5 Ways of Amazon Inventory Liquidation

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Amazon Inventory Liquidation: Dealing with excess inventory is a common challenge for Amazon sellers. When products don’t sell as quickly as expected, you’re left with extra units taking up space in Amazon’s fulfillment centers. The costs of storage and management can quickly add up, eating into your bottom line. Liquidating unprofitable inventory becomes crucial.

Thankfully, Amazon offers several options to help sellers recover value from slow-moving products. In this article, we’ll explore the five main methods Amazon provides to liquidate excess inventory:

• Amazon Outlet Deals – Offers discounted pricing on Amazon’s Outlet site
• Amazon Inventory Liquidation – Let Amazon find a buyer to purchase your excess inventory
• FBA Refurbishment – Amazon prepares products to be resold as refurbished
• Removal/Return to Seller – Inventory returned to you for disposal or resale
• Donation/Charity – Donate inventory and receive a VAT exemption (in some cases)

Understanding how each liquidation method works is key to choosing the best option for your particular situation. Weighing the pros and cons of each approach allows you to maximize your recovery and minimize losses on excess stock.

Whether you have a few slow movers or a large overstock of products, having a smart Amazon Inventory Liquidation plan is crucial for any Amazon seller. This guide will walk you through everything you need to know to effectively liquidate excess inventory and keep your Amazon business running smoothly.

Amazon Outlet Deals:

What Are Amazon Outlet Deals?

Amazon Outlet Deals allows sellers to offer discounted pricing on excess inventory. This is done through a dedicated Amazon Outlet site where overstock, closeout, and clearance items are sold at lower prices.

Products listed on the Outlet site will display an “Outlet Deal” badge and the discounted price. This signals to customers that they are getting a deal on the product.

How Outlet Deals Work

If Amazon identifies products in your inventory that are eligible for Outlet Deals, it will show the “Create Outlet Deal” option in your Manage Inventory section in Seller Central.

You can then opt-in to create an Outlet Deal for that product. Amazon will suggest the maximum discounted price you can offer, usually around 30-35% lower than the original price.

For example, if your product normally sells for $19.99, Amazon may offer a maximum Outlet Deal price of $13.99. You can choose to discount it further if you wish.

Once created, the Outlet Deal terms will last for 30-90 days. After the deal expires, the product reverts back to its original pricing.

Eligibility Requirements

To be eligible for Outlet Deals, products must meet these criteria:

• New condition (not used)
• Have existing sales history and proven demand
• Product rating of 3.5 stars or higher

If your overstock meets these qualifications, Outlet Deals can be a great liquidation option.

Benefits of Amazon Outlet Deals

There are several advantages to liquidating excess inventory through Outlet Deals:

• Drives sales velocity – By offering a discount, you can stimulate demand and sell through products quickly.
• Low fees – No additional fees beyond the regular referral and FBA fees.
• Expanded exposure – Gets your products in front of the segment of buyers specifically looking for deals.
• Preserves branding – Lets you liquidate stock while still having your brand name and page displayed.
• Higher recovery than disposal – Recoup more value than you would from removing and disposing of inventory.

Downsides to Consider

The potential downsides to Outlet Deals include:

• Lower profit margins – The discounted price will eat into your profits on each sale.
• Can impact brand reputation – Heavily discounted prices may diminish brand image.
• Time limit – Deal terms eventually expire and prices go back up.

Outlet Deals offer an easy way to liquidate eligible overstock while retaining full use of Amazon’s selling features. For many sellers, it strikes the right balance between moving excess inventory quickly and maintaining margins.

Amazon Inventory Liquidation:

What is Amazon Inventory Liquidation?

Amazon Inventory Liquidation allows you to have Amazon dispose of your excess inventory on your behalf.

It works by having Amazon send your overstock products to a liquidator. The liquidator purchases the inventory in bulk and sells it to another reseller or distributor.

This allows you to quickly move excess products without having to coordinate the liquidation yourself.

Enabling Amazon Inventory Liquidation

The Liquidation option can be enabled in your Seller Central account settings:

1. Go to Settings > Fulfillment by Amazon

2. Scroll down and click “Edit” next to “Automated unfulfillable inventory.”
   

2. Check the box next to “Liquidation” to activate it.

You can choose to exclude certain ASINs if you wish to keep them. Any inventory Amazon identifies as eligible will then be prepped for liquidation.

Amazon Inventory Liquidation Fees

Amazon will charge two fees as part of the liquidation process:

• Referral Fee – 15% of the sale price to the liquidator.
• FBA Removal Fee – Variable fee based on size and weight, usually $0.50 to $1 per unit.

For example, if the liquidator pays $5 for a 1 lb. product, you would pay $0.75 in referral fees and about $0.50 in removal fees.

Payment Timeline

It takes approximately 30 days for Amazon to connect you with a liquidator.

Once your inventory is shipped to the liquidator, payment (minus fees) will be sent to you within 60 days.

The payment breakdown by shipment will appear in the Removal Order Details. Each shipment may have been sold to different liquidators at different rates.

Pros of Amazon Inventory Liquidation

The main benefits of Amazon Inventory Liquidation include:

• Easy handoff to Amazon – They coordinate the full liquidation for you.
• No storage fees – Amazon stops charging storage fees once liquidation begins.
• Bulk selling – Liquidators pay for large quantities of inventory.
• Some margin recovery – Recoup more value than disposing of inventory.

Cons to Consider

Some potential downsides of Amazon Inventory Liquidation:

• Lower recovery than self-liquidating – Liquidators need profit margin too.
• Limited control – You rely fully on Amazon managing the process.
• Potentially lower rates – Rates can vary between different liquidators.
• Fees subtract from payout – Amazon’s fees are deducted from proceeds.

For eligible products, Liquidation provides a hands-off way to remove excess stock through Amazon’s channels. Weigh the pros and cons to decide if it makes sense for your situation.

FBA Refurbishment:

What is FBA Refurbishment?

FBA Refurbishment is when Amazon takes your returned or excess products and prepares them to be resold as refurbished items.

Amazon will inspect the products and may re-package them to remove damage or wear. This gets the items ready to be sold again as refurbished.

The refurbished units are then added back into your general sellable FBA inventory.

How Amazon Refurbishes Inventory

Amazon states that they may conduct these refurbishment processes:

• Re-taping or gluing boxes
• Removing any labels, stickers or excess tape
• Repackaging products
• Testing and inspecting electronics
• Cleaning/repairing used items

The goal is to make the products look as new as possible without actually re-manufacturing them.

Risks of FBA Refurbishment

While it recovers some value, there are a few risks to be aware of with FBA Refurbishment:

• Used as new – Refurbished items run the risk of being passed off as new to customers if not properly labeled. This can lead to complaints and returns if the customer feels misled.
• Quality issues – Problems can arise if refurbishment is not done thoroughly and quality control is lacking. A poor customer experience could result.
• Increased returns – Each return and refurbishment cycle increases the chances of receiving a product with defects or flaws.
• Negative reviews – Used products sold as refurbished can still receive poor reviews if they don’t meet expectations. Damaging brand reputation.
• Suspensions – Repeated complaints about used products being sold as new can potentially lead to suspension of your listings.

When It May Work Best

FBA Refurbishment may be most suitable for:

• High-value products – Where there is sufficient margin to cover refurbishment costs.
• Items not easily damaged – For example, industrial equipment or electronics.
• Companies with strong branding – Established brands may better withstand the risks.

For many sellers, it is safer to avoid refurbishment given the many risks involved. But it can be a viable option on a selective basis for some inventory types.

Removal/Return to Seller:

What is Removal/Return to Seller?

Removal/Return to Seller is when you have Amazon ship your excess inventory back to you from their fulfillment centers.

Once you receive the returned products, you can then try to resell them through your own channels or dispose of the inventory if needed.

• This gives you back full control and possession of the overstock items.
• You can sell them on other platforms, through your own website, or to a liquidator or wholesaler.

How the Removal Process Works

To have Amazon return inventory, you need to submit a removal order in Seller Central.

• Amazon will then pull the products from their various fulfillment centers where they are stored.
• Inventory will be packed and shipped back to you in separate boxes.
• It typically takes Amazon 3-6 weeks to process removal orders and return all units.

Costs Involved

Amazon charges the following fees to return inventory through removals:

• Removal order fee – $0.50 per unit
• Return shipping – $0.20 to $1 per unit depending on weight
• Disposal fees may apply if you choose not to have units returned.

There are also risks of inventory getting lost or damaged during the long return transit.

Pros of Removal/Return to Seller

• Regain control of inventory – Allows you to resell or dispose on your own terms.
• Potential for higher recovery – You may get better resale value than liquidation.
• Avoid Amazon fees – No 15% referral fee if you can resell through other channels.

Cons to Consider

• Slow process – It takes weeks or longer to get all inventory shipped back.
• Added costs – You pay shipping fees and take back ownership costs.
• Logistical challenges – Warehousing, managing, and reselling units yourself.

Removal orders give you maximum flexibility but also the burden of managing the returned inventory. Analyze the time investment and potential recovery value before deciding if returns are the right liquidation choice.

Wrapping Up

Deciding how to liquidate excess inventory is a key component of successfully selling on Amazon. When products fail to sell as expected, taking action to recover value from your stuck inventory is crucial.

As we covered, Amazon provides several options to help sellers liquidate slow-moving stock:

• Outlet Deals help you clear excess inventory quickly while still using Amazon’s platform. Discounting prices stimulates demand and increases sales velocity.
• Liquidation through Amazon gets your overstock directly into the hands of resellers. Though you lose some control, it saves you the legwork of coordinating liquidation.
• FBA Refurbishment carries risks like negative reviews and suspensions. It may only make sense selectively for high-margin products.
• Removal/Return to Seller gives you back full control but also the hassle of reselling or disposing of units.
• Donation/Charity lets you dispose of inventory philanthropically while getting a VAT exemption.

Choosing the right method depends on your specific situation and goals. Analyze all the options – fees, time investment, risks, potential recovery value and more.

The most important takeaway is having a plan in place before excess inventory becomes a problem. Stay on top of sales trends and forecasts. Liquidate slower products while they still have value. Avoid storage fees and logjams down the line.

With a smart liquidation strategy, you can turn excess inventory from a burden into a value recovery opportunity. Use these Amazon tools to your advantage and keep products moving efficiently.