How to Estimate Potential Profits Before Buying Customer Returns

For Illustration Only: We do not offer investment advice.

General Merchandise

In the liquidation industry, we refer to mixed assortments as “General Merchandise.” When you walk into a big box store like Wal Mart , K- mart, or Mijer,  you are quickly overwhelmed with the variety of merchandise that is available to you. Departments are created to organize the sheer volume of items. A Truckload or Pallet of assorted general merchandise can contain any of the items you could see in the department store. Hardly ever are two pallets identical.

The Representation

Distressed merchandise is sold by “Representation.”  When you receive your shipment you should expect the product to be as represented. AML makes every effort to represent each shipment as accurately as possible.

One Example of a Representation could be as follows:

Assorted General merchandise from XYZ store, mostly hard items, contains no food items, no perishables, no clothing. Expect a waste factor from 20- 25%. The price  is based on 22% of the wholesale price of $50,000. There is a manifest. There are 24 pallets on the truckload.

What is a waste factor?  

When buying customer returns there will be bad merchandise along with the good. The waste factor is determined by testimonies from other buyers of the product line or by the processors of the load.

When estimating your potential profits from the load, deduct the waste in dollars as follows:

$ 10,000     Cost of load (20% of $50,000/original wholesale)
   2,000     Freight
$ 12,000     Your Cost for this load
---------------------------------------------------------------
$ 50,000     Wholesale of products received
– 10,000     20% Waste Factor
---------------------------------------------------------------
$ 40,000     Available for resell

For Illustration Only

In many cases the store retail price will average wholesale X  2. In this example you have $40,000 in wholesale cost remaining after disposing of the waste. The estimated original retail is $80,000. Your objective is to sell at liquidation prices below the price of other stores. In this illustration you would sell at 50% OFF.

If you sell your merchandise at 50% OFF Retail the Gross profit for the load would be:

$ 40,000     Sell at 50% OFF Retail
– 12,000     Cost paid for load
---------------------------------------------------------------
$ 28,000     Gross Profit before operating expenses

For Illustration Only

All loads will vary in price and contents. All Loads are different. Some are better than others. Remember to ask for the load “Representation.” Many have grown to trust AML for their truckload and pallet purchases. Call us today if you have questions about this post.

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