What Is Liquidated Stock?

Many people don't know what liquidated stock is. And are put off by this fear of the unknown. When a business like Sears, Macy's or Kmart stock their stores they buy in wholesale to get access to prices that Joe Public cannot. However, the stock has a shelf life. The products that don't sell in an efficient time are pulled from the shelves and liquidated, sold on, to another vendor. The store takes a small loss on this. In large retail businesses this is just a normal operating expense but with tightening economic conditions there will be a greater number of liquidations due to Chapter 7 and 11 Bankruptcies.

I recommend: Finding out more about the liquidation process if you're still unsure. The Forbes Guide to liquidation is short and simple.

Decide Which Kind of Stock Will Suit Your Business

It's important to note that liquidated stock generally falls into two categories. 'Store Stock' is stock that has been pulled from shelves because the range has been discontinued, trends have changed or the store has closed down. This is the highest quality of liquidated stock. The second main type is 'Store Returns' - items that have been returned to the store. Most returns are because of size, color and appearance. On occasion damaged goods are returned to the store. However, spoiled or damaged products usually only make up 15% of store returns.

I recommend: Checking what kind of Liquidated stock you'll be purchasing before ordering. Speak to the supplier and ask, "Have the goods been returned, are they salvage, or are they from the shelves?" Have a look at the Best Buy returns policy to get an idea of what to expect from store returns.

Choose a supplier

There is a perception that to get access to liquidated stock there is usually a minimum amount of that needs to be spent. Liquidated stock usually comes in by the pallet load, and with large amounts of stock comes a large price. An average pallet is usually $900, a hefty price for many cash strapped entrepreneurs. So it's important to find a liquidator that will suit your budget.

I recommend: Beginning with small order to ensure that the quality is up to standard. Asking for a sample is often a good way of gauging how a reliable a supplier is. This way if the quality is average or the shipping is terrible a large amount of money won't be wasted.