A student writes to me regarding a company, we'll call Xcorp, that offers to find buyers for distressed merchandise you might find. It is a club. You pay to join. There is no selling on your part, you just call around, even from a list they give, and find distressed merchandise.
The person inquiring said she found some items, but the XCorp keeps telling her they have not found a buyer. Why would they? The game is the club fee, not the service. After they got your money, they can safely ignore you. It is a great scam.
First off, there is no such thing as distressed merchandise, only distressed importers. Second, there is already a very efficient system for getting distressed merchandise sold.
The person inquiring said she found some items, but the XCorp keeps telling her they have not found a buyer. Why would they? The game is the club fee, not the service. After they got your money, they can safely ignore you. It is a great scam.
First off, there is no such thing as distressed merchandise, only distressed importers. Second, there is already a very efficient system for getting distressed merchandise sold.
I have in the last 40 years had to liquidate mistakes from time to time. It happens. And I know what to do. I go straight to BigLots. (40 years ago it was AAA liquidating, then it was Macfrugals 20 years ago, now it is BigLots, bless their hearts.) They will buy every piece of my mistakes, whether I have 100 pieces or one million pieces. At what price? Well, say I paid $10 each for my item. And I have 5000 pieces. So they cost me $50,000.
BIgLots will look at those 5000 pieces and say at what price can we sell all of them in 30 days?
hmmmmm... say 50 cents each, the can move the 5000 pieces out their door in 30 days at a retail price of $2500 for all 5000 pieces. $2500 is what they will gross on selling my dead stuff.
Then BigLots will offer me 10 cents each for those, because they need to make 5 times on everything they buy in 30 days.
So they will pay me $500 for what I paid $50,000 for, and they will get $2500 for it. If BigLots could get more, you know they would, because they want as much as possible. This is one company I never hear anyone complain about. Straight as an arrow.
BigLots, as you might imagine, always pays their bills, first rate company to work with.
Can I get a better price elsewhere? Never.
You mean I am taking a $49,500 loss? Yes.
Is there an alternative? No.
Why don't I offer it on sale to my regular customers? I said 'No!" My customers want to buy new, not dead on sale.
Can't I sell these at flea markets or craigslist or ebay and get more? No. first you are not in that business of selling on eBay. Second the time and effort to sell the $50,000 will be more than the "more money" you might ever get. You job is to rip the band-aid off fast.
Can't I sell these at flea markets or craigslist or ebay and get more? No. first you are not in that business of selling on eBay. Second the time and effort to sell the $50,000 will be more than the "more money" you might ever get. You job is to rip the band-aid off fast.
I bless my lucky stars there is a BigLots to buy my mistakes. When I have a dead item, they move it at a very fair price. They take it all, I no longer pay rent and insurance on a dead merchandise. The $49,500 comes straight off the bottom line, so my taxes are lower, but I learn from my mistakes or fire who needs to be fired.
Feel free to forward this by email to three of your friends.
4 comments:
As an entrepreneur, I also like the part about the loss reducing my taxes. Makes the product failure a little less painful.
Another question though, are you saying you had $50,000.00 of "sample product" - 5,000 pieces? That's a lot of "sample" product. I thought we only use a very small supply of sample product initially? Are'nt we supposed to refrain from buying a garage-full of product before actually having buyers for the product?
Well, better to have no losses at all. This is a common enough problem when a company is mature, has 500 SKUs and management screws up a call, one way or another. It happens, but in a $5 million a year company, no big deal.
A start up would never have this problem. It is also, as an aside, why small business necessarily does not trust government.. small business suffers for its mistakes, government gets promotion for its mistakes. Small business knows how easy it is to get it wrong, government has fantastic leverage when it gets it wrong, to get it wrong.
So this is why Big Lots has such low prices!
It’s always important to take time before make any transaction. Good practice will be to choose well-known sites for buying anything.
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