happened at Robinsons.

In the US, there are lots of such companies that underwent liquidation. These companies are normally small retail stores that run into financial problems and need to close down to reduce further losses. Especially in recent years, with the Amazon platform becoming more established and somewhat as a staple shopping means for US families, many small retail companies are losing out, so they have to end their businesses.

But mind you, when I say ‘small’, I mean when compared against the bigger companies in the US. Their ‘small’ is still considered ‘big’ to Singapore’s retail stores – it’s not like our typical mama shops under HDB flats. So, you can imagine at the point of closing down, these retail stores are going to have quite a bit of stock in their warehouses. Ecommerce buyers like to flock to such liquidated companies and buy their goods, so that they can list and sell these products online again. 

This process is what sellers like to call ‘flipping’, and it’s a very good bargain. Because liquidated products are going to be sold off very cheaply, but the products’ intrinsic value is still there. Say, if you buy a pair of Adidas shoes from a liquidation company, you can get it at around tens of bucks cheaper than its retail price. But when you list it online – because the shoes are still new, you can list it at its retail price, and people won’t see the difference. So, you gain much more profits than if you buy the same shoes from an authorised supplier.  

In any case, liquidated products will usually come packed in pallets for easy shipment. One thing to take note of is that before listing such products online, get someone to check the palletized products. This is because most of the time, 30% of such products are going to be damaged. The reason is very simple – these products are usually quickly packed, and since they are liquidated products, the packers won’t bother to pack them nicely. A lot of these products may be crushed in the packing or delivery process, so when they reach your warehouse, they are probably not going to be in good shape. As such, you must get someone to check these products before you list them on Amazon.

Personally, I don’t like to buy liquidated products, and I don’t recommend people to do so. I have tried it before: last time, I used to go to liquidation companies to buy their stocks, and I also sourced for leftover stocks from companies like Target, Walmart, etc. But as I mentioned before, when the stocks come to my warehouse, roughly 30% of them are unsaleable, and I have to pay for people to help me check them again. This is something I don’t like – I mean, it’s more work and more money to be spent!

Next, there is a risk of such product listings being taken down by Amazon due to fraudulency. This is because you are not selling your own products, and the original brand owners can complain against you if they see you selling their products without permission. For example, the liquidated product I intended to sell last time was a Star Wars Lego set. But Lego is a brand by the LEGO. So I got warned, and in the end, my listings were being taken off Amazon. Which means I cannot make money from these products, and I still have to think of ways to clear them off, so that they don’t take up space in my warehouse.

Last of all, when you are listing such liquidated products on Amazon, there is a high possibility of going into a price war. The logic here is simple – since you can sell these products, so can other sellers! So, back to my Star Wars Lego set as an example again: within that short period when that Amazon listing was still active, I got into such a price war. I had bought this product for S5 per set, and at that time I listed it for S50 per set. I thought I could ‘flipped’ the product, right, and the profit-margins were pretty high. However, the next day I discovered someone else selling the product at $49. So, I adjusted my product price to $48, then that seller adjusted his to $47, and I adjusted my price again… In the end, I didn’t make any profits. This is how the price war is like for you, and no matter who won at last, you are still making a loss.

So, I won’t recommend sellers to buy products from liquidation companies. I find that it is much better to sell your own products so that you can avoid all the stuff I mentioned previously – getting unsaleable stocks, risks of your listings being taken off, and getting into price wars with other sellers.

Alright, so I shall stop here. See you in the next episode.


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