Online sellers are always looking for deals on products, be it at the wholesale level, retail arbitrage, or auctions. Recent news reports covering the lifecycle of returned products from companies like Amazon and Walmart, have inadvertently generated a lot of interest from resellers. Businesses of all sizes and individual sellers would like to know if they can profit from sourcing these items and just how it all works.
How big is the opportunity? Returns alone generate enough resale products to keep most sellers in business, primarily due to the huge number of online retail returns. Online merchants can see as much as 30 percent of their sales being returned, which is several times more than the average for offline purchases.
“Optoro, a technology company that specializes in streamlining reverse logistics — the process of sorting through retail returns — estimates that $400 billion US worth of merchandise is returned to all retailers every year…” reports CBC.
In the middle of this environmental crisis, is an opportunity for Canadians who want to make money from returns and other liquidated products.
“Turns out there is a multi-million dollar business behind mounting Amazon returns,” reports Yahoo Finance Canada. “Some online marketplaces allow you to buy Amazon returns online— items are not individually packaged but are bundled in huge pallets based on categories. Warehouse liquidation has always been how retailers remove inventory. As e-commerce evolves, this liquidation process has also moved online. Now websites like Liquidation.com and Direct Liquidation sell merchandise from major retailers, including Walmart and Amazon.”
How it Works
Reselling used (recommerce) or returned products is a trending online business model that has exploded in popularity. Thanks to the ease of starting an online business and increasing access to suppliers at the small business level, virtually anyone can do it.
Liquidation has been around almost as long as retail has. It’s a necessary process to ensure products that aren’t selling can make way for new products on store shelves. Trends change, items go out of style, tech evolves, and so on. Customer returns have become a growing issue as retailers look for a way to salvage some profit from used/rejected items, which could actually be anything from customer returns to floor models or damaged items. Companies can also liquidate excess stock, refurbished products, or stock that isn’t selling fast enough.
Retailers often have on-going arrangements with liquidators and brokers. When they’re ready to unload a large part of their inventory or customer returns, they negotiate a price (usually per truckload, pallet or by weight).
The next step in the product’s journey may include being sold in a box or pallet lot to resellers or salvage professionals, who are hoping to sell it yet again to consumers. In the meantime, the price of that same product could start at the top, drop to below wholesale, then steadily increase to a respectable (yet discounted) retail price again.
Example of a product life cycle:
- Product is Manufactured
- Sold to Wholesalers & Distributors
- Sold to Retailers
- Sold to Consumers
- Returned or Pulled From Inventory
- Sold to Liquidators
- Sold to Resellers (that’s you)
- Sold to Consumers
Where to Sell Liquidated Products Online
Most online sellers in Canada do so via various marketplaces and/or through their own website.
Your Website: Unpredictable inventory makes it challenging to operate as a normal ecommerce store, but it can be done. The most successful sellers I know combine it with another supply method (wholesale and/or drop shipping), and then sell liquidation pallet products in a special ‘clearance’ section. Many sellers simply link to their listings on various online marketplaces or auctions.
At the very least, you’ll want a website to provide information about your business to build your brand and increase consumer trust. It also provides a home base for your marketing efforts, allowing you to produce content for SEO, social media and email marketing. Use the Checklist: How to Start a Profitable Online Business in Canada to learn more.
Marketplace Listings: Any online marketplace that allows for the sale of used products can facilitate direct-to-consumer (DTC) sales for you. It’s important to read the terms of service for each marketplace and note any fees they have. Do this research before you order products to make sure you don’t end up with something prohibited by the platform. For example, Amazon won’t allow you to sell specific brands, or even categories before you’ve been ‘ungated’.
Risks of Selling Liquidated Products
It’s important to begin with your eyes wide open. Research everything from the liquidator’s terms and conditions to the average resale price of each item. Most sales are final and there is always a certain level of risk involved.
Case in point, Roy Dirnbeck, a Canadian liquidator, told CBC the pallets are packed to sell, which usually means displaying popular products on the outside and hiding less desirable products deep in the pallet.
There is less risk involved with new or ‘like new’ stock, such as products from retailers who are going out of business or clearing stock for whatever reason. However, many of the best deals (and risk) come from customer returns. They can be unsorted, ‘as is’ items, or they might be sorted by condition or graded. If you can repair broken products you could enjoy even higher profit margins, as is the case with cleaning up items from insurance claims. Regardless of which condition you go for, expect up to 30% will be unsalvagable and factor that into your projected profitability. If you do better, it’s a bonus.
Speaking of profitability, budgeting for this business model can be difficult, mainly because you’ll have no idea what you’re buying or how much you can sell it for. The cost of shipping, storage and other costs can seriously impact profitability. Additionally, you’ll have to factor in the cost of your website, marketplace fees and any marketing you have to do.
How Can I Find Liquidators in Canada?
There are a surprising number of liquidators in Canada, along with liquidators in other countries that ship here. You can arm yourself with a spreadsheet and start searching online or in business directories (such as Thomasnet.com). If you’re lucky, you’ll find one close enough to you for pickup, thus avoiding shipping costs. You can also hire a reputable broker to help you find more options and negotiate deals.
Research product sales and popularity, as you would for any product or category before you buy it. Search the larger marketplaces and try tools like Jungle Scout to increase your chances of ending up in the black.
Don’t be afraid to approach manufacturers and local retailers directly, because you can make even more money by skipping the middleman. The same goes for local auctions, like annual police or government surplus sales. Larger retailers may liquidate their own products too, offering a wholesale-like arrangement for registered businesses only. Tradeshows can be a wealth of information and connections. There’s a good listing of Canadian tradeshows at 10Times.
Carefully read the description and manifest before ordering or bidding, as well as the terms of sale and FAQs. When dealing with new companies, place a smaller order so you can determine the quality you can expect and how the business performs. Recommendations from other sellers are golden, but often they don’t want to share their suppliers with other sellers.
Take your time and don’t spend too much at once. There will be a bit of a learning curve and it isn’t wise to rush it. Many Canadian sellers start this business as a side hustle and grow it into a fulltime business.
Following are a few liquidators that we’re familiar with:
Liquidation.com Brampton Ontario
VDC Canada Wholesale Liquidation
When your merchandise arrives, take a minute to check for recalls on specific products before listing them for sale. Also, make sure you have an environmentally-friendly plan in place to dispose of any unwanted items you receive in pallets.
While it isn’t for the faint of heart, selling product returns and other retail rejects is proving to be profitable for a growing number of online sellers in Canada. I suggest you start small while you learn about this business model. Your profits will be lower than they would be if you ordered large amounts, but you might avoid some costly mistakes.
Have you looked into selling liquidated products or returns online in Canada? Please share your experience or questions in the comments below, or join us in the Online Business Canada Facebook group.
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Melody McKinnon's formal education is in business management, which she enhanced with more than 60 certifications revolving around business, marketing, health, general sciences and writing. In 25 years of working online, she has owned or managed both educational and ecommerce websites. Her book, 7 Recession Proof Online Businesses to Start From Home, is available on Amazon.
Melody has worked with many businesses & brands in a multitude of capacities. She can often be found on CanadiansInternet.com, CanadianFamily.net and AllNaturalPetCare.com, as well as other quality digital publications. Her content has earned reference links from highly-respected websites, magazines and university textbooks.