If you are looking to effectively liquidate your excess inventory, it is essential that you understand your sales channels. And you have to know the cycle that your goods move through from your business to the end user. If you have excess inventory that your normal sales channels were not able to dissolve, you may consider a liquidation auction to purge this inventory. Using an auction can have its benefits but can also have severe drawbacks.
When using liquidation auctions, do you know what channels the buyers are going to be using? Do you know what markets they are operating in? That is going to be the most critical question you can ask yourself because it can affect your business in many different ways. The potential buyer could be using similar channels that you do or operate in neighboring markets, which could turn your liquidated products into primary competition against your own goods. This could end up hurting your sales because you would have to lower the price on your current goods just to compete, and quite possibly compromise the integrity of your brand and image in the process.
If you have to lower your own prices, this ends up hurting your margins and ultimately your bottom line. It can also hurt your brand image. If your products are commonly being sold at a discount, consumers may lose faith in your brand and the value your products offer. Another real concern with liquidation auctions is that you cannot work as effectively to protect your brand name. With normal sales channels, you have an idea how your brand image is being held up. But by employing an auction to dispose of your excess inventory you forfeit that luxury.
If there is a problem with your product, which may very well be the case with excess inventory, and a customer is unhappy, this could also tarnish your brand because you would not be able to exchange or refund the purchase. Being able to maintain customer relations is another potential risk that you take when liquidating your inventory in a liquidation auction.
Other customer service issues include the risk of fraudulent customer returns. If you operate in neighboring markets, you want to ensure that your liquidated items are not returned to your stores for a full refund. This is especially vital if you have private-label goods that are exclusive to your company. This can end up costing your business exponentially.
Of course if you are closing down your business or have filed for bankruptcy, these issues would not be as relevant, unless you have products that are still circulating in the market with other vendors, but overall the risks involved with liquidation auctions are still a very real threat.
If you’re looking to liquidate your excess inventory, consider your options, think it through, and do your homework. Using a liquidation auction may not be the best fit for your situation.
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