When it comes to getting the best prices in a sale, some of the most successful finds are achieved in liquidation sales and auctions.
You may have heard these terms bustling around the internet. You may have even engaged with one of these online sale options yourself. But identifying the differences between the two can be a tricky task.
Basics of liquidation
As a general rule of thumb, both of these sales are a means of gaining money for assets to pay off creditors. They’re typically performed when a company is going out of business or when a specific store as a part of a larger chain or franchise needs to be sold.
For larger companies like Walmart or Amazon, things are different. A Walmart liquidation might occur when a store has too many returned products, and simply liquidates them because it’s cheaper than restocking them.
Online auctions
Auction sales are used by business who hope for a quick way to clear their business of unwanted products. This might take the form of a closing sale, but some businesses utilize an auction if they simply have excess stock. The supplier often starts with a base price for a certain product, such as $10 for a couch or other piece of furniture. Then, consumers bid higher and higher amounts in the hopes of obtaining this asset within a set amount of time.
This bidder competition drives the sale of the item, which is either good or bad for the company supplying the item. A popular item may garner a great deal of competition, but an unpopular item may get few, if any, bids. It is often a great deal for the consumer because they typically win the item for a lower price than market value. Since online auctions have gone global, bidders from all over the world are hoping to strike a good deal.
These sales are often performed quickly. In a store that’s going out of business, they simply need to list all of their assets online and allow bidding competition to do the rest. This means that an auction sale, including the setup, bidding, and shipping of the goods, can take as little as 90 days to complete.
Liquidation sales
A liquidation sale typically occurs when a company or store is going out of business. To make up costs to their creditors, they will “liquidate” their merchandise and inventory. This includes items stored on your business’s shelves and the shelves themselves. All of the profit incurred from a liquidation sale goes to these creditors, lenders, or shareholders as a result. However, a store that doesn’t have any debts can profit from a liquidation sale.
Liquidation can take anywhere from several weeks to a year. The process can take a little longer as businesses negotiate with potential vendors to try to get a price closest to the market value for the item. A company may even seek out these individual vendors to fetch the highest price.
Liquidation sales are often the inverse of auction sales. Where competitors bid increasingly higher on items in an auction sale, liquidation sales rely on lowering their costs over time if an item doesn’t sell.
One aspect of a liquidation sale is that it can sometimes turn to auction sales. This is incredibly beneficial for a company with niche market items that can fetch a high cost. Some companies will use a blend of auction and liquidation sales to achieve the highest prices on their goods. Using an online method makes this process all the easier for businesses and consumers alike.
