Which liquidation strategy is best for your business?
If your business has decided to enter the process of liquidation, congratulations! Now, the next question you should be asking is, “How?” How does your business plan to liquidate?
Let’s take a few steps back for a moment.
Liquidation is defined as the process where businesses sell off their assets and/or inventory to generate funds. In the past, entering into liquidation most likely meant that your company is going into bankruptcy, selling off assets in order to pay off outstanding debts and other financial obligations to creditors. Nowadays, this isn’t entirely the case. While it is definitely still a viable exit strategy undertaken by insolvent companies, more and more up-and-running businesses liquidate their assets, most especially their inventory, for a number of reasons.
For one, liquidation is a great strategy to recover value from assets that may be sitting around, collecting dust. Think of excess office equipment, old electronics, unsold merchandise and more. Liquidating these items recovers some, if not all, of the capital invested in them resulting in more room for financial growth and re-investment elsewhere. Not to mention, liquidation also frees up space in offices and warehouses and smoothes a company’s operations by ridding them of their excess and/or aged inventory.
If your business has decided to enter into liquidation, more specifically the liquidation of inventory, then chances are that you are one of the many businesses that have found themselves with an excess of merchandise. The next step now is to figure out which among the many liquidation methods is best for your company.
In this article, we’ll share the different liquidation strategies companies may pursue to recover value from their inventory and unused assets. Let’s go!
Picking a strategy
As a reminder, the following liquidation strategies are simply a few of the many creative solutions that businesses have at their disposal. This list is by no means exhaustive! However, before deciding on any course of action, it is always important to assess not only the needs of your company but its capacity to enter and sustain any specific liquidation strategy. Liquidation is a process that involves many moving parts from your inventory, warehouse, operations, finance, marketing, business development, and so much more. Thus, a thorough survey of your business’ current state is a must.
Beginning with the decision to liquidate, it is important to have a clear goal in sight. Is it to recover value from unsold items? Clear up warehouse space? Pay off creditors and shareholders? Make way for new products? All of the above? Knowing which goals you want to achieve through liquidation is essential in determining your liquidation strategy and the duration that you and your business will be allocating for this process.
Afterwards, we recommend appointing a person-in-charge for each department involved. This reduces road blocks ensuring that your team is running like a well-oiled machine and all facets of the liquidation process are accounted for.
The next step would be to assess your inventory. What kind of items are you looking to liquidate? Are they excess inventory, aging items, returns, or showroom stock? What is their condition? Brand-new, secondhand, or damaged? Keep in mind that certain approaches are better suited to specific item conditions in comparison to others.
Having a good understanding of what it is you’re trying to sell will smoothen the liquidation process. Afterwards, you’re all set to select a liquidation path to take.
Product bundling is a common retail strategy that involves selling your items in a package. It is commonly done to boost sales, improve your customers average order value and keep low-selling items in circulation. Bundling is an example of upselling your items, and according to sales expert and author Jeffrey Gitomer, is the most effective form of it. Product bundling has become an increasingly popular retail strategy, becoming a mainstay of both online and offline sales and taking on many forms.
One of the most common product bundles you can explore is the classic “Buy One Get One” (BOGO) offer. Whether it’s via a physical retail store or an e-commerce platform, you can’t go wrong with the BOGO promo as most consumers can’t resist a deal that offers them a free item.
However, the more common method of bundling for businesses looking to liquidate is by mixing up slow-moving items with more attractive and fast-moving ones. This allows you a higher chance of flushing out your excess inventory and attracting value-conscious customers. Bundles also reduce your market and distribution costs as you don’t have to spend so much on promoting individual products.
Overall, bundling increases your potential sales, upsells slow-moving items, reduces inventory and allows you to reach budget-conscious customers looking to get the most bang for their buck.
Liquidation Sale or Auctions
If you’ve got an abundance and a wide assortment of merchandise, holding a liquidation sale is a straightforward way of showcasing all your excess inventory to interested customers.
Dress up your warehouse, rent a showroom, or if you’re dealing with higher-value and more in-demand goods, consider hosting an official auction where potential buyers can scope out your items and bid for the highest price.
Furthermore, these in-person liquidation sales are a great way of building consumer trust. Buyers can thoroughly inspect the items up-close and even test them out if necessary, as in the case of electronic goods. It is also common for businesses, such as Walmart for example, to utilize online platforms when holding their liquidation sales, making the execution of such an event more efficient.
Holding auction events may require more effort and time from your team, from organizing and/or renting a space, arranging and bundling your merchandise, and marketing to your desired audience. However, it’s definitely a viable, tried-and-tested method of earning back value from your items and thus, an attractive liquidation option especially if you have the time and manpower to spare.
Internal employee incentives
What better way to hit multiple birds with one stone than with gamifying the entire ordeal?
Make liquidation a fun, rapport-building team exercise by motivating your employees to make a sale via incentives.
Whether it’s through a commission, a promise of a fun team outing, a bonus, or even all of the above, have your employees, even those in non-sales roles, join in on the fun.
Set up a shared document detailing the inventory for sale, set up the parameters of the rewards, track progress, and even create a leaderboard. Gamifying the liquidation process through internal company activities is a low-cost yet creative way of utilizing existing connections in pursuit of a unified goal.
B2B sales, short for business-to-business entails your company selling your inventory directly to another company. This process is a sales model that generally involves more complex processes and higher price points.
Executing a B2B sale can have a series of varying steps but it generally includes the following:
- Research and prospecting
- Qualifying for a pitch
- Negotiating and managing expectations and objections
- Closing the sale
- Keeping the connection
This will also require a group of well and highly-trained individuals ready to put in the work required towards establishing connections with businesses, effectively communicating your products or services, and demonstrating ease in doing business.
Donations are admittedly not a revenue-earning endeavor. However, that does not mean it is a pointless one.
Donating your items, whether they be electronics, apparel, home and living goods, or any other category benefits its recipients while also giving your business an opportunity to practice some corporate social responsibility.
For example, you can donate your unused electronics to organizations that distribute them to students from public schools or children living in depressed areas. Home and living items, clothing, and other miscellaneous items can go to thrift stores benefiting your local economy or to disaster-stricken members of your community.
While donating old inventory to charity is often viewed as a last ditch effort, no one can argue about the benefits it offers to stakeholders in your local community, allowing you to make a positive impact in the lives of many people in non-financial ways.
For a real-world example of how donating can reap benefits for your company, check out this awesome initiative by Walgreens involving their surplus products, donations, and liquidation to divert their inventory from ending up in landfills.
Partnering with a liquidator
If your business is looking to liquidate effectively and efficiently (and it has sufficient resources to pour into the endeavor), then partnering with a professional liquidator is an option that will alleviate the brunt work of the process. While this option is not necessarily the most affordable, it is definitely one that may produce the optimal results for your company.
Remember, liquidation involves a series of moving parts. If you come to the assessment that your business may not have the manpower to handle in-house liquidation, these third-party liquidators, depending on your agreement, may cover a series of functions involved in the process. This includes but is not limited to the valuation of your items, quality control, inbounding and shipping to interested buyers, marketing, and more.
A transaction with a professional liquidator will often involve negotiating how to go about the items you’re looking to sell. This will often vary according to your liquidator and your goals. However, two common directions your partnership may possibly go in is towards an outright purchase or consignment.
An outright purchase means that the liquidation company will pay for your items in full with one payment. This means that you will get your returns immediately. This option is particularly suited for your business if you have financial needs that require immediate attention.
A consignment, on the other hand, is more of a long-term agreement. You, the business owner and consignee will offload your items to the possession of your liquidation partner, the consignor, to sell. The consignee and consignor will agree upon a revenue split, with your business agreeing to pay your liquidation partner a percentage of the revenue from every successful sale.
There are a multitude of other arrangements liquidation companies may propose but the aforementioned two are some of the most common. To determine the best course of action, it is best to thoroughly discuss your company’s goals with your chosen liquidator.
Work with Humble Sustainability
If you’re interested in pursuing a partnership with a professional liquidation company, then meet Humble Sustainability.
Humble Sustainability is a liquidation company with a purpose. They have worked with ecommerce stores, logistics providers, brands, malls, retailers, manufacturers and distributors in liquidating their inventory and diverting items from landfills. They specialize in high-value IT and office assets such as laptops and mobile phones, but they also accept items from other product categories such as furniture, home and living appliances and more!
By partnering with Humble, your company will save on time and gain access to their vast knowledge and expertise on liquidation, network of suppliers and buyers, innovative solutions, and of course, consultations that result in a liquidation process tailor-fitted to your specific and unique needs.
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