Are you an eCommerce business owner looking for a reliable way to increase your profits? Surplus warehouses offer one of the most lucrative sources of affordable, high-quality merchandise. With surplus warehouses, you can access a variety of products at wholesale prices – giving you an advantage over competitors who are paying retail prices for items. But before diving into this new supply chain resource, it's essential to understand what a surplus warehouse is and how it works. Keep reading to learn more!
What Is A Surplus Warehouse?
A surplus warehouse is a store that sells goods below the manufacturer's suggested retail price. The store gets its interest by buying them in large quantities at a discount from the manufacturer or distributor. The store will usually have a wide variety of goods, including clothing, electronics, and home appliances. It may also carry seasonal items, such as Christmas decorations or swimwear, in the summer.
A surplus warehouse is separate from a closeout store. A closeout store specializes in selling products that are about to go out of style or that are being discontinued by the manufacturer.
What Is Surplus Storage?
Surplus storage stores extra goods or products beyond what is needed for regular business operations. The purpose of surplus storage can be to have a backup in case of shortages, to prepare for future growth, or to sell at a higher price due to increased demand.
Businesses use different methods of extra storage, such as warehouses, shipping containers, and even underground bunkers. The type of storage used often depends on the product being stored and the climate conditions in the area. For example, goods that need to be kept cold might be stored in a refrigerated warehouse, while goods that need to be kept dry might be stored in a container with ventilation holes.
How To Find A Surplus Warehouse?
There are a few different ways to find surplus warehouses. One way is to do a Google search for "surplus warehouse [city name]." This will bring up a list of warehouses in your city that sell surplus and discounted merchandise.
Another way to find surplus warehouses is by checking online classifieds websites such as Craigslist or Kijiji. Enter "surplus warehouse" into the search bar, and you'll get a list of all the warehouses in your area selling discounted and surplus merchandise.
Finally, you can also ask your friends and family if they know of any suitable surplus warehouses in your area. Chances are someone you know stumbled upon an excellent warehouse deal at some point and will be more.
Pros And Cons Of Surplus Warehouses
Surplus warehouses provide businesses with more excellent response time when it comes to responding to customer demands. By stocking surplus items in a warehouse, companies can restock faster and react quickly to customer needs. This allows them to remain competitive and quickly meet their customers' expectations.
Surplus warehouses also help businesses reduce their risk of running out of stock during periods of high demand. Accessing additional inventory from surplus warehouses ensures that companies have enough supply, enabling them to better serve their customers without fear of running out of stock unexpectedly.
Finally, being able to access additional inventory from a surplus warehouse helps businesses quickly restock items that are in high demand. This can help companies to reduce the time between orders, ensuring that their customers promptly receive the things they need.
Tying Cash Flow
Adding a surplus warehouse to your business can tie up cash flow. This is because you will need to buy more inventory than you need. This means that funds which could be used for other aspects of the business may not be available, thus limiting their use.
Possibility Of Inventory Going Out Of Date
When keeping excess inventory in a surplus warehouse, it is always risky to have some of it go out of date. If goods become obsolete or customers' preferences change, then any additional stocks held in a surplus warehouse may be well-spent if they aren't sold over time.
Possibly Not Selling The Item
There is also the possibility that products being stored in a surplus warehouse might never sell, meaning that the business would have wasted money and resources on items that never made it out of their storage unit.
Higher Costs For Storage
In addition to tying up cash flow, having a surplus warehouse also adds additional costs in terms of storage. These costs may include maintenance fees, rent, or other associated costs with keeping the facility running smoothly. This can add an extra burden on businesses' budgets and should be considered before opting for this solution.
Challenges Of Surplus Stock
Takes Up Space In Warehouses
The extra stock that is not being sold must be stored somewhere, which can take up valuable space in warehouses and stores. This can lead to an increase in overhead costs and reduce the efficiency of producing new goods.
Increases Storage Costs
Warehousing costs money, and having surplus stock on hand will add to those expenses, even if it is not being used or sold. The additional cost of storing the merchandise is high, especially for items needing special handling or temperature control.
Related: 6 Main Types of Warehouse Storage Systems
Inventory Management Issues
The surplus stock also means having more inventory than is needed for current demand. This can lead to problems tracking which items are available, how much is on hand when they are received, and other related tasks. Inventory management can become more complex and time-consuming when too much stock is on hand.
Decreases Cash Flow
Having a lot of surplus stock on hand also affects cash flow, as the money tied up in these items cannot be used to cover other expenses or investments that could help the business grow. Additionally, it means that customers' orders may take longer to fill if they are not in stock, resulting in lost sales opportunities.
Risk Of Obsolescence
Finally, having too much inventory can mean risking products becoming obsolete before they can be sold. This means investing money into products with no return, leading to financial losses for the business.
Related: Types of Warehouse Management Systems
How eCommerce Inventory Software Can Help Handle Surplus Stock
Utilizing a surplus warehouse has the drawback of locking up a sizable amount of capital in inventory. In addition, you run the danger of being unable to move merchandise in the event of economic difficulty or a slump comparable to COVID-19, which would result in the surplus stock continuing to drain your bank account.
There are a few strategies to use if you now need to grow into a surplus warehouse or have extra goods that you can't move:
- Evaluate your capital and revenue first. Then, examine how long you can afford to keep your current inventory on hand and whether moving some of it to a surplus warehouse location could be more cost-effective.
- Try to minimize your minimum order volume through negotiations with your wholesale and manufacturing partners.
- Contact prospective retail partners. Find someone who will take your stock in their shops if you can. Consider local and national brands, and be willing to accept a lesser profit margin than you would have needed in 2019.
- Considering a similar product area shortage, consider reviewing sales and marketing to see if you can target a new industry or niche.
- Discounted products and discounts increase as more of a particular SKU is purchased.
- Combine merchandise with kitting services.
- Offer some products as incentives or freebies.
- To free up cash flow and qualify for a tax break, ask your surplus warehouse partners if they know of any liquidation firms or have worked with donation services.
How to Find the Best Surplus Warehouse?
The key to finding the best surplus warehouse is to do your research. There are a few factors that you should consider when selecting a warehouse:
1. Quality of inventory - Inspect the items in stock to ensure they meet your standards and expectations.
2. Location - Consider the distance from your business or home and any shipping costs associated with transport.
3. Services offered - Determine what services are available at the warehouse, such as order fulfillment, delivery, advising on product selections, etc.
4. Cost - Compare pricing and discounts with other warehouses to get the best deal possible.
5. Reputation - Ask for reviews and recommendations from others who have experience with the warehouse.
Once you have found a reputable surplus warehouse, it is essential to take advantage of its services. The warehouse may offer order fulfillment, delivery, advising on product selections, discounts for bulk orders, or other services depending on the type of inventory they carry. These services ensure you get what you want promptly and at an affordable rate. Additionally, some warehouses provide educational materials about their products so that customers understand how to use and care for the items they buy correctly. This can be an invaluable resource for customers who are unfamiliar with the products.
Related: 3 Tips to Choosing the Best Warehouse Solution as a Small Business
A surplus warehouse can be a great source of products for your eCommerce business at unbeatable prices. By partnering with a reliable and reputable 3PL provider, you can maximize your profits while ensuring that your customers can always find your store's latest and most excellent products. Contact us today to learn more about how we can help you take advantage of the opportunities presented by surplus warehouses – with our all-in-one 3PL management tools; there's no limit to what your business can achieve!
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