Careers Business Ownership How to Buy Factory Closeout Merchandise Share PINTEREST Email Print Mikroman6 / Getty Images Business Ownership Operations & Success Supply Chain Management Sustainable Businesses Operations & Technology Marketing Market Research Business Law & Taxes Business Insurance Business Finance Accounting Industries Becoming an Owner Table of Contents Expand Create a Game Plan Get a Resale Permit Find Factory Closeout Suppliers Choose the Right Supplier Start Buying By Karen Waksman Karen Waksman Facebook Instagram LinkedIn Twitter President and CEO of Retail MBA University of California, Santa Barbara Karen Waksman is a former writer for The Balance Small Business and an experienced seller who advises entrepreneurs who sell products to retailers. Learn about our Editorial Process Updated on 02/22/21 When businesses need to unload merchandise to make room for new products, they typically offer something called factory closeouts. Seasonal goods, store closing merchandise, old products replaced by newer goods and returns are all typical examples of factory closeouts. These are products that are sold at below original wholesale costs. A perfect example of a product that is offered as a factory closeout is bathing suits. When summer ends, retailers deeply discount bathing suits at the end of the season as a way to sell their excess inventory. Factory closeouts tend to be a win-win for all parties. Businesses make more money by selling their excess merchandise quickly, and customers win by getting access to deeply discounted items. The best part of factory closeouts is that they can be of high quality, branded items that are perfect for resale. And they can typically be purchased for 10 cents on the dollar. At these prices, businesses can resell factory closeouts for significant profits. However, if not purchased carefully, factory closeout merchandise can be combined with low quality, damaged goods. Therefore, it is essential that you take the time to find the right factory closeout dealer to purchase the best possible product. To guide you through this tricky terrain, below a simple step-by-step plan to help you get started. Create a Game Plan Buying factory closeout merchandise can be an incredibly lucrative opportunity if done right. Therefore, take the time to think through the following questions: Where will I store the factory closeout items if purchased in bulk? What types of products do I want to buy? Is there an actual need for the products that I plan to re-sell? How do I plan to pay for the factory closeouts? How will I sell the factory closeout items once I receive them? Will I sell the products on eBay, Amazon, flea markets, online retail stores, craft fairs, etc.? The clearer you are about your game plan, the better. This simple step will save you a tremendous amount of time and energy. Get a Resale Permit To start purchasing factory closeout merchandise, you will need to retain a resale permit (sales tax number). Just contact your local government agency and take the necessary steps to obtain this permit. For instance, if you live in California, you would contact the California Department of Tax and Fee Administration. Getting a resale permit is very easy to do and is essential to your success. Find Factory Closeout Suppliers There are a variety of excellent resources available to help you find factory closeout suppliers. Here are four great options to help you get started: Online Resources The quickest way to find factory closeout merchandise is to do an online search. A great website to check out is Liquidation.com. A few other options include TopTenWholesale.com and Thomasnet.com. Classified Ads Searching classified ads of genuine trade publications can also be a great way to get access to items in bulk. For example, California Apparel News is a popular trade publication that offers excellent resources in the classified section for deeply discounted merchandise. Jobbers Jobbers are people who specialize in finding bulk products at discounted rates. The easiest way to find jobbers is to run a Google search for a wholesale jobber. Other ways to contact jobbers are through the yellow pages or even industry newsletters and classifieds. Manufacturer’s Outlets Another great option to find factory closeouts is making friends with salespeople at manufacturer outlets. Companies such as TJ Maxx, Marshalls, and Burlington Coat Factory all have access to high-quality closeout items. By finding out when these outlets receive new merchandise, you can get access to some amazing factory closeout items. Choose the Right Supplier Choosing a good factory closeout supplier will make a tremendous difference in your business. The following are a few strategies to help you get started: Ask for references Check out the Better Business Bureau, TrustArc or SquareTrade to learn more about the supplier Understand shipping charges. When it comes to factory closeouts, you are typically responsible for shipping. So take the time to learn how much it will cost you to receive your factory closeouts If you have found a local supplier, try and review the product in person before you buy When in doubt, do a Google search on the supplier to get more information Make sure everything you agree upon is in writing Start small. The best way to ensure that you are working with a competent supplier is to start with a small order and build from there Start Buying Buying factory closeouts is a very successful and proven way of generating revenue for your business when done right. Therefore, take the time to follow the steps outlined above. If you think through your game plan and do the necessary research, you will find that buying factory closeout merchandise can be a fantastic approach to finding quality products at deeply discounted prices.