Closeouts are a double-edged sword; they offer attractive profit margins, as buying closeouts provides you with potential markup, but they are also extremely risky due to the various scams and unreliable middlemen you encounter. It’s crucial to tread the waters of buying closeouts very carefully. Here are three closeout scams that you need to know about in order to successfully navigate the realm of buying and selling closeout merchandise:
A closeout is a method retailers utilize to clear some shelf space and dispose of old, discontinued or slow-moving stock. The low wholesale prices, or closeout clearance sales, free up room for new stock and allow the purchasing party to make a profit with a markup. But things can get messy if a broker is involved.
Damaged Goods: This middleman also wants to benefit from the closeout deal. One closeout scam you need to be aware of is a scenario in which you get sold a trailer filled with damaged goods. This merchandise will be unsellable, and you will have lost your money. Closeout merchandise from a retail clothing outlet runs the risk of being imperfect or torn or stained from its time on the showroom floor, but a large percentage of it should still be wearable and sellable. The broker should not be selling you damaged goods.
Counterfeit Merchandise: Another closeout scam you need to avoid is purchasing counterfeit merchandise. If you are purchasing a specific brand of closeout merchandise, be it through a broker or on your own, it’s vital to ensure its authenticity.
Accessories Stuffing: Another closeout scam you must be aware of is accessory stuffing. This closeout scam occurs when you buy X items from a retailer in a closeout sale, and the retailer stuffs the trailer with smaller, cheaper items such as accessories, socks and bras. When this occurs, the profit potential of the closeout deal is diminished. For example, you would have been able to turn a much bigger profit if you had received a greater ratio of brand name jackets, pants and shirts (which you can sell at a decent price) than low-end bracelets, rings, undergarments and umbrellas.
You can avoid these closeout scams by working with a broker you trust or working directly with the retailer. Check with the Better Business Bureau before you begin a relationship with any broker or retailer. If possible, examine the merchandise before paying for it. And remember, if a deal seems too good to be true, it probably is.