If you’ve ever walked into a liquidation store and seen a completely random offering of items, you’ve probably wondered how all that stuff ends up in the same place. It’s not random though, and getting items from Amazon, Target, Home Depot, and more is very common at liquidation stores. There’s a whole supply chain behind it, and once you understand how it works, you’ll shop these stores completely differently.
Retailers can’t keep everything
Big box stores like Walmart, Target, Amazon, Costco, and Home Depot deal with an enormous amount of product that they can’t or won’t put back on their shelves. We’re talking about customer returns, overstock that didn’t sell, shelf pulls that got replaced by newer inventory, and items that got damaged in transit or in the store.
Returning all of that to manufacturers isn’t always possible. Throwing it away is wasteful and expensive. So retailers sell it off in bulk. Liquidation companies who specialize in purchasing bulk product purchase truckloads of pallets.
The middle step: liquidation companies and brokers
Most of what ends up in a liquidation store doesn’t go straight from the retailer to the store owner. It passes through a liquidation company or broker first. Companies like B-Stock, BULQ, Direct Liquidation, and Via Trading buy huge quantities from retailers and then resell it in smaller lots to businesses, including the liquidation store owners you buy from. There are also many other companies in the liquidation business, so its not necessary to purchase from a huge company.
This is why you’ll see stores advertising “Amazon returns” or “Target pallets.” They bought those pallets from a broker who sourced them from the actual retailer’s reverse logistics program. The store owner may never have talked to Amazon or Target directly.
What “customer returns” actually means
This is important to understand before you buy anything at a liquidation store. Customer returns means someone bought it and sent it back. That’s it. It doesn’t mean it was defective. People return things because they changed their mind, ordered the wrong size, found it cheaper somewhere else, or just didn’t want it anymore. A lot of returned merchandise is perfectly fine. Sometimes it isn’t even opened or used.
However some of the inventory is not in the best condition. That’s the nature of customer returns and is to be expected. Good liquidation stores sort through it and price accordingly. Less careful ones just put it out on their shelves or toss it in a bin and let the customers figure it out.
Shelf pulls are different
Shelf pulls are items that were never sold and never opened. A retailer decided to discontinue a product, make room for new inventory, or close a location, and pulled everything off the shelf. Shelf pulls are some of the best stuff you’ll find at a liquidation store. If a store advertises shelf pulls specifically, that’s worth paying attention to.
Overstock is what it sounds like
Overstock is simply too much of something. A retailer ordered 10,000 units of a product and sold 7,000. The other 3,000 need to go somewhere. That inventory often ends up in liquidation channels because the retailer doesn’t want to deeply discount it in their own store and cannibalize full-price sales.
Overstock is usually in good condition. The reason it’s discounted has nothing to do with quality — it’s just supply and demand math that didn’t work out for the retailer.
An extremely common kind of overstock is holiday items. Think of how many times you’ve gone to a liquidation or bin store and found holiday candy, Christmas decorations, or Halloween costumes. The stores need to clear out this inventory so they can bring in current seasonal items, so they liquidate it.
Why this matters when you’re shopping
Understanding where the inventory came from helps you make better decisions in the store. If you know a store sources primarily shelf pulls and overstock, you can shop with more confidence that what you’re picking up is in good shape. If a store is primarily customer returns, you need to inspect everything more carefully.
The best stores are upfront about their sourcing. If you ask a store owner where their inventory comes from and they can’t or won’t tell you, that’s something to factor in.
Most experienced liquidation shoppers develop a sense for this over time. You start recognizing the types of inventory, the condition patterns, and which stores in your area are sourcing quality merchandise versus just moving junk.
For example, there is a bin store that is easy for me to drop by when I’m in the area. They also have a separate liquidation section with individual prices. The bin section is absolute trash honestly, and I often wonder how they have stayed in business so long. The liquidation section is full of overpriced items and often the same ones are sitting there that I saw a month ago.
On the other hand, there area few stores that I go to occasionally which are further away for me. However, their inventory is of a better quality and their prices are right. I much prefer dropping by this store when I can, as opposed to the closer store where I don’t often find much.