The word “liquidation” doesn’t always conjure up positive associations. For many consumers, it’s a sign that something has gone wrong or failed. You tend to see the word pop up a lot during going-out-of-business sales, for instance.
While liquidation does happen when a business is closing up for good, that’s not the only way it occurs. It can even have a positive meaning in a lot of cases. Liquidation is a cost of doing business for most places, and while it’s not entirely ideal, it can result in plenty of benefits for both the company and potential customers.
Here’s what you need to know about liquidation and why it’s potentially useful.
Why is merchandise liquidated?
If an entire company is going under, then they’re going to need to get rid of everything. If you’ve ever passed by a storefront in its last days, you’ve no doubt seen signs like “Everything Must Go!” and “Fixtures For Sale.” A store putting out signs that say “Everything Must Go” is easier and quicker than saying, “Our lease runs out in a month and we have no use for this stuff anymore; please take it from us.”
The fixtures (like clothing racks or dressing room mirrors) often go to other retailers who are still up and running. If the store has locations which are staying open, it’s possible that some of the extra inventory will be moved to those places. But if all the stores are going, then you should expect to see even more of a fire sale of sorts.
But while that kind of liquidation gets the most attention because it’s easy to spot, perhaps you’ve also seen sales for things like Walmart liquidation. Walmart is the biggest brick-and-mortar retailer in the world, so they’re obviously not going under. Walmart liquidation happens when Walmart stores have merchandise that they can’t or don’t want to use anymore.
Some of these liquidated products might be customer returns that were either lightly used or not used at all. But once an item’s box is opened, it typically can’t be sold as “new”. That means the company might stick it in a pile with other items and just have a Walmart liquidation sale for this entire pallet of related merchandise.
How regular customers get liquidated merchandise
Let’s say you’re interested in a deal on a pretty big-ticket item. Something like a fancy vacuum cleaner or big-screen TV can be costly if you buy brand-new. But if you buy liquidated merchandise, you can get a better deal on a product that might not be perfect, but will still last you a long time. So how do you go about doing that?
You could try looking for online liquidation sales of single items, but you should know that it’s more common for entire pallets to be sold. And you’d likely only want an entire pallet full of customer-returned vacuums if you’re running a store and think you can sell those vacuums.
So you’ll need to seek out local retailers who have purchased pallets and are breaking them apart for individual sales to regular customers. In many cases, Googling your town name and something like “liquidation sale” will get you off to a good start.
One final reminder: you’re not going to get the newest technology when you buy liquidated. If you’re looking for digital photo storage boxes, you’re going to have more like buying something brand new from the retailer or maybe Amazon.
If a product is cutting-edge or really trendy, waiting for it to hit the liquidation market is probably not the best use of your time. You might be able to get a good deal on a similar model from a couple of years ago, though.
Why is Liquidation Useful?
In many cases, liquidation is useful as it prevents business owners from incurring more losses and adding to their woes. Liquidation also helps in paying back some or all of the debt, which the business might have added on, ever since it started losing profitability. The question when is business liquidation needed has different meanings and interpretations for different people.
Many business owners also take advantage from the liquidation and use the capital to start something new. You will be amazed about some businesses, which started and are very successful even after the owner had to liquidate some of his other businesses.