Finding cheap merchandise for a retail store
Lots of small store owners ask me frequently how they can buy very inexpensive merchandise to fill their retail store. Store owners today are always looking for more margain and if they can buy cheaper than they usually pay to their suppliers their margains can improve. Over time this can be highly significant. If a dollar store, for example, can shave 25 cents off the cost of items and sells 8,000 of those per month they will net an extra $25,000 per year which can mean the difference between a good year and surviving.
So where can you find "the deals". First of all the closeout industry is one place. Closeouts goods come from all sorts of places and it provides a needed marketplace for manufacturers and finance. The closeout industry is mostly centered around a few cities, mainly Chicago, Los Angeles, New York and Miami. There are other sub hubs, like Minneapolis, that have active markets. Chicago is the biggest and has more closeout dealers than any city, probably because it is in the center of the country and is the transportation hub for the midwest. Many of the closeout vendors blend imported goods with closeouts to give a great variety of inventory like www.RegentProducts.com Others like The Bazaar, H & J, Great Discounters, only deal in closeouts. In another blog we'll give a complete list of top closeout firms. Regent Products currently hosts 8 merchandise shows a year in its Chicago warehouse with over 50 other vendors.
Closeouts is a generic term for merchandise that moves from it's regular selling channel to the closeout channel for liquidation. It can be simply because a firm ordered too many and they didn't sell or made too many. When a manufacturer get a product idea they base the cost upon selling so many units and order up an initial run of say 500,000 widgets. Say the product is the wrong color, wrong price or simply doesn't sell. After selling 100,000 in the first year, 80,000 in the second year and 50,000 in the 3 year, they still have 270,000 widgets from their initial run. That is a perfect example of a product that would be liquidated because it didn't "turn" fast enough to be profitable. It might have cost $1.00 to manufacture but every month it sits on the warehouse racking it cost storage and it could be replaced with a product that sells faster and makes money. That might be sold to a liquidator for $0.10 cents and to you for $0.15 cents so you can sell it to your customers for $0.30 or much more.
"Managing the margain" becomes an important part of closeouts when you get them. Normal wholesale channels might give you a 30% to 50% margain. Say you buy an item for $0.65 and sell it for $1.00 and you make 35 cents. A closeout item might cost you that same $0.65 cents but because it previously sold for $5.00, means you could mark it up to say $1.99 and give you $1.34 selling profit and save the customer over $3.00. It's a win-win for you and the customer.
Think of the tremendous margain over a single year you can gain by dealing in closeouts with your regular retail store goods.
I've exhibited in many trade shows and was originally surprised to find out how many stores shop the closeout shows to find unique and off price goods for their stores. Many drug stores, grocery stores, home stores all come to the shows to find goods that will improve their margins. Most national manufacturers use closeouts to move their slow moving products. You'll find 3M, GE, Mead and most other top manufacturers selling their brand name goods off price to move it.
Sometimes entire warehouses are sold to liquidators when a manufacturer makes a strategic decision to close a building.
Liquidators mostly work on "blended margain" and try to get a higher price when an items comes in and then over time drops the price to keep moving the product until it gone. Many times near the end when the product is almost gone you can offer a much lower price to the vendor to clean them out of the item. If they have done well at the beginning they will look at the overall blended margain and accept your offer. Say they sold 20 at $5.00, 20 at $4.00, 20 at $3.00, 20 at $2.00 and have 20 left. Their blended or average selling price was $3.50 for the 80 they sold and might let the last 20 go at something less than their previously low of $2.00 to clean it out. That's an overly simple example but shows an important aspect of the closeout business that most customers all pay different prices based upon your purchasing volume and negeotiating skills.
Our own business is 100% closeouts www.kiefers.com and comes to you freight paid. The free freight is a factor because freight today can easily add 10% to 20% to an entire order. Most closeout houses cannot offer free freight because the weight of certain categories such as paper, chemicals, plastics, etc. can be tremendous and cost alot to ship. We use averages and don't buy certain products that would cost more to ship than the product is worth. We offer a huge selection of products numbering into the thousands of items, and they are all delivered to you freight paid.
Another source of closeout goods is auctions which we'll talk about in another blog. Auctions can be a huge source of profit for retail store if you know what to look for.
So where can you find "the deals". First of all the closeout industry is one place. Closeouts goods come from all sorts of places and it provides a needed marketplace for manufacturers and finance. The closeout industry is mostly centered around a few cities, mainly Chicago, Los Angeles, New York and Miami. There are other sub hubs, like Minneapolis, that have active markets. Chicago is the biggest and has more closeout dealers than any city, probably because it is in the center of the country and is the transportation hub for the midwest. Many of the closeout vendors blend imported goods with closeouts to give a great variety of inventory like www.RegentProducts.com Others like The Bazaar, H & J, Great Discounters, only deal in closeouts. In another blog we'll give a complete list of top closeout firms. Regent Products currently hosts 8 merchandise shows a year in its Chicago warehouse with over 50 other vendors.
Closeouts is a generic term for merchandise that moves from it's regular selling channel to the closeout channel for liquidation. It can be simply because a firm ordered too many and they didn't sell or made too many. When a manufacturer get a product idea they base the cost upon selling so many units and order up an initial run of say 500,000 widgets. Say the product is the wrong color, wrong price or simply doesn't sell. After selling 100,000 in the first year, 80,000 in the second year and 50,000 in the 3 year, they still have 270,000 widgets from their initial run. That is a perfect example of a product that would be liquidated because it didn't "turn" fast enough to be profitable. It might have cost $1.00 to manufacture but every month it sits on the warehouse racking it cost storage and it could be replaced with a product that sells faster and makes money. That might be sold to a liquidator for $0.10 cents and to you for $0.15 cents so you can sell it to your customers for $0.30 or much more.
"Managing the margain" becomes an important part of closeouts when you get them. Normal wholesale channels might give you a 30% to 50% margain. Say you buy an item for $0.65 and sell it for $1.00 and you make 35 cents. A closeout item might cost you that same $0.65 cents but because it previously sold for $5.00, means you could mark it up to say $1.99 and give you $1.34 selling profit and save the customer over $3.00. It's a win-win for you and the customer.
Think of the tremendous margain over a single year you can gain by dealing in closeouts with your regular retail store goods.
I've exhibited in many trade shows and was originally surprised to find out how many stores shop the closeout shows to find unique and off price goods for their stores. Many drug stores, grocery stores, home stores all come to the shows to find goods that will improve their margins. Most national manufacturers use closeouts to move their slow moving products. You'll find 3M, GE, Mead and most other top manufacturers selling their brand name goods off price to move it.
Sometimes entire warehouses are sold to liquidators when a manufacturer makes a strategic decision to close a building.
Liquidators mostly work on "blended margain" and try to get a higher price when an items comes in and then over time drops the price to keep moving the product until it gone. Many times near the end when the product is almost gone you can offer a much lower price to the vendor to clean them out of the item. If they have done well at the beginning they will look at the overall blended margain and accept your offer. Say they sold 20 at $5.00, 20 at $4.00, 20 at $3.00, 20 at $2.00 and have 20 left. Their blended or average selling price was $3.50 for the 80 they sold and might let the last 20 go at something less than their previously low of $2.00 to clean it out. That's an overly simple example but shows an important aspect of the closeout business that most customers all pay different prices based upon your purchasing volume and negeotiating skills.
Our own business is 100% closeouts www.kiefers.com and comes to you freight paid. The free freight is a factor because freight today can easily add 10% to 20% to an entire order. Most closeout houses cannot offer free freight because the weight of certain categories such as paper, chemicals, plastics, etc. can be tremendous and cost alot to ship. We use averages and don't buy certain products that would cost more to ship than the product is worth. We offer a huge selection of products numbering into the thousands of items, and they are all delivered to you freight paid.
Another source of closeout goods is auctions which we'll talk about in another blog. Auctions can be a huge source of profit for retail store if you know what to look for.
Labels: cheap merchandise, closeouts, liquidation merchandise
posted by kurt kiefer @ 4:14 AM
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