Liquidation and wholesale are similar concepts that are quite confusing when communicated to many people, the difference between the two. Especially since there is a strong relationship between liquidations and wholesalers. Liquidation is generally more attractive to both businesses and customers, while wholesale is more beneficial to businesses. Wholesale liquidation is the world’s best for both businesses and customers. However, you must know what each concept is before you learn what they like when combined.
What is Liquidation?
Liquidation is when a business decides to sell all, or some, of its excess assets to turn them into cash. The reason a business may want to get rid of its stock is the stock could be in excess, overstocked, or outdated. If the stock falls into any of those categories, then it needs to be sold off quickly for various reasons: it takes to a up valuable shelf, or warehouse, space; the goods will depreciate over time, which would eventually trigger an even bigger loss; they end up tying any remaining capital. A business will sell this inventory at a loss to closeout liquidators to fix the problems caused by keeping it around, namely it releases capital and clears up space in the warehouse. This inventory gets sold at a fraction of the Manufacturer Suggested Retail Price to buyers via negotiated transactions. Buyers of liquid stock then sell it to other retailers. In some cases, liquidators are retailers themselves and will sell liquidated inventory at a price that is lower than MSRP, but higher than what they paid for it, since, of course, they need to make a gain from those purchases.
What is Wholesale?
This usually happens when a company purchases a large quantity of goods directly from a manufacturer and sells those goods to a reseller, who then sells those goods to the consumer. Those products can also buy from liquidation sales as mentioned above. As wholesalers buy products in bulk, they can benefit from the economy of scale and sell products at lower prices. Wholesalers (Walmart)only generally worry about storing and transporting the goods rather than selling them, since that is the retailer’s job. It should be noted that consumers are generally exempt from wholesale sales as this is usually a business-to-business transaction, although discounts may occur.
Advantages of Wholesale
No Marketing Concerns:
Since wholesalers only distribute the goods, they do not have to worried about meeting the sales targets or any other goals. They only need to worried about the supply and storage of the goods.
Fixed Profit Margins:
Wholesalers know how much of their goods they need to sell to retailers to turn a profit. The margin of profit for a wholesaler is generally between 3% to 10%, so, they always know exactly how much of their stock they need to sell to retailers to turn a profit.
Disadvantages of Wholesale
High Capital Demand:
It costs a lot to buy products in bulk and those products don’t get resold straight away. Therefore, wholesalers need sufficient capital to maintain their stock so that they have a continuous supply to sell to retailers.
A Lot of Spaces are Necessary:
Wholesalers need a goodly storage area, which means that they will have to purchase or rent a warehouse. Both are expensive options that are necessary if the business to be successful.
Which Is the Better Choice? The best options are actually a closeout liquidator because they are wholesalers who get their stock from the liquidation sale. That means they acquire their stock for a low price, so, they can resell it at a low price while remaining profitable. General merchandise liquidators generally have the great deals and a wide range of products. So, they are the best choice for customers looking for great deals, and businesses who want to provide those deals while still turn out a profit.