Closeouts, Overstock, Customer Returns: Which is Right for You?

Some online sellers, on sites like eBay and Amazon, are happy to occasionally sell an old used item from their household, to clear space on the mantle above the fireplace and make a few dollars in the process. But what if you are someone who is looking to add a second, or third stream of steady income? What if you‘d like to spend your spare time by browsing online deals for wholesale merchandise to buy and resell?

More and more people are creating businesses online, selling stock bought at wholesale prices, and developing their ventures into real profitable businesses.

When starting out, you are faced with many questions and unknowns, from what is the right price for a product, how to find the best supplier, how to market and sell the merchandise, getting registered for business licenses, and operating growing operations legally, and much more. Today, however, we are focusing on the types of merchandise you can buy from your supplier and their differences.

Eventually, it boils down to a personal preference, but buying closeout merchandise, overstock or customer returns, although related, has its differences.

This article, will not only help you understand the terms and the differences between closeouts, overstock and customer returns, but it will also give you an insight into the advantages and pitfalls of these types of merchandise, which as a result, should help you make your choice easier, should you embark upon opening an online resale business.

Types of Merchandise for Sale

Closeout Merchandise

Closeout merchandise can mean a number of things, but these are usually the products that get liquidated by retailers when they are looking to free shelf space for new products, or even if the store is closing and it is looking to get rid of the remaining merchandise quickly. 

In many cases you will see seasonal goods being offered in closeout sales at the end of their respective season. This can be anything from BBQs and outdoor grills to winter clothing.

In terms of advantages over the types of merchandise that we will discuss later, closeouts are possibly the preferable option for most resellers new to the business, since they usually contain brand new items that have not been worn and are not faulty. Although they might not have sold at the original store for one reason or another, these products are still either in their original packaging and very often have their price tags still attached. On top of this, similar to other types of merchandise to be discussed, closeout merchandise is being sold for pennies on the dollar.

However, as always, you have to be careful when sourcing closeout merchandise and look to buy from reputable sources and suppliers only. Done right, closeouts can help you develop your online resale business quickly.

Overstock Merchandise

Thys type of merchandise brings its own advantages and issues. In terms of quality, this can be up to the standard of closeout merchandise, because overstock mainly consists of new products that have never been used before. They are called overstock because they could be a result of a mistaken order, or a bad plan by the store management that has ordered a product in excessive quantity or simply a larger-than-ordered delivery by the supplier.

If a store, or a retailer ends up with overstock merchandise it is usually sold either at really low prices to the customers, or packed up in wholesale pallets and sold to liquidators. It can even be sent back to the distributor or the manufacturer.

The positive for you again is the price, which is very low. The difference between closeout merchandise and overstock is in the way these products become surplus. One can be seen as a result of a seasonal change or a release of a new product, while the other can be seen as a result of bad management or a wrong delivery. Either way, you are getting brand new products on offer.

Customer Returns

Contrary to the previous two categories, customer returns are the products that have been previously purchased by the customers and returned to the seller for one reason or another. This is not a rare occurrence, especially for the products ordered online, as at least 30 percent of these find their way back to the seller.

Reasons for the product return can vary, from a wrong order to a wrong shipment. In many cases, the customer happens to order a wrong size of the product or even the wrong product itself. At times, the customer is not satisfied with the received product as it does not match the description from the catalogue or the seller made a mistake and shipped the wrong product.

All these can be seen as positive cases for you as a buyer who is looking to purchase cheap products to resell online, because most of these products get sent back in original packaging, unopened. However, once a product is sold and get returned, it can’t be labeled as new anymore and has to be offered as a customer return or even a refurbished item.

This doesn’t mean they are less appealing or profitable than the previous two categories. There is a market for customer returns out there as well as refurbished products, especially refurbished electronics.

The main issue with the customer returns and refurbished products can be the quality. This is why it is essential to know your source and to work with a respected, reputable supplier that will provide you with top-quality merchandise.

Special attention should always be given to the refurbished electronics. Such products are reviewed either by the store, or sent back to the manufacturer for inspection. Whether faulty or not, such products are put through a series of strict tests to ensure that they are back to their best working condition. They get labeled as refurbished and are usually sold in bulk by liquidators. The best liquidators will provide a new warranty on these items.

Customer returns and refurbished products are usually even cheaper than the previous two categories. This means that if you source smartly, the profit margin you can have when reselling the products is the biggest with customer returns.

Which Merchandise Should You Buy?

All in all, each type of merchandise has its advantages and flaws, and which one you chose to take your business forward with is your personal preference. You could try with a pallet of each type, ordering products you are familiar with, and will be able to identify and sell on more easily.

After selling the contents of those pallets, you may have a better idea as to which categories of products you prefer, and which work out for you in terms of costs and profits. However, if you plan your moves smartly, you can make the resale business, not your third or second stream of income, but actually turn it into a full-time job and finally start to reap the rewards of your hard work. 

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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.