IN THIS CHAPTER

Speaking like a merchandiser

Understanding the different types of salvage merchandise

Practicing safe shopping

Drop-shipping without drop-kicking your customers

You’re likely to find various levels of quality when you look for merchandise to resell on eBay. Receiving a box of ripped or stained goods when you expected first-quality merchandise can be disheartening. If you take the time to evaluate the condition of the merchandise you’re interested in buying, you save time (and money) in the long run. But to make that evaluation, you need to know what the industry language tells you about the quality of the merchandise.

In addition to qualifying the goods you buy, take the time to qualify the processes and partners you use. For example, drop-shipping (shipping goods straight from the manufacturer or distributor to the consumer) has become a popular method for moving merchandise sold on eBay, but it comes with many caveats. For example, eBay has a policy about preselling items you don’t have in stock, so be sure to check it out in advance; make sure your drop-shipper has the merchandise ready to go when you place your order. Use this chapter to become a savvy buyer of goods to resell — and an effective mover of those same goods.

Many people use an elaborate practice called eBay arbitrage. They put items sold on Amazon up for sale on eBay, and have Amazon ship direct to the customer — or vice versa. This process can go very wrong or very right — sometimes at the same time. If your customer gets a packing slip from another seller, perhaps even indicating a lower price than they paid, you might be in for some very bad feedback. This is a stressful and tricky way to go. I only recommend this if you buy the goods on another site and sell directly from your own purchased stock on eBay.

Know the Lingo of Merchandisers

To help ensure that industry jargon won’t trip you up, this section describes the merchandising lingo you need to know — and offers pointers on making the right decisions about your merchandise and methods. Here are some terms you’re likely to come across:

• Job lots: A job lot simply refers to a bunch of merchandise sold at once. The goods may consist of unusual sizes, odd colors, or even some hideous stuff that wouldn’t blow out of your online store if a hurricane blew through. Some of the merchandise (usually no more than 15 percent) may be damaged. Super discounts can be had on job lots — and if the lot contains brand names from major stores, you may be able to make an excellent profit.

  A good way to find a jobber (someone who wants to sell you job lots) on the Internet is to run a Google search on wholesale jobber.

• Off-price lots: If you can get hold of top-quality, brand-name items in off-price lots, you can do very well on eBay. These items are end-of-season overruns (more items were made than could be sold through normal retailers). You can generally find this merchandise toward the end of the buying season.

  Many eBay sellers, without having untold thousands of dollars to buy merchandise, make friends with the salespeople at manufacturers’ outlet stores (which is where the merchandise may land first). Others haunt places like TJ Maxx, Marshall’s, and Burlington Coat Factory for first-rate deals.

  Search the classified ads of genuine trade publications for items to buy in bulk. Publications such as California Apparel News have classifieds that are accessible online. Visit their website at www.apparelnews.net and click Classifieds.

• Liquidations: All eBay sellers think of liquidations as the motherlode of deals. And yes, they may be the motherlode of deals — if you can afford to buy and store an entire 18-wheeler truckload of merchandise. That takes a great deal of money and a great deal of square footage, plus the staff to go through and test each and every item.

  The merchandise can be an assortment of liquidations, store returns, salvage, closeouts, shelf pulls, overstocks, and surplus goods. Some items may be damaged but repairable; others may be perfectly salable. As much as 30 percent or more of a truckload may be useless. Buying liquidation merchandise is a gamble but can have advantages. By buying a full truckload, you have a wide breadth of merchandise, you pay the lowest amount for it, and some of it may be good for spare parts. Just make sure beforehand that you have a place to put it all.

Save yourself some money. Don’t go on eBay and buy some wholesale list for $5. You can get the same names by running a Google search on the term wholesale. Every true wholesaler’s website has a place where authorized dealers (that could be you) can log in. Try searching for dealer login along with a category name, such as dealer login golf (as I’ve done in Figure 4-1).

Salvage: Liquidation Items, Unclaimed Freight, and Returns

The easiest to buy for resale, salvage merchandise is retail merchandise that has been returned, exchanged, or shelf-pulled for some reason. Salvage can also encompass liquidation merchandise and unclaimed freight. Generally, this merchandise is sold as-is and where-is — and may be in new condition. To buy this merchandise directly from the liquidator in large lots, you must have your resale (sales tax number) permit and be prepared to pay the shipping to your location.

Several types of salvage merchandise are available:

• Unclaimed freight: When a trucking company delivers merchandise, a manifest accompanies the freight. If, for some reason, a portion of the shipment arrives incomplete, contains the wrong items, or is damaged, the entire shipment may be refused by the merchant. The trucking company is now stuck with as much as a truckload of freight. The original seller may not want to pay the freight charges to return the merchandise to his or her warehouse (or want to accept blame for an incorrect shipment), so the freight becomes the trucker’s problem. The trucking companies arrive at agreements with liquidators to buy this freight in the various areas that the liquidators serve. This way, truckers are never far from a location where they can dump, er, drop off such merchandise.

• Returns: Did you know that when you return something to a store or mail-order house, it can never be sold as new again (in most states anyway)? The merchandise is generally sent to a liquidator who agrees in advance to pay a flat percentage for goods. The liquidator must move the merchandise to someone else. All major retailers liquidate returns, and much of this merchandise ends up on eBay or in closeout stores.

  If you’re handy at repairing electronics or computers, you’d probably do very well with a specialized lot. You may easily be able to revitalize damaged merchandise, often using parts from two unsalable items to come up with one that you can sell in like-new working condition.

• Liquidations: Liquidators buy liquidation merchandise by truckloads and sell it in smaller lots. The merchandise comes from financially stressed or bankrupt companies that need to raise cash quickly.

  The liquidation business has been thriving as a well-kept secret for years. As long as you have space to store salvage merchandise and a way to sell it, you can acquire it for as low as ten cents on the dollar. When I say you need storage space, I mean lots of space. To buy this type of merchandise at bottom-of-the-barrel prices, you must be willing to accept truckloads — full 18-wheelers, loaded with more than 20 pallets (4 feet x 4 feet x 6 or 7 feet) — of merchandise at a time. Often these truckloads have manifests (a document detailing the contents of the shipment) listing the retail and wholesale price of each item on the truck. If you have access to the more-than-10,000-square-feet of warehouse that you’ll need to unpack and process this amount of merchandise, you’re in business.

  I’m a fan of Liquidatation.com (www.liquidation.com) and often find myself scrolling their home page to see the current offerings (see Figure 4-2). Buying from them at a good price can mean healthy profits.

• Seasonal overstocks: My motto is “Buy off-season, sell on-season.” At the end of the season, a store may find its shelves overloaded with seasonal merchandise (such as swimsuits in August) that it must get rid of to make room for the next season’s stock. These brand-new items become salvage merchandise because they’re seasonal overstocks.
• Shelf-pulls: Have you ever passed up one item in the store for the one behind it in the display because its box was in better condition? Sometimes the plastic bubble or the package is dented, and you’d rather have a pristine one. That box you just passed up may be destined to become a shelf-pull. The item inside may be in perfect condition, but it’s cosmetically unsalable in the retail-store environment.

Some liquidation items, unclaimed freight, and returns may be unsalable. Although you’ll acquire many gems that stand to bring you profit, you’ll also be left with a varying percentage of useless items.

Some liquidation sellers sell their merchandise in the same condition that it ships in to their location, so what you get is a crapshoot. You may lose money on some items while making back your money on others. Other sellers who charge a bit more will remove less-desirable merchandise from the pallets. Some may even make up deluxe pallets with better-quality merchandise. These loads cost more, but if they’re filled with the type of merchandise that you’re interested in selling, you’ll probably write better descriptions and subsequently do a better job selling them.

Before you glaze over and get dazzled by a low, low price on a lot, check the shipping cost to you before you buy. Many so-called wholesalers will lure you in with bargain-basement prices, only to charge you three times the normal shipping costs. Do your homework before you buy!

Staying Safe When Buying Online

Nobody offers a quality or fitness guarantee when you buy liquidation merchandise. You could end up with pallets of unsalable merchandise, and you must steer quickly away from anyone who guarantees that you’ll make money. Remember that liquidation merchandise is always sold as-is.

Unfortunately, this market can be rife with unscrupulous sellers who are middlemen. They buy the truckloads, go through everything with a fine-tooth comb, and pull out all the saleable merchandise. Then they repack the pallets with what’s left, and sell those to unsuspecting newbies who think that they may get a good deal.

When buying online, it’s hard to know about the company you’re dealing with because you’ve probably just found them after performing a web search. When you find a source from which you want to buy merchandise by the pallet, check out a few things before spending your hard-earned cash:

• Get an anonymous free email address from Gmail before signing up for any mailing lists or newsletters. Some websites that offer these publications make most of their money by selling your email address to spammers. If you give them an anonymous email address, the buckets of spam will never end up in your real mailbox. (I learned about that the hard way.)
• Raise your shields if the wholesalers also link their websites to miscellaneous make-big-profits-on-eBay websites. They may be making most of their money from commissions when the ebook of “road-to-riches secret tips” is sold to you.
• Be sure the site has a phone number. Give them a call and see how you’re treated. It’s no guarantee of how they’ll treat you if you’re unhappy with a purchase, but you may get a human being on the phone (rare and precious these days).
• Look for a physical address. Do they have a place of business or is the company running out of some guy’s pocket cellphone? (Often it’s not a good sign if there’s no place to hang a sign.)
• Ask for references. Seeing the Better Business Bureau Online BuySafe or SquareTrade logo on the website can bolster trust in the company. (They have to qualify for those seals.)
• Before you purchase anything, go to eBay and see whether that item will sell — and for how much. Often you find hundreds of listings for an item with no bids. Check completed listings and be sure that the item is selling for a solid profit over what you expect to pay for it (including shipping).
• Never buy anything just because it’s cheap. That was true in Thomas Jefferson’s day and is still true today. Be sure you can actually sell the merchandise. (I also learned this the hard way.)
• Look for a guarantee. Does the source guarantee that you will make money or that you can make money by buying the right merchandise? Remember that no one can guarantee that you’ll make money.
• Check for references. Does the supplier offer on its website references that you can contact to find out some usable information on this seller’s items and the percentage of unsalable goods in a box or pallet?
• Look for FOB. That means freight on board. You will be charged freight from the location of the merchandise to your door. The shorter the distance, the cheaper your freight costs.

Before doing business on any website, be sure its owners have a privacy policy that protects your personal information. Also check for an About Us page and make sure the page talks about the business and the people behind it. I hate to be repetitive, but be sure you can reach a human being on a phone or in person (with a street address) if need be.

Dealing with Drop-Shippers

A drop-shipper is a business that stocks merchandise, sells the merchandise to you (the reseller), but ships it directly to your customer. By using a drop-shipper, you transfer the risks of buying, storing, and shipping merchandise to another party. You become a stockless retailer with no inventory hanging around — often an economical, cost-effective way to do business.

The following steps outline the standard way to work with most drop-shippers on eBay:

1. Sign up on the drop-shipper’s website to sell their merchandise on eBay or in your web store. Check out their terms before you sign up; make sure there’s no minimum purchase.
2. Select the items from their inventory that you want to sell. The supplier gives you descriptive copy and photographs to help make your sales job easier.
3. Post the item online and wait (fidgeting with anticipation) for someone to buy it.
4. As soon as your buyer pays you for the item, email the drop-shipper (or fill out a special secure form on their website) and pay for the item with your credit card or PayPal.
5. Relax while the drop-shipper ships the item to your customer for you.
6. If all goes well, the item arrives quickly and safely.

You make a profit and get some positive feedback.

The drop-shipper’s website provides you with descriptions and images. Fine. But you and everybody else who sells that item on eBay will have the same photos and descriptive copy. Do yourself a favor and get a sample of your item, take your own pictures, and write your own description. Then at least you have a chance at beating the competitive sameness on eBay.

Drop-shipping works especially well for web-based retail operations. Web stores can link directly to the drop-shipper to transmit shipping and payment information. When you’re selling on eBay, it’s another thing. There’s more competition and you can’t list hundreds of items at no additional cost.

Listing items on eBay costs time and may build up your expenses before you make a profit. You can’t just select an item from a drop-shipper and throw hundreds of listings on eBay without losing money — that is, unless your item is selling like gangbusters at an enormous profit. If that were the case, believe me, there would be another eBay seller buying directly from the manufacturer and undercutting your price.

I must interject that I bought (for research) several drop-shipper lists from eBay sellers. I am saddened to report that I couldn’t find any that fulfilled my security requirements for doing business with an unknown business online. The drop-shippers whose merchandise I could track had a penchant for flooding the eBay market by selling the same item to way too many sellers — thereby driving down the price. I also found little brand-name merchandise available. If any of my readers find a reputable drop-shipper who allows room for profit on eBay, please email me through my website. I think this is a business that could work, but only if the right businesses (and business practices) were involved.

It’s one thing to sign up for a free newsletter — or even to register with a particular site — but it’s something else to have to pay to see what the drop-shipper intends to offer you. You should not pay anything in advance for the opportunity to check out a drop-shipper’s merchandise.