An important part of being a smart liquidation reseller (aka pallet flipper) is knowing how to lower your risk when it comes to purchasing pallets.
If you have a truck, trailer, and a means to pick up pallets yourself, that's ideal even if you only do it for the first purchase. This way, you are able to look potential sources in the eye and develop deeper relationships more quickly. That's not always possible, so it's still an okay practice to develop relationships online or over the phone. We've done it that way for years, and we have had success with it.
Regardless of whether or not you are meeting potential "honey holes" in person or in a virtual setting, you're going to want to make sure you ask a few things before you purchase. These questions are going to lower your risk and increase your chances of having successful pallets.
1. Ask Who They Source Their Pallets From
Not every pallet liquidator gets their pallets straight from the big box companies and manufacturers.
Some liquidators have major contracts from stores like Amazon, Walmart, Target, Macy's, etc. It costs a ton of money to do that, and they're locked into contracts for at least a year. These companies are likely the bigger liquidation companies that have the capital and space to spend on these items.
Other liquidators purchase their pallets from other liquidators to make them more available in their area and region. We are thankful for those people. Although the pallets will cost more, you're saving a bunch of money on shipping and pallets are more readily available for those who cannot travel far to get themselves or don't have the extra money to pay for freight.
Just because a liquidator is smaller does NOT always mean that they don't have contracts with the stores they purchase their goods from, but it does require extensive contracts and upfront money and therefore larger companies are traditionally more likely to get them straight from major companies themselves.
Important Note: The more hands the pallet has been through, the more chances there are that the pallet has been picked through or "cherry picked".
It's always a good question to ask, but keep in mind that many times a liquidator will not give the name of their source to protect their own business (customers may just end up cutting costs and forgoing them as a middle man altogether).
2. Ask Them What Their Process for Their Pallets Are
If a liquidator is also a reseller of the items they receive, this can be a red flag. It is not always a deal breaker though. Some liquidators may palletize (place individual items on pallets to sell) their items and then keep full pallets for themselves. This means that they just essentially purchase their own pallets.
Most of the time, this is not the case. Many liquidators pull items BEFORE palletizing their items. This is cherry picking. These people are pulling higher priced items and easily shippable items for themselves, and the palletizing the rest of the items.
This is bad news for you, and could cost you a bunch of money, ruining the potential profitability of your pallets. If they are pulling items before palletizing, thank them for their time and find another liquidator. Trust me on this.
Also, keep in mind, you want to ask this question not just for their process, but the processes for the sources that they purchased from. As mentioned before, liquidators may not want to give the name of their sources. That's understandable. But if they cannot tell you their process or the process of their sources when it comes to the items, take that as a huge red flag and do not purchase from them. Omission of the truth is sketchy and bad for business. Don't risk it because there are plenty of pallets out there belonging to liquidators willing to give you that information.
3. Don't just ask the liquidators, ask their customers!
Sometimes, the best information doesn't come from the liquidators themselves, but from their customers. When trying to decide which liquidator and what pallets to buy, look around and find some that you feel are promising. Then ask others in the liquidation community!
Search for Facebook groups and see if any of the other resellers in those groups have purchased from them before? How well did their pallets fair? Are they the same ones you plan on buying? How was their overall experience with the liquidator in general?
You can also look up pallet unboxings from that liquidator or at least that type of pallet to see what to expect when you purchase as well.
Remember, there is no way to completely eliminate the risk when it comes to buying liquidation. Accept is as part of the lifestyle. However, asking questions is a great way to reduce the overall risk when it comes to liquidation. Be careful who you trust, and NEVER invest your last dollar in a pallet or shipment, no matter what you do. It could get you in pretty deep trouble.
DON'T FORGET TO CATCH US ON TV! Extreme Unboxing, A&E 10pm EST.