You are going to have damage in your container. What do you do? Do you just throw it away?
As a matter of fact, I’ve made a lot of money on damaged goods before. Sometimes I’ve made more money on damaged goods than I’ve made on “good” goods. You’d be surprised. If people get into a bidding war in an auction situation, sometimes they will pay more for stuff you don’t want than you would have ever gotten anyway.
A friend of mine has a site and he imports tapestries, really nice tapestries from China. He does a lot of business. People return them, or he’ll overstock in one that he thinks is going to sell and it doesn’t sell as well as the others do.
Sometimes you’ll liquidate just to balance inventory. We’ve had three models of something and one model will sell out in two weeks, but the other two will take forever. You’re just willing to sell them out so you can reorder. The next time you reorder you’ll know to go heavier on the model that sold the most, but you didn’t know that the first time out so you just liquidate out these others as quickly as possible to give you the capital to reorder.
eBay And Craigslist
What I will do is take a look at a lot of my damaged goods or overstocked goods and I’ll determine what the best strategy is to liquidate the product. Number one, I go to eBay. You’re not going to get any more out of the product that you’re liquidating then you are going to get out of it on eBay. You’re going straight to the consumer at that point. The same is true with Craigslist.
The friend of mine that does tapestries is fortunate because he has 1000 tapestries. When he gets returns back that are overstocks or damaged, he has one or two of this one and one or two of that one and he can have 100 auctions going on eBay for 100 different tapestries and that works for him. If you have 100 of exactly the same thing you can’t put 100 auctions up on eBay for it because you’ll destroy the market and nobody will buy it. It’s a slow going process, but if you want the most money out of your additional freight eBay does a good job.
The second thing is scratch-n-dent sales. If you have a customer base, in most cases you’re going to have a list. We did this with equipment one time. We had a list of customers and we got in a shipment of fillers that we didn’t sell a lot of. We, or the factory, had made a mistake on the order. We meant to order five of one filler and 20 of another because we already a bunch of the one we had just ordered five of, but they inverted the order and we ended up getting almost none of the ones we needed and a whole bunch of the ones we didn’t. We just went to our best customers and said, “We’re having a scratch-n-dent sale,” everything coming in gets a scratch or a dent on it somewhere, “and we have these 20 fillers, and if you want one we’ll sell it to you for half price right now.”
Remember, I can dock up to half price on an expensive piece of equipment and guess what I’m still making? Money. My first cost is one third of my sale price? I’m still making a 40 margin. I was able to go out and liquidate at half price all of the additional fillers that I didn’t want in one day just by going back to my core list.
Here’s the thing. You can’t just go in and say I’m going to give them to you at half price. There has to be a reason why. “I’m closing my warehouse.” “I’m consolidating shelving.” “They’re scratch-n-dent.” “I’m overstocked.” You have to have a reason why or you’re just discounting the product. One thing you have to be aware of when you do that: if you’re selling to customers who consistently buy from you each month, and you give them a deal to come in and buy a bunch of your overstock or a bunch of your damaged goods or a bunch of your scratch-n-dent, you’re going to take them out of the market for a while. That sucks. That’s exactly what happened here. We had a guy in South America that was buying about four fillers from us every month. He was paying us $3500-3700 a filler. We offered him these scratch-n-dent fillers for $2000. He bought them all, but then he didn’t buy anything from me for five months. You have to be sure you want to do that when you do it.
Another thing is to go to retailers like Big Lots and Overstock.com. Overstock.com will give you a bid on practically anything. You can send them a photo and some specs of what you have and they’ll give you a bid on it. Many times Overstock will not even move the merchandise. They’ll just pay you to pack it and ship it for them. Big Lots, if it’s a reasonable good, a consumer good, this type of company will make a bid on it. They will make you an embarrassing bid but they’ll make you a bid. Here’s the deal with them. When you’re starting to deal with guys like them and brokers, they’re like us, they’re going to look at that and say, “He made about a dollar for that. Let’s give him $.80.” They’re going to make you bleed a little bit. But I would much rather lose $.20 on the dollar and turn over my cash than let it set there and ride that train all the way into the ground. I’d rather turn it and burn it while I can.
Try local brokers and local discount people. There are a lot of them around and if you want to find them here is a really great tip: make friends with some trucking company managers in town, and people who handle damaged freight for trucking companies. When the trucking company have a damaged load they pay an insurance claim to whoever the damaged claim was going to and they keep the goods. Then they try to recoup some of their money is by calling surplus brokers and saying, “Hey, this is Jimmy over at Passville Truck Lines, and I have a truck load of light switches. What will you give me for them?” The guys who run the trucking company docks know all the liquidation dealers in town.
Most cities, or most larger cities have liquidation auctions. They’ll usually have them once a week or at least once a month. They are often called Asset Recovery Auctions, or Asset Reduction Auctions. You can bring in your container of stuff and let somebody bid on it at an auction and sell it right there. Again, you might not get everything that you want out of it.
I told you before that sometimes I would make more money. This is pretty interesting. If you get freight insurance on a product, particularly inland freight, and it gets damaged between California and wherever you are, you are going to get a claim with the inland company, the trucking company, or the rail company that brought it in. If you can show that that is the case, they’ll usually make you two offers. “We’ll give you $20,000 and we keep the freight, or we’ll give you $17,000 and you keep the freight.” I’m pretty good at liquidating so if I can do it I’ll take the lower amount from the insurance claim and then I’ll sell off the scratch-n-dent merchandise, which in a lot of cases there isn’t a whole lot wrong with it. I’ve had situations where I’ve actually made more money from a losing container than I’ve made from a winning container because I have $.90 on the dollar for the goods and got a $17,000, $18,000, or $25,000 check from the freight company. There is a possibility that can happen. Is that a business model? Hell, no. It doesn’t happen most of the time, but occasionally it will happen.
Recouping From The Factory
With damaged goods though, your number one avenue is to try to get the factory to make it right. Most of the time they will do their very best to make it right if there is any possible way that they can. If I get damaged goods in and I am able to overcome it, when I place my reorder I will ask the factory for a credit for whatever it was that it cost me. “I’ll tell you what. You guys really messed me up on that last order.” They’re going to start calling and emailing you, “Are you ready for another order?” “No, you really messed me up on the last order. It cost me $10,000 to get that crap fixed. If you want to give me a $10,000 credit on that last order I might try you again. I might.” Don’t ever give them a sure thing. “Oh, okay, okay.” Normally they will do it and they’ll cover whatever it was that cost you to remediate on your side of the fence. That is another way that you can make money on damaged freight.