Have you considered buying store returns?
Every wholesale buyer eventually comes across offers for store return merchandise.
It’s a difficult decision wether should someone get involved with store returns.
While the profit potential is definitely there, there are also adverse factors to consider.
To start with we need to have a clear understanding of what store returns are.
Most major retailers have a program where they accept returns from their customers.
Keep in mind that the returned merchandise does not always have to be in its original packaging.
For instance, one major retailer, allows returns of children’s clothing for any reason for an extended period of time. I have been told that this period is now 6 months.
Since the major retailers want the repeat business from their customers, they will even accept merchandise which might have been damaged by consumers.
So what do retailers do with these store returns?
They have a program where they contract out with salvage dealers, wholesalers, and fulfillment centers, who then sell this merchandise for them.
So if the merchandise is likely damaged, why would you even consider buying it?
For the reason that store returned merchandise is usually sold for as little as 10% of the wholesale value.
Assuming the wholesale value is half the retail value, there are times when you can buy $5,000 worth of retail merchandise for as little as $250.
But before you decide to stock your business with store returns you need to realize the following.
About 50-75% of the merchandise will be clearly damaged. The remaining 25-50% will be merchandise returned because of size or taste issues.
Meaning those customers are returning merchandise which doesn’t fit them, they changed their mind about it, or received it as a gift.
This means that in reality the price you are paying will only be giving you 25-50% of the merchandise that you originally planned on receiving. So the $250 is really only buying about $1,250 worth of retail merchandise.
Remember, realistically you should only expect 25% of the merchandise to be in decent condition.
At this point you are actually paying about 20% of the original retail value.
$250/$1250
If you are in the retail business you still have room to markup the merchandise.
But if you are in the wholesale or closeout business, you are in a difficult spot.
How will you resell this merchandise to wholesale or closeout buyers who need to sell it themselves?
Also keep in mind the time it will take to sort out the good merchandise from the damaged items.
Donny Lowy is the CEO of http://www.closeoutexplosion.com, an online wholesale and closeout business.
