What Are Closeout Warehouses?
What are closeout warehouses? A closeout warehouse is an outlet for surplus inventory that has been sold in bulk quantities to another company. It could be that the original retailer is shutting down due to poor sales, a large order of merchandise, an over-order, due to bankruptcy, relocating, or simply because of economic malaise. Whatever the reason, the inventory is being cleared out and offered up at bargain prices. For instance, my wholesale business, Closeout Explosion Inc, is essentially a closeout warehouse. I primarily purchase overstock merchandise from brands, department stores, and sell it through my warehouse. You can find closeout warehouses throughout the United States, such as Via Trading in California, as well as smaller and hidden warehouses in places such as the New York Garment District, the Miami Wholesale District, and the LA Fashion District.
The closeout business is basically an outlet for products that have either been over ordered or discontinued. It is the retailing equivalent of a clearance sale. Many large retailers go through a period where they have lots of unsold stock that they have had to put on their shelves for a long time and simply cannot sell because of lack of demand. It is at this point that they either close their store down for good or put the stock on eBay and sell it off to the first bidder on eBay who pays the low bar. In either case, the supply chain is cut off, but it is better for the economy if the retailer does declare bankruptcy due to his or her inability to generate cashflow. Retailers can also opt to sell their unsold goods through auctioneers, or through auction sites such as Liquidation.com and Bstock.com
There are many places where these warehouses come into play. Large retailers such as Target or Wal-Mart regularly have very large quantities of goods that they have had sitting on their shelves for a long time, sometimes for years. These products are not just clothing. They include electronics, electrical appliances, food goods, books, DVD's, music, DVD's, furniture, and more. There are even some large electronics retailers that have entire departments solely dedicated to the buying, selling, and leasing of closeout merchandise.
There are other retailers that have experienced a decrease in sales and have had to downsize. The reason that they have experienced a decline in sales is simply because there was no room for inventory turnover. Inventory shrinkage often occurs when a company has switched production from one area of the business to another. There are times when stores have expanded, moved, consolidated, added on, or closed locations. The bottom line is that closeout warehouses are extremely helpful to these types of retailers because it allows them to keep inventory for future use.
Department stores need to constantly refresh their inventory, as well as move out unsold products, since they don't want to tarnish their image by seeming to carry used or slightly damaged inventory. Since retailers want to ensure that all of their merchandise looks brand new, they will opt for liquidating their unsold products after a certain time period, even if the department store buyer will replenish the merchandise with the same or similar items. Department stores will liquidate their stock stock, or overstock merchandise, as well as their store returns, to liquidators such as closeout warehouses, as well as to a network of retailers such as Marshalls and T.J. Maxx.
Another benefit is that larger retailers can get extra supplies of merchandise from the warehouse without having to hold or inventory the products themselves. Items that are left on store shelves are actually inventory that has been sold or traded-in by another customer. This means that there is room in the warehouse for more purchases of the same item and it also means that the store is losing out on revenue because they are holding on to inventory that is not being sold. This in effect creates more revenue for the business and makes the operating costs of the business go down.
There are several different types of closeout warehouses that warehouse products that are not being sold. Storage warehouses that are used to store excess inventory before the products go on sale are one type of facility. Others are refrigerated storage spaces that allow for the quick placement of products on the shelf before they go on sale to the public. Other businesses use closeout warehouses to store products until a retailer purchases them.
Many times, manufacturers will purchase excess inventory from a closeout warehouse before their product goes on sale at the manufacturer's store. This is especially true with mobile electronics. The reason manufacturers buy this inventory in this manner is to ensure that there will be sufficient supply to meet the launch of the new product line. In fact, many large electronic companies have closeout warehouses that house thousands of mobile phones, computers, printers, televisions, digital camera units, and other computer related items. Some retailers opt to run their closeout sales online, such as Best Buy, who liquidates its merchandise through Bstock Solutions, an online provider of auction marketplaces for retailers.
What are closeout warehouses? It may seem like an easy question to answer but often it can be rather confusing. Some companies store excess inventory until a new order arrives. Others warehouse products that are not moving too quickly from the warehouse to the store shelves. And, still others warehouse products that will not sell as quickly as planned. Outlets, like those that you see in Woodbury Commons, started out originally as closeout warehouses established by the brands so that they can liquidate their excess and end of season merchandise.