I spent a lot of time working in the liquidation and surplus business before I finally realized that I needed to get an exlusive contract with a specific item supplier. All of my suppliers were readily accessible to the other wholesalers with whom I was competing.  I was certain that if I got stuck in the current free-for-all supplier system, it would be impossible to negotiate prices, and it would stifle the progress I was making in building my business. Other wholesalers had formed liquidation prices by modifying supply and demand.  I set out to locate a supplier who was searching for better returns for their liquidations and surplus; this would in turn give me the exclusive supply I was looking for to keep my business going.  

It might sound like a novel idea, but making that idea a reality is not that straightforward! First, I thought up what options I had to start out with. One of my favorite chain stores is Costco, so I began my search there.  Once I decided to go toward Costco, I wondered how to reach the General Managers who would hear me out. Would meeting with me even be of any interest to them?  When my business was compared to Costco, I was just a tiny water droplet in a large ocean!

I had to remember, however, that liquidators are desire by all retail chains in some capacity. They end up with minimum storage in their stockroom if they haven't found a liquidator to keep their product cycle going. When you factor in the fact that most retail chains aim to please customers with a loose return policy, they end up with a large amount of customer returns, the returns build up rapidly on a weekly basis at Costco. More often than not, a customer simply changed their mind after making the purchase and the items are still in good condition. Regardless of what condition the product is in, the corporate headquarters will not want these products to be put placed on the shelf, leaving the store to figure out a place for them.  

Enter the wholesale liquidator, who buys all the customer returns from Costco, since they are not permitted to put them on the shelves and sell them at a greatly lowered price point.  Not only is Costco able to get back some of what they lost from the returns, but I can get my merchandise at a discounted price.  

Since they carry a wide variety of items, it is an advantage to negotiate an exclusive contract for Costco's customer returns.  It might look as if Costco is a wholesaler itself, but in actuality it is a retail store since their customers themselves will not be reselling the items they have paid for.  Most items purchased at Costco, however, are being sold in bulk. When customers make a purchase at Costco, and they buy in bulk, they may end up returning the entire bunch if even one item in that lot is damaged.  By selling the rest of the lot at a higher price, a liquidator is able to make up for that one damaged item. The most often returned merchandise by customers are general necessities such as household goods and clothing. You will certainly be able to resell the items, since somebody wanted to purchase them to begin with!

So you may be wondering what the process is for forming a contract proposal for the liquidation of Costco customer returns.   

A good place to start would be to call one of the Costco outlets in your area. My first attempt at doing this didn't actually workout too well until I came to a realization of a few things:

Make it clear that you are a liquidator and disclose what your intentions are.  A "salvage company" may be another term they use to describe a company that does liquidations. Get the name of the person who makes all the decisions regarding customer return handling. If 15% to 28% is what they currently receive, try to increase that by 3% to 5%.  Bidding wars should not be something that you are afraid to engage in.

Handling Costco's Customer Returns

I noticed a several things about the exclusive business relationship between myself and Costco for customer returns after it was established.  The RTV or Receiving Manager makes it clear that they do not want any hassle regarding the fact that they want the highest revenue that is possible for their customer returns. If you are used to working with owners of other types of businesses, you will soon find out that working with a large company isn't the same thing.  Because an RTV manager will put limits on what he will do in the case of a disagreement, your business relationship may become unbalanced.  

In order for me to retain my contract, I had to adopt certain behaviors.  

First, I made sure to recognize that the General Manager's happiness was always the aim of the RTV Manager. To keep the GM happy, then, an RTV Manager will end the relationship with you before he makes deals with you at the expense of Costco.  As a liquidator, failing to be on schedule to pick up customer returns and goods is very unprofessional and frustrating to your business partners.  When picking up your purchased customer returns, it is essential that you pay using your business credit card (anything but American Express, a cashier's check, or cash.  Before a time to pick up your goods is scheduled, you need to resolve any oversights that may have occurred. Almost every time, when I would pick up my goods, the numbers on the RTV's inventory sheet and what quantities I actually received did not match up.  It is not worth a Costo employee's extra time to correct a shortage or overage in the system, because they see it is salvage and just simply don't care.  Regardless of whether or not the quantities and numbers match up, the discrepancies become purged and you get what you're given. You can be sure that what is written down by the RTV Manager for the General Manager to see will be accurate, at least on paper.  If you have the guts to complain, you could risk ending your business relationship, and it could even be seen by the RTV Manager as a personal attack.  This may seem unfair, but if you want to have a deal with a large corporation, it must be dealt with.  

Does this method only work in relation to Costco?

Although I have spoken to you about my personal experience with Costco, it seems the same basic principles will apply to another retailer.  Unless you call other large corporations and find out how they take care of their customer returns, you won't know if it is something they do themselves or if they use a liquidator. Remember that each business will have customer returns, liquidated items, and surplus that they will want to have taken off their hands. If you work hard, your wholesale liquidation business could make an exclusive partnership with one of the many retail outlets.  

Most businesses consider liquidators to be at the bottom of the ladder.  In order to be successful as a wholesaler, you will simply have to deal with the aspects of business relationships that appear to be unfair. If you plan for the best profit margin structure, your business can compensate for these inconveniences and you will come out on top.  Almost all retailers are anxious to let you as a liquidator handle their customer returns instead of hassling with it themselves. The goods selling cycle has many aspects, and just one of those is the wholesaler business.