Why (Most) Liquidators Hate Your Inventory

You are an Amazon FBA seller and have a pile (or pallet) of returns sitting in your workspace. You’ve sold what you can online and want to find a liquidator that will help you get rid of all of the rest.

You may have heard that Amazon’s liquidation program generally pays out about 5.5% of retail, but you want to know if you can do better.

You reach out to a liquidator and when they finally respond, they hear you out. Now, if you have some insider knowledge, you know that they pay about 10% of retail ($1.25-3/ unit) for a whole Amazon truckload, and you ask them to pay you a similar rate. The liquidator looks at your items and either declines immediately or gives you an offer of 1-5% or retail and now you are just frustrated that you didn’t sell to Amazon’s liquidation program in the first place. What a waste of time.

So why does this happen and why do liquidators “hate” your inventory?

In all fairness, no one actually hates anyone else’s inventory, and most of the time, both sellers and liquidators want to work together to make a profit. Here are the reasons why your inventory is not worth “market rate” and why these deals and relationships rarely succeed long-term.

1)     Your inventory is likely considered “cheap”

Liquidators buy whole truckloads at a weighted average of 10% of retail (give or take). Unfortunately, a lot of the value in these loads come from the most expensive 20% of items, leaving the liquidator to deal with the “cheap stuff”.

That’s not to say that cheap items are undesirable. In fact, most sales locally are for these “cheap” items. The challenge with “cheap items is the labor it takes to price, test, inspect such items. As a result, liquidators are often most incentivized to run very cheap sales to move these items as fast as possible without ever even testing or individually pricing these items.

If you bring them more of these inexpensive items, they don’t value that item at 10% of retail, it might only be worth 2-5% because they don’t get more valuable items with it.

2)     You have too much of the same thing

Most Amazon truckloads are bought and sold as large mixes of general merchandise so a liquidator is rarely stuck with any one item for too long. Weather that item is sold individually or sold in bulk to another company, these lots are an easy way to build up instant miniature stores. Trying to sell 1,000 of the same item doesn’t really make for a good shopping experience. For those liquidation companies that have to capacity to sell a lot of the same item or spread it out over many retail locations, they still have to wait months or years to sell through. As such, some lots can both be a “great value” and simultaneously a “terrible deal”.

3)     The deal is too logistically challenging

As an Amazon FBA Seller, your excess inventory either exists in Amazon’s warehouse or our own workspace. If you have the items on hand, you can search out a local liquidation company and maybe drive it to their location. However, this obviously limits you to a few companies, and most of the time, you are too busy to bother with this anyways. If you have found a liquidator out of state, it is rare for the value of a pallet to exceed the cost of shipping to that liquidator ($150-250).

If you think about it a little, there would seem to be a solution. Just send the removal order directly to that liquidator’s warehouse. The issue here is that removal orders are broken up and shipped over a 6-month time period, so a liquidator would have to receive items piecemeal for months on end. Many don’t run the typical M-F work hours so they will miss deliveries of small packages from UPS or USPS. Then there is the challenge of identifying where this item came from, record what is in the box, and make many smaller payments to you along the way. That is frankly too much work when liquidators can buy a whole truckloads of inventory and get it delivered within a week.

4)     The deal is too small

If you have enough returns to full up a pallet, you are probably selling 7-8 figures annually on Amazon and netting $1,000-5000 dollars a day. Your time is valuable. Most liquidation companies will buy and sell pallets for $100-400 profit so it really isn’t worth either party’s time to bother driving it to the others’ warehouse. Of course, you may be running out of space at your warehouse and just need to get rid of it regardless of the cost, but then why not just “liquidate” or “dispose” with Amazon so you don’t have the problem in the first place.

Hopefully, it is pretty clear why the disconnect between liquidators and Amazon sellers has existed and why more trade doesn’t happen outside of the established system more often. I can’t say with 100% confidence that all sellers facing these challenges can find a liquidation partner who will be able to help them.

However, our company (Stellar Service Ohio) is one of the few that specializes in buying Amazon sellers’ inventory and have figured out solutions to most of the challenges referenced above. If you enjoyed reading this, feel free to follow or reach out to us!

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