5 Things You Need to Know Before Bidding on Liquidation Auctions

Are you starting a business as a reseller? If you are, you need to have inventory, and when you are a small business without too much capital, it can be very difficult to get that inventory. Fortunately, you can often find good deals at liquidation auctions. It can be an ideal way to get plenty of inventory for your business whether you are selling online, offline, or both.

The temptation can be to jump right into the first liquidation auction that you find, but you need to slow down a bit and make sure you know what you are doing. The following are five things you need to know before you start bidding at liquidation auctions, along with a bonus tip to help you.

Do Your Research

Before you bid, you need to do plenty of research in various areas. First, if you have a new company, you need to think about the types of products that you want to sell and the products that your ideal customers would want to buy. Having a plan before you are bidding will help to ensure that you are only looking at and bidding on the right types of pallets and lots at the liquidation auction.

In addition, you should research the brands that your customers are interested in and what has the potential to provide you with the best resale value.

You will also need to research to make sure the liquidation auction company you are using is legitimate and that they have a good reputation in the business. Check to see what types of auction or transaction fees there are, as well.

Once you find good liquidation auctions, it is time to start looking at the various lots and pallets available. This is where your other research will help you. It will be much easier to know which pallets are worth your time and which ones are not viable for your business. When you see pallets that look like they would work for you, look at the manifest to understand everything that is available, as well as the condition.

When you get the information from the manifest, it is time to research how much those items are selling for through other resellers. This will give you a better idea of what you could reasonably expect when you are selling them to your customers. Not only will this help you with your pricing, but it will also ensure that you do not spend too much on the pallets. After all, you have to make a profit.

Another part of your research should be to look at the cost of freight for shipping the pallet to your location. This will add to the overall cost of the goods, so make sure that you can still make a good profit after factoring in all the costs of the auction.

You Need to Set a Budget

One of the most important things to do when you are considering bidding on an auction is to create a budget. Consider just how much you need to buy and how much you can bid for each of the pallets. It is important that you stick to this budget if you want to make the most out of the auction.

Otherwise, you could spend too much on a single pallet and not be able to get the rest of the inventory you need. The goal is always to make a profit, and if you are going over your budget when you are buying your inventory, making money will be difficult.

Factor your bidding into your overall company budget for inventory, and remember to include the costs of shipping the items to you. The following is a basic example of how to do this from the Small Business Association. You can create your own.

Start With a Small Bid

It is generally a good idea to start with a low bid. If you are the first bidder, bid close to the lowest amount possible. There is always a possibility, however slim it might be, that no one else will want to bid on that pallet. This means you can get a low price. If others are bidding against you, they will usually want to keep the prices on the bids low, as well. They do not want to spend too much either.

Watch the Bid Carefully

Once you have placed a bid on the lot at the liquidation auction, you will want to keep an eye on it. Others will be bidding against you, and you need to make the time to increase your bid so that you remain in the lead. This is especially important when the bidding is winding down and the auction is getting ready to close.

There are sometimes those last-minute snipers that will come in at the end and try to outbid you by a small amount. You need to be aware of those tactics. In some cases, the tactic might even come in helpful for you.

Never Get Into a Bidding War

One of the dangers that those who are new to auctions can face is getting embroiled in a bidding war. This is one of the worst things you can do. You are trying to make a profit and you want to keep the prices for your pallets as low as you can.

However, the competitive nature of some people can take hold, and they will start bidding higher and higher just to beat the other bidder. It is a surefire way to waste money. When the bids get too high, you will never be able to resell and recoup your cost, much less make a profit.

Bonus Tip: Consider Using the Buy Now Option

Here’s a bonus tip that might work well for you in some cases. If you find a pallet of items that are perfect for your needs, and that has a buy now option, run the numbers. Will you be able to make a profit if you buy the pallet at this price? If you can, then you might want to buy it right then and skip the auction process.

Bidding at liquidation auctions can be fun and it can be profitable. Just make sure you remember the advice here and keep learning with all the future auctions you attend.

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Henley Johnson

Henley currently works as a sales representative for Direct Liquidation, assisting businesses with product sourcing of liquidated merchandise from the largest retailers in the world. Whether you are looking for a pallet or a truckload Henley is here to help you grow your business.

View Henley’s Bio on YouTube.