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What type of liquidation pallets should I buy?

Posted by Zack Kram on

One of the most common questions that I get asked is, "which liquidation pallet should I buy?"

Well.....it depends...

When a reseller or a potential reseller comes into our liquidation warehouse and starts looking through the available pallets they can quickly become overwhelmed if they don't have experience in liquidations so they turn to the "experts" for advice hoping for a great recommendation or some insider advice to find the perfect liquidation pallet. Unfortunately, it's just not that simple. The reality is that a great pallet for one reseller can be a terrible pallet for another. Several factors affect a reseller's ability to make a profit which can include things like experience with different sales channels, knowledge about certain types of products, or their ability to fix damaged products. Before we decide which type of liquidation pallet to purchase we first need to know what types of pallets there are. So we are going to discuss some of the more common types of pallets seen in liquidation warehouses.

Types of Pallets

Amazon Return Pallets

The most popular by far is the Amazon return pallet. When liquidation warehouses buy Amazon returns direct they may get one of several different programs. The three most commonly seen are smalls, mediums, or bulk (I should note that these are not official names of the programs but it is how they are most commonly referred to in the industry). The difference refers to the size of the items on the pallets and determines the piece count. The smaller the items the more that can fit on the pallet and the larger the items the less that can fit. Most bulk pallets usually have 1-5 items, mediums usually have 10-40 items, and smalls can have anywhere from 100-1500 items depending on the size of the items and the size of the gaylord they come in. The pallets can come manifested or unmanifested and prices can vary significantly. These pallets will have damaged items, however, the damage tends to not be an overwhelming amount since these are online returns and as a general rule, online returns are usually considered to be cleaner pallets than in-store returns (Disclaimer - this is a general rule and definitely is not true all the time. There are online return liquidation pallets that have 50-100% damaged items. This is a fact of this business and something you will have to deal with at some point if you are actively involved in liquidations). Amazon return pallets can contain a wide variety of products which could be anything that is sold on Amazon and is currently over 350 million different items. We are continually surprised by the types of items that we see on Amazon pallets and it is common to receive items that we are unfamiliar with. 

Amazon Overstock/Box Damage Pallets

These are just like the Amazon returns pallets except that the items have never been sold to a customer (sometimes returns do end up in these pallets but it should be a very small percentage of the products). That does not mean that there are no damaged items. Just because it was never sent to a customer does not mean that a forklift driver didn't run it over before they decided to liquidate it. Commonly, items get damaged in shipping. These are usually referred to as "box damage". That's because the warehouse workers can see that the box is damaged, not because that's the only damage. The items inside that box may be completely untouched or it could be completely demolished. The other thing to consider with these types of pallets is what type of products you are going to receive. If a company is liquidating brand new product it is because that product is not selling. They do not normally liquidate highly desirable items with no damage. Overall these pallets do tend to have significantly less damage than Amazon returns pallets and both types have their pros and cons. These pallets overall are cleaner but have less desirable items. Amazon returns pallets have more damage but the items are good selling items, or at least good enough for somebody to buy before they returned it.

Walmart Liquidation Pallets

Walmart liquidations usually come from one of two categories: in-store returns and dot com returns (there is at least one more type that is common but those are usually sold by the truckload only and are outside the scope of this article). As noted earlier the in-store liquidation pallets usually tend to have more damage than the online returns liquidation pallets. Walmart is a massive retailer and sells over 75 million products so their pallets could include a large variety of items just like the Amazon return pallets, however, the items on the pallets are usually grouped by category more so than on the Amazon return pallets. It's common to see electronics pallets, toy pallets, bedding pallets, tool pallets, or even furniture pallets on these loads. The sizes of the items will vary from one pallet to the next as well as the item count. 

Target Liquidation Pallets

Target pallets are a popular choice for many resellers. There are several different programs such as general merchandise pallets, furniture pallets, and casepack pallets. The general merchandise pallets are usually unmanifested and can contain any item that Target sells. Typically they are a mix of softlines, furniture, and hardgoods. They will have returns and shelf-pulls but these are generally considered to be some of the cleanest pallets on the market with a large portion of the items being shelf-pulls. The target furniture pallets are exclusively furniture and are known for being exceptionally clean pallets. The Target case-pack pallets consist of all brand new casepacked merchandise. They tend to only have between 1 and 4 SKUs per pallet. So they will have a large number of repeated items. Just like the Amazon overstock pallets, these could be less desirable items, however, they are all new and the damage rate should be essentially zero. 

Lowes Liquidation Pallets

The Lowes liquidation pallets are a popular choice due to the product mix and the price. These pallets can contain tools, which are a very popular item for resellers, as well as a large variety of other items. These pallets also are typically cheaper than other types of pallets and it's not uncommon to see liquidation pallets from Lowes in the $100 to $300 range. The reason for this is because damage rates tend to be among some of the highest in the industry and pallets can range from only having 1 or 2 low-value items on them to being completely packed full of high dollar products. These pallets are generally considered to be some of the riskiest pallets in the liquidation industry and opinions on them cover both ends of the spectrum from "complete junk" to the "best pallets on the market". I think the truth is probably right in the middle. There is money to be made with these but, these are a great example of how a good pallet for one reseller may be a bad pallet for a different reseller.

Home Depot Liquidation Pallets

The Home Depot liquidation pallets are available in several different programs. I'm not going to go into much detail about all of the different programs because it's too in-depth for this article and most liquidation warehouses sell these as full truckloads as opposed to by the pallet. However, there are some places that sell unmanifested Home Depot liquidation pallets and even fewer that sell manifested Home Depot Liquidation pallets. These pallets can contain products from a single category, a few categories, or a mix of all categories of products that Home Depot sells. Because of this, the item count can vary from just a few items on a pallet to several hundred items. The types of products found on these pallets are very similar to what is found in the Lowes return pallets, but the damage rate tends to be much lower on these pallets and usually contains a much higher portion of shelf-pulls. For this reason, they tend to be priced higher and may contain a higher percentage of tools. 

How to Choose a Liquidation Pallet

There are tons of other types of pallets that you may see in a liquidation warehouse when you are shopping for liquidation pallets, but these are the most common types that are sold by the individual pallet. Next, we will discuss the four factors that you should consider when choosing a pallet. 

 Size

There are two different sizes that need to be taken into consideration. First, you should consider the size of the pallet and next the size of the items on the pallet. When looking at the size of the pallet you will want to have a plan to get that pallet back to your house or place of business. If you have a truck you can probably just have it put in the back of your truck with a forklift and drive it wherever you need to go, but make sure you check the weather before you head out with your pallets. If you have access to a trailer or a box truck that may be a better option to transport your pallets but you will want to make sure that your trailer can be loaded with a forklift (e.g. is there a gate that folds down and is not removable? is it wide enough? tall enough? are there other things in the way?) If you don't have access to a truck or trailer some liquidation warehouses offer local delivery. The other option is shipping your pallets with a freight company. This is a fairly simple process especially if you have a good freight broker to help out. However, this adds extra cost, and depending on what type of pallet you are shipping and where you are shipping it to the cost can be significant and at times it may cost more in shipping than the cost of the pallet. The other size that needs to be considered is the size of the items that you are going to resell. This is a very important consideration because it will determine how and where you are going to resell your items. If you are buying pallets with large heavy items you will usually have to focus on local sales to avoid shipping costs and if you are buying pallets with small items you can ship you may decide to focus more on e-commerce. 

Sales Channel

Another large consideration for a reseller is how and where you are going to sell your merchandise. This decision should be made before you go shopping for a pallet because it will determine which pallets you should be looking at. If your focus is e-commerce like Amazon, eBay, Walmart.com, or Facebook Commerce you may want to look for pallets that have new products with a lot of the same item. This will save you time when listing because you don't have to list each item separately. If your focus is going to be on local internet sales such as Facebook and Craigslist then you may want to find medium or larger items so that when you are meeting with people to make a sale the value of the product is high enough to be worth the time that you invest in meeting each person. If you plan on selling through face-to-face sales such as at a retail store, a flea market, a swap meet, or events then you may want to look for items that fit your brand and work well for impulse purchases. Auctions houses usually do well with medium to larger items and they tend to focus more on higher value items with a lower piece count.

Damage Rates

Receiving damaged items is going to happen in this business and it's better to be prepared for it ahead of time. So it's important that you understand what your tolerance is for damaged items and how you are going to deal with them so that you can make your decisions about your pallet purchases accordingly. Dealing with damaged items requires both the time that it takes to fix items as well as the knowledge and tools to do so. Some resellers are very good at fixing damaged items that they get on their liquidation pallets and are able to make a great living in this business by ensuring that they make money off of every single item that they receive so there is very little or no loss of items. Other resellers are unwilling or unable to fix items and may want to focus on buying items with lower damage rates.

Experience

The last factor to consider when choosing which liquidation pallets to buy is which products you have knowledge of. Some resellers are very knowledgeable about particular types of items and it's common for them to specialize in a certain niche. One common specialization we see often is tools. Many resellers choose to focus on tools because it may have been an item that they were familiar with before starting their reselling career or because they are mechanically inclined and can combine parts from broken tools to fix them. Resellers who know who to fix electronics can make a great living in this business and another popular focus is clothing. There are many boutiques and independent resellers that buy all or a portion of their inventory on liquidation pallets.

 

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