Buying inventory is the easiest thing to do when it comes to liquidation resale. The trick – and the secret of survival – is to grasp the math of your money. As a result, many of the new resellers tend to concentrate on a deal they received on a pallet from Quicklotz – and mistakenly assume that purchasing low means selling high. The real profitability is only a result of compliance with Return on Investment (ROI) calculations.
Profit is the structure within the practice, and its understanding turns a hobby into a scalable business. Here is how to deconstruct those figures to make sure every truckload delivers for you.
A Step-by-Step Formula for Calculating Liquidation ROI
A Step-by-Step Formula for Calculating Liquidation ROI
A simple percentage, ROI is simply a measure telling you how much your money is working. To find it for a liquidation pallet, just apply this equation:
ROI = Net income / Total investment expenditure) x 100.
Here is a practical example. Suppose that you purchase a manifested pallet of Target returns for $1,000.
- Total Income: After all the products have been sold, an income of $2,500 comes in.
- Total Money Paid: This includes the pallet price of $1,000 and an account for transportation of another $200; this brings us to $1,200 altogether.
- Profit: The revenue of $2,500 – total cost of $1,200 equals $1,300 in profit.
Factoring in Hidden Costs: Storage, Labor, and Resale Fees
Factoring in Hidden Costs: Storage, Labor, and Resale Fees
The biggest trap that resellers tend to fall into is determining gross profit and calling it a day. To discover the hidden cost of doing business that leads to your true profit, you must deduct the following:
- Platform Fees: If you sell on eBay, Poshmark, or Amazon, you'll face an outright loss of 10-15% off of your sale price because of fees.
- Shipping Materials: Boxes, parcel bags, tapes and bubble wrap add up. A single shipment might cost you $2 just on materials.
- Labor: Whether you are working as a solo business or not, don't forget the value of your time.
- Storage: Are you renting a warehouse room or storage space? That monthly rent needs to be split up among those pallets you process.
Setting Resale Prices: The 4 Key Pricing Models for Liquidated Goods
Setting Resale Prices: The 4 Key Pricing Models for Liquidated Goods
Once you know your costs, you need a pricing strategy that does not simply move inventory and protects your margins.
- MSRP Discounting: Used for 'New in Box' products. You sell the item for 50-60% of the retail sticker price.
- Market Value Matching: Vital for electronics. Use 'sold listings' on eBay to view your price street value, no matter the original MSRP.
- Flat Rate Pricing: Used by bin stores. Each Friday is a $10, Saturday is a $5, etc. This is straightforward, but it costs a lot of volume.
- Psychological Pricing: Pricing items to be sold for $19.99, rather than $20. It is cliché, but a proven strategy to enhance conversion rates on individual listings.
Tracking Inventory: Simple Tools for Monitoring Profitability
Tracking Inventory: Simple Tools for Monitoring Profitability
You cannot enhance what you do not measure. You don't need big business software to keep a tab of what is happening with your liquidation business; sometimes, a well-structured spreadsheet is just fine. Set up a 'mater inventory sheet' in Excel or Google Sheets. The columns and their information should be:
- Purchased date.
- Source of pallet.
- Item.
- Cost of goods sold (COGS).
- Price.
- Fees.
- Final net profit.
Analyzing such data will help to find trends fast. Although Amazon pallets are more expensive up front, you might find they move faster than their apparel loads. This data-driven approach allows you to stop guessing and invest in the exact Quicklotz inventory items that will have the highest return for your business model.
