7 Great Ways to Liquidate InventoryJune 22, 2020 in Blog
One of the top questions we get in our private members area is this: what’s the best way to liquidate inventory?
After you’ve been selling for any amount of time, you will run into dud inventory that you need to get rid of. Either price competition makes the product no longer feasible, you can longer rank it, or you just need to free up cash flow.
In this post, I’ll discuss the top ways you can liquidate inventory.
Disposing of the Inventory is Often the Best Choice
Before we discuss what the best way to liquidate your inventory is, we need to have a bit of a gut check.
Disposing of your inventory is often the best choice. Yup, throwing away all that inventory that you paid thousands of dollars (or more) for.
If you are racking up long term storage fees, disposing is almost always the best option. If you’re still paying regular non-long term storage fees then by all means try and get as much value for your inventory as you can. But as you get closer to the point of long term storage fees, be honest with reality that you may need to dispose of your inventory.
You’ll normally pay $0.50 + $0.20/lbs to either remove or dispose of your inventory. However, after running significant price discounts, paying selling fees and/or fulfillment fees, storage fees and, most importantly, factoring in your time, you can easily be paying far more than this just to get rid of your inventory. Also, there will often be some tax advantages for writing off inventory as well.
Getting rid of the mental weight of your stagnant inventory will free your mind to focus on other things and that always has a positive ROI. However, entrepreneurs can be irrational creatures, and sometimes we’d rather slowly sell a bunch of inventory while eating up a small fortune in storage fees than clicking the dispose button.
The Top Ways To Liquidate Inventory
Now here’s the the other gut check: ultimately, you’re the best liquidator of your inventory. The majority of the time, no one else in the world will be able to sell your stagnant inventory for as much as you can. You’re going to be paid accordingly for this fact.
With that in mind, here are some ways to consider when liquidating your inventory:
- Make a New Merchant Fulfilled SKU. Make a new Merchant Fulfilled ASIN on Amazon with a bulk quantity bundle and at a lower price. If it sells, do a MCF order (i.e. you don’t need to relabel or send items in).
- Sell in bulk on eBay. Like above, make a listing for multiple items and sell in bulk. You can ship with multi-channel fulfillment directly from Amazon.
- Amazon outlet deals. Amazon runs an outlet section of their website specifically for reasons like inventory liquidation. There’s a bunch of catches to being eligible (such as having recent sales history) but if your item is eligible it can have a similar effect as a Lightning Deal.
- Run a social media promo code. This is available from within promotions in Seller Central. Do a 50% discount AND select “Share with: Amazon Influencers and Associates”. There’s a small chance Amazon will share it with their LARGE network of influencers and you will get some virality to your coupon.
- Enroll it in Amazon VINE. This will get you some “free” sales velocity and potentially give the product a second chance at life.Your inventory will be given away though and you will have to pay applicable FBA fees.
- Cold Call Other Businesses. Cold call/email a few related businesses seeing if they will buy your inventory at a significant discount.
- Donate to Charity. The tax advantages of this will vary immensely by jurisdiction. In many jurisdictions though, you may actually receive no taxable benefit from donating inventory. You will receive karma points no matter what jurisdiction you’re in though :)
Bad Options to Liquidate Inventory
Now let’s discuss what the bad options are for liquidating your inventory.
- Inventory Liquidators. An inventory liquidator will typically give you 5-10% of the COGS if you’re lucky (and normally it’s 5% or below) and after removal costs you can be losing much more money than simply disposing of the inventory.
- Prolonging your pain and storing items at a 3PL. A lot of people prolong their pain and store their items at a 3PL and rack up $25/pallet monthly storage fees (or more) and eventually disposing the inventory (or worse, slowly selling the inventory at a loss). 3PLs are full of these clients.
Liquidating inventory is one of the harshest realities of being a retailer and most of us have a few sad heartbreak songs about losing money on dead inventory. I have a great story (OK, not so great) about mistakenly ordering $10,000 in marine products for U.S. boats that was only compatible with European boats (over 3 years I think I found every American with one of these European boats though!).
You can take some comfort in knowing that you’re not alone. Every entrepreneur loses money on inventory at some point and even the largest retailers in the world have a discount bin or two in their stores. What’s your sad heartbreak inventory story? Let me know in the comments below.
Dave Bryant has been importing from China for over 10 years and has started numerous product brands. He sold his multi-million dollar ecommerce business in 2016 and create another 7-figure business within 18 months. He’s also a former Amazon warehouse employee of one week.