Buying liquidation or wholesale can be very profitable if you know how to bid correctly. I am going to explain the thought process involved and the "how to" so you can bid correctly and lower your risk while maximizing your potential gain.

The bidding on liquidation product is very different than online auctions. The first step is to get a list of product to bid on from liquidation or close out sources. You bid on liquidation items by placing what is called a "Blind Bid" from this product list. This simply means that you bid the price you are willing to pay for a set list of product.

No other bidders can see your bid or vice versa. You are notified via email if you won the items you bid on, usually within 48 hours. It is very important that you do your research thoroughly prior to placing any bid!

Payment

The two accepted methods of payment from the liquidation sources are Cashier's Checks or Wire Transfer directly to their bank.

Buying Liquidation

Once you obtain the contact information and are placed on the Approved Buyer list from a liquidation company, you will receive an email stating, "Lots for Bid" or "Manifest Bid List".

These bid lists come with basic listing information, such as quantity and a very general description of the product. Depending on the company, the Bid Lists are broken up into three separate categories: "Sent Good", "Sent Bad" and "Untested". All the companies terms and conditions clearly state "As Is, Where Is, With No Guarantees Or Claims, Etc to Working Condition"!

"Sent Good This product group will have a higher percentage of functional product. The negative aspect is that there will be more bidders and this drives the price higher. I personally have had occasions in which I won the bid on a "Sent Good" lot, and actually received less functional product than a lot I purchased that was labeled "Sent Bad".

"Sent Bad In my experience, these lots have been the most profitable. There is more risk involved. Suppliers often include discontinued items in this category, items no longer in production. Some of these items are brand new! There is a large demand for "out of production" parts on the auction sites such as Ebay, Yahoo, etc. A lot of this product may have been tested by a technician or returned by a customer.

"Sent Untested There is a good potential for this product as well. It is more of a gamble, but I have found that the product sent in untested lots were items usually used internally in a company. One big advantage is that your competitors will not bid as aggressively!

You will notice that there is a lot number assigned to each group of product. When you place your bid it is never for a single line item, but for all of the products listed under the Lot number. As you can see, it lists only very general information.

Shipping

When buying large quantities, or a "Lot" of product, you will find shipping is quite different from other auctions as well. Due to the weight and size of a larger purchase, it will not be sent via normal common carriers such as UPS, FED EX, and USPS.

You will arrange the shipment via a trucking line. Important! Shipping is very competitive, be sure to get at least three bids prior to shipping. Moving two to three pallets across the country can cost around $350. Delivery on average is five-seven days maximum. This is also affected by the distance, and the shipper you choose.

Some Important Tips

When I first started buying Liquidation, I would use the Google Search Engine to check prices on the products listed in the Manifest. In those cases I was barely able to break even on the pallets I successfully bid on, because the information on Google can be compared to a "Wish List".

eBay is the tool for finding what the product will sell for right now! It gives you real time market information on the lowest price buyers will pay for an item. This is invaluable!

It is always better to lose a bid at your maximum price than to set your bid too high. I have had many instances where I had not won a Bid for weeks, but then the Bid I did win almost doubled my investment.

My tested formula is very simple. I research each item on the Manifest quickly on eBay, searching only Completed Auctions. The data on auctions that are still running is of no value in determining the low market price for an item.

I then take the lowest completed winning bid on the eBay item. I then do the same procedure for all the items on the list and put my maximum price on that item at 45% of the lowest eBay sold price for any lot labeled "Good". I use 20% of the lowest eBay value on any lot labeled "Bad", and 25% of the lowest value of any lot labeled "Untested".

Add up all of the prices for the items, and then place one bid for each lot. In a "worst case scenario" you break even on your investment - "best case" scenario, you double or triple your investment.

There may be cases where you are unable to find any sales data on eBay. You should then search the web. When you locate the item, put your maximum value to be 10% of the price listed on the web. When you bid correctly, there is the potential to double your bid on every lot.