Many companies see liquidation companies as a necessary evil or the idea of a liquidation company conjures up negative connotations. In this video, Larry Morgan, CEO of RL Liquidators will be discussing how a company can benefit from a relationship with a liquidation partner. We will discuss why the bad rap often associated with liquidation companies is undeserved.
Let’s start by talking about Manufacturers. Manufacturers convert cash into products. I understand that some may argue that they convert raw materials into products, that is undoubtedly true, but it is the cash that pays for those raw materials, as well as the equipment and processes they use, so... Liquidation companies simply convert those manufactured products back into cash. Now, because the value is usually not conserved in this equation, liquidation companies rarely recapture 100% of an item’s manufacturing costs, liquidation companies are often looked down upon.
The term, “Liquidate,” conjures unpleasant images of companies losing money and going under. When seen through this very narrow lens, one can understand the stigma associated with liquidation companies. However, when seen as a vital part of the whole process, reputable liquidation companies become both very valuable and highly desirable. So, let’s look at that big picture. It’s the goal of every manufacturer, distributor, and retailer to sell every item produced or bought. However, that goal is very rarely achieved. All of these industries understand that a certain portion of manufacturing, distribution or purchasing costs will be lost on inventory overages.
Manufactures will produce more than they can move, distributors will fill their warehouses with more than they can distribute and retailers will purchase more than they can sell. No one wants to be caught running out of something they could have sold more of. Recapturing no value from these overstocks is like throwing money away.
Savvy and successful businesses understand from the outset that they will need the services of a quality liquidation company to sell whatever overages remain, if they are to maximize their profits. Even though these overstocks are sold at a loss, it is much less of a loss than throwing them all out, donating them or destroying them. Liquidation companies are, therefore, not a necessary evil but an essential partner of successful companies.
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