AboutJames E. Dion Expertise Most questions about trends in specialty retail, how customers are changing both in the US and Europe. Demographics for all countries as they relate to retail trends and issues. Store Operations, Buying and Merchandising.
Experience
Past/Present clients Microsoft, Harley-Davidson, Ritz-Carlton, Hummer, Ace Hardware, Coleman Spas, Aldo, Intel, Dell, Safeway, New Balance, IBM, Kodak, Bata International, Nortel Networks, Honey Baked Ham Co., Man Alive, Highsmith
B.S Chicago State University
M.S. Chicago State University
PhD (abd) Illinois Institute of Technology
Expert: James E. Dion Date: 3/28/2008 Subject: How do I determine wholesale price in liquidation/buyout scenarios
Question Hello - I have started a small business specializing in liquidation and resale of designer, boutique brand children's clothing. I have uncovered an opportunity to buy directly from a manufacturer w/ overstock and can get the line sheets showing original wholesale, so not a problem. Another opportunity is to buy inventory from a store going out of business. Without knowing the true wholesale cost of every label/item, how do I determine the true wholesale so that I can make a profitable offer? Thanks so much.
Answer Geri,
The only way to value any inventory is to start with the market value, not the original cost, wholesale or retail. Look at every item and ask yourself what would a consumer pay for the item and then work back to what you would pay. For example, if you need to make 30% profit on a sale, and if you figure that the retailer that you will be re-selling to needs to make 50% profit, then you identify an item that you feel could sell to a consumer for $25.00, so, a retailer would expect to pay you $12.50 for the item, and if you are going to make your 30% profit, which, by the way, is 30% of your wholesale price, you would offer to pay $8.75 for the item which would give you a $3.75 profit on your sale to the retailer. Remember, original or replacement cost is NEVER used, only use true estimated market value, and even then, be very conservative as to what a consumer will really pay. Do not over estimate it as you will get burned badly. A retail inventory for a store that is going out of business has most of the good inventory already gone and what is left is often worth at most ten cents on the cost dollar or almost 80% off retail value at best.
Good luck!
