What Do Inventory Liquidators Do?

What Is Inventory Liquidation?

Inventory liquidation is the process of selling off some or all of a company’s inventory, usually at a deep discount, to turn it into cash. Often, inventory is liquidated as part of the process of liquidating an entire business, turning all of its assets, including store fixtures, office furniture, business equipment, furniture, company-owned vehicles, tools, and so on into cash. Keep reading to find out what do inventory liquidators do.

Got Stuff? We buy surplus inventory and hard to recycle items. Call us before you send it to the landfill! 

Reasons for Liquidating Inventory

There are many reasons for liquidating inventory. Often, inventory is liquidated because a company is going out of business, either voluntarily—typically because of the owner’s retirement—or as a part of bankruptcy proceedings. In such cases, it’s common for all of a company’s assets to be liquidated, not only the inventory. The goal is to raise as much cash as possible by selling off the inventory, either to help fund the business owner’s retirement or to pay off creditors in accordance with the orders of the bankruptcy court. Inventory liquidation may also be a step in the disaster recovery process following a fire, flood, or other catastrophe.

Bulk vs. Single Item Inventory Liquidation

Bulk inventory liquidation occurs when a business owner wants or needs to sell off their entire inventory. This typically includes damaged goods and returns. Liquidating items previously purchased by customers and subsequently returned for a refund or exchange makes good financial sense. In the United States, returns treated as waste account for an estimated 16 million tons of carbon emissions and up to 5.8 billion pounds of landfill waste each year.

Partial or single item inventory liquidation is a way for business owners to rid themselves of specific products that aren’t selling well, are overstocked, or have been discontinued by the manufacturer. They then can use the money recovered through liquidation to purchase other items that may be more popular with customers or fill a gap in the company’s product line-up. Having a lot of surplus, slow-moving inventory ties up capital that could be put to better use. Freeing up that cash is the primary objective of most partial inventory liquidations. Partial liquidation also is a common strategy for businesses that are about to relocate and don’t want the hassle of moving all their existing inventory.

Do It Yourself Inventory Liquidation

Retailers may attempt their own partial or complete inventory liquidation. You’ve surely seen people twirling signs outside of businesses holding liquidation sales or distributing flyers proclaiming, “Everything Must Go!” Some of these ads are misleading, as the retailer’s intent is not to go out of business but rather to clear out old inventory to make room for new merchandise.

More often, though, retailers who keep a close eye on their inventory turns will target certain slow-moving products for liquidation and offer them as two-for-one deals or for a substantial discount on their original prices. The truth is, they probably could have done as well, if not better, selling those specific inventory items all at once to an inventory liquidator.

Professional Inventory Liquidators

Professional inventory liquidators such as RepurposedMATERIALS are in the business of buying merchandise at a discount from retailers and other businesses seeking to turn some or all of their inventory into cash. Some inventory liquidators operate their own retail outlets, either online or in a brick-and-mortar store, or both, where they sell the inventory items they have purchased. Others resell primarily to recycling companies.

In some situations, especially during bankruptcy proceedings, a professional inventory liquidator is brought in to appraise the inventory to be liquidated using one of these appraisal methods:

  • Fair market value—the price an asset would sell for on the open market when 1) the parties involved are aware of all the facts, are acting in their own interest, and have ample time to make the decision.
  • Orderly liquidation value—an estimate of what the asset(s) would sell for in an auction-style liquidation when the seller needs to liquidate the assets on an “as is” and “where is” basis, with a reasonable period of time for identifying all available buyers and the seller in control of the sale process.
  • Forced liquidation value—the monetary value of the asset(s) that can be expected in a transaction with a single seller under a short time constraint, with the sale being made to the first available buyer; the seller does not typically control the sale process. This is most common in a bankruptcy situation, and the court or a lender assigns a specific appraiser to evaluate the inventory to be liquidated.

The fair market value is most favorable for the seller, and the forced liquidation value, common in bankruptcies, is the least favorable.

Advantages of Working with a Professional Inventory Liquidator

There are a number of significant benefits to be gained by working with RepurposedMATERIALS and other professional inventory liquidators. For example:

  • Liquidators usually pay more for unwanted inventory than business owners can raise on their own by selling off their inventory.
  • Liquidators remove all of the inventory items at the same time, transport them, and store them until they’re resold.
  • Liquidators accept any quantity of inventory items—no amount is too much or too little.
  • Liquidators usually take even damaged and returned merchandise, so you don’t have to worry about getting rid of them.
  • Liquidators help keep inventory items out of the landfill by selling them for cash, to be repurposed or recycled, which is good for the environment.

What Products Do Inventory Liquidators Buy?

There are markets out there for just about every saleable item. Some inventory liquidators specialize in particular types of merchandise, and we have included links to some things that we buy, such as:

  • Apparel, new and used garments, shoes, factory seconds, fabric, etc.
  • Building materials and tools, such as home insulation, paving material, flooringplastic sheetinghoses, synthetic turf, bricks, wood, power tools, hand tools, etc.
  • Home goods, such as appliances, lighting handbags, fixtures, furniture, outdoor furniture, housewares, giftware, home décor, etc.
  • Entertainment items, such as books, music CDs, video games, toys, sound equipment, electronics, sporting goods, etc.
  • Automotive parts, supplies, and accessories

For a full list of our inventory, follow the link and see our list of products on the side. If you’re unsure that we can take your inventory off your hands, you can reach out to us here.

How Do Liquidators Pay for Inventory?

There are two basic ways in which liquidators return value to business owners who are selling off inventory: on a percentage basis or through flat fee pricing.

Liquidators who work on a percentage typically don’t return value to business owners until the inventory items have been resold. The liquidator retains a certain percentage of the sale proceeds and turns the rest over to the business owner (the seller).

Liquidators who offer flat fee pricing purchase the inventory outright from the business owner, who does not have to wait until the goods are resold to see a return on the value of the liquidated inventory. Because the business owner is paid up front, the discount from the appraised value of the merchandise is steeper than it is when the liquidator charges a percentage and pays after resale of the liquidated items.

How to Choose an Inventory Liquidator

For the best results, there are certain things you should look for when choosing an inventory liquidator, including:

  • The right kind of experience—a liquidator who has experience buying and reselling the kinds of merchandise you have to sell. A liquidator who has vast experience with construction materials may not have a good network of buyers for the contents of a clothing store. Similarly, look for a liquidator who has experience with the specific type of liquidation involved (voluntary store closing, bankruptcy, etc.) and can navigate its particular challenges.
  • An honest and ethical liquidator will get you the best prices for your inventory, fixtures, or other assets being liquidated.
  • A certain amount of transparency regarding the contractual relationship with a liquidator is essential. Liquidators have standard contracts that they customize for each new job, spelling out the pricing arrangement and any guarantees. Make sure the contract offered by a potential liquidator for your inventory is clear and fair. Be skeptical about promises, guarantees, and percentage pricing.
  • Choosing a liquidator who offers flat fee pricing means you will know what the fee will be before you sign a contract.
  • An environmentally responsible liquidator will find ways to keep merchandise that can’t be sold to retail customers out of the waste stream through donation or recycling.

Future Outlook: What Do Inventory Liquidators Do?

The liquidation market more than doubled in size between 2008 and 2020, when it reached $644 billion. Driven by high inflation, rising prices for consumer goods, and growing concerns about the amount of waste entering the nation’s landfills and the negative impact on the environment, it continues to grow at an unprecedented rate. More and more, consumers are looking for low prices and the opportunity to repurpose and reuse goods, and very few liquidated items end up in the waste stream prematurely. Inventory liquidation can end up being a win for all involved.

Contact Repurposed Materials today to find out how we can help you find a new home for the unwanted materials.