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Their Loss Is Your Gain

Business-liquidation auctions can be an excellent source for inventory.

In the days before the Internet, I had a garden store. I learned pretty quickly that to be price-competitive meant finding products by looking in a few rather untraditional places.

Getting through the first year in the retail garden business, we were on a shoestring budget. We had to be careful with our funds and knew we had to manage risk carefully when purchasing inventory. Luckily for us, a similar store had been closed, and a warehouse full of inventory confiscated, because the owners thought they could grow and sell contraband as well as garden products. The local authorities thought differently.

When the court case closed and dust settled, the city government had a warehouse full of new products to dispose of. They had soil amendments, tools, green house supplies and more. Products well-suited to our business! What did they do? They hired their local business auctioneer to dispose of the property.

Many products sold for pennies when purchased in bulk lots, and some of these were the kind of items that, under normal circumstances, we couldn’t come close to getting a good margin for resale. It was a blessing for our business. We stocked our shelves with products that allowed us to be price-competitive and still receive a healthy markup.

When you buy at these auctions, you don’t have control over the inventory lines you’ll be purchasing

During the 10 years we were in business, I went to a number of business auctions and came away with high-profit-margin inventory to sell at our shop. The kind of auctions I’m referring to are done by auction houses that specialize in business liquidation. Mainstays for them are restaurants, bakeries, large equipment or police seizures. However, peppered in between, they take on assets from other businesses. These sandwiched jewels can mean extra inventory for a small seller.

You may not have considered this type of auction as a source for new stock. But you’d be surprised at what’s there—and most of it goes for pennies on the dollar.

Auction considerations

I still watch for business-liquidation auctions today. Recently, I picked up a nice bunch of “new old stock” photo supplies from a store that had closed years ago. The owner didn’t liquidate his inventory when he closed—I guess he decided to wait till later. Unfortunately for him, that later never came and his inheritors wanted to move the stock quickly after he passed away. Off it went to the auction.

Of course, when you buy at these auctions, you don’t have control over the inventory lines you’ll be purchasing. When we bought for the garden store, the items sometimes had a different brand name than we normally carried. That meant we were not authorized dealers and if a customer returned the item we carried the refund. But if you buy carefully, you’ll have plenty of profit to be able to accept the occasional return.

Other times, we found things we would otherwise be uncomfortable purchasing because of the risk of not selling quickly. But with a minimal investment, we were able to purchase them as a test. (Luckily for us, we can now use online research tools to find the sell-through rates long before we allocate any of our purchasing budget to products).

How do you find out about industrial auctions? Do a Google search for auctions in your area. By now, most auction houses have Web sites. But if you don’t find one, don’t give up. Look in the yellow pages under “auctioneer,” “inventory liquidations,” or “liquidators.” Watch the classified section in your local paper, or look on Craigslist. Once you find an auction that sounds interesting, get ready to go.

Fools rush in

Look closely at open boxes, count remaining inventory and make sure all the pieces are there and look good

Before the day of the big auction, do your homework. Most auctions have a list of things they’re going to sell, and most will allow you preview the items the day before, or morning of, the auction. Go, look closely at the items for sale—and take notes. Look closely at open boxes, count remaining inventory and make sure all the pieces are there and look good.

Most warehouses are dark, so bring a flashlight with you.

Did I mention to look closely at the lots? I can’t emphasis this enough. A box full of junk will take up space in your crowded storeroom, or worse, ruin your reputation if you try and sell it. At the last auction I attended, there was a box-lot of camera filters that, if in good condition could have fetched close to a thousand dollars. However, after opening several of the boxes and looking at them closely, I found they had mildew that ruined their optical quality.

Once you’ve inspected the items you wish to bid on, it’s time to pull out the computer. Bring up your favorite research service and start finding out how quickly the items sell on eBay. To determine how much I’ll bid, I like to look at the lower value of the sold items. Usually I’ll go no more than half the lowest value. Of course, it depends on sell-through and number of items currently for sale on eBay.

On the day of the auction, set your limit—and stick to it! Live auctioneers are so much better at cajoling you into bidding more than an outbid e-mail from eBay—lol! I like to write down the maximum amount I’ll bid in a notebook. And judging from those around me, closely guarding their notes so others can’t see them, I think many wise bidders follow suit.

Prepare for anything

Dress comfortably and wear layers—warehouses can be dark, damp and cold—but standing among a crowd or crawling around stacks of inventory can be work. Be prepared for both. Wear comfortable shoes and be prepared to stand all day. These aren’t the sedate estate auctions, where you sit throughout. Most of the inventory is sold on the spot it was left by the business.

There may be a concessionaire attending if the auction is big enough, but many times not. Bring lots of water and pack a lunch. These auctions can go for eight to 10 hours and it always seems the inventory you want to bid on will be at the very start of the auction and at the end. It’s Murphy’s Law.

Take written notes and don’t expect Wi-Fi—it’s not everywhere.

Finally, bring your own boxes. You’ll be expected to move the inventory out ASAP, usually within 24 to 48 hours of the end of the auction.

Good luck. Please let me know what you found. I’d love to hear your treasure-hunting stories.

About the author

Cindy Shebley
Cindy Shebley is an eBay certified business consultant, education specialist, store designer and author who teaches throughout the Northwest. The recently released eBay Marketing Bible is available in bookstores everywhere. Shebley's Web Sellers' Circle program helps sellers grow their business and stay competetive in today's marketplace. Opinions expressed here may not be shared by The Online Seller and/or its principals.

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