Inside The World Of Liquidated Amazon Merchandise
When Anthony Connelly posted in a Facebook group for independent Amazon Sellers about his new, but wildly successful reverse supply chain business, he was overwhelmed by the response. Several hundred sellers responded, either eager to learn more about how the business model works, or chiming in with their own experiences flipping used, returned or refurbished items on Amazon.
For sellers like Connelly, reselling products can be a lucrative business. For the manufacturers, these often-anonymous sellers can create issues with brand perception.
It works like this: Amazon sells some of its inventory to liquidation buyers like Connelly by the pallet or by the truckload. Often these are products that have been returned to Amazon and marked as “defective” by the customer. Because Amazon allows free returns of defective items, many shoppers claim this reason for their return even if the item is in working condition. As a result, much of this inventory is able to be sold again with little to no refurbishing, creating an opportunity for sellers like Connelly to list the products on Amazon once again, but in “used” condition.
Amazon packages on a doorstep.
According Connelly and other people who’ve built businesses around the Amazon returns ecosystem, Amazon doesn’t really want to be in the business of processing returned inventory and reselling it through its own “Amazon Warehouse Deals” program. This opens the door to what can be a lucrative business model for those who are willing to roll up their sleeves to store inventory, process it, and manage the sale on Amazon.
Connelly, in fact pivoted from developing his own products on Amazon into managing his liquidation business full-time. “I find it easier [than developing branded products from scratch]," says Connelly. "Someone already did all the hard work—ranking a product in Amazon search results, building reviews, developing content. The competition is even less because you’re often just competing with the brand for sales.”
But the brands themselves often don’t take kindly to these independent liquidators. If a liquidator claims that a product is in new condition but the end customer receives a clearly used product, that reflects poorly on the brand. Shoppers may leave negative product reviews and Amazon may event suspend that product if there are enough quality concerns.
Amazon Shoppers often don’t know the difference between a third-party marketplace sellers and branded manufacturers selling on Amazon. And they may not check whether an item is in new or used condition before checkout.
The other concern brands have is around price integrity. Liquidators offering products at low prices also created channel conflict for brands who may have MAP (Minimum Advertised Price) agreements with other retailers.
Anthony Connelly’s business partner amongst a large volume of returned items that they intend to resell on Amazon.
Other people in the Facebook group where Connelly posted had not been so successful with their liquidation business. Some complained that once the branded manufacturers became aware of their activities, they pursued action through Amazon: filing IP infringement claims, or claiming that their inventory was counterfeit. Both these claims don’t directly address the issue, and some of the sellers know how to fight back and ensure Amazon allows them to continue selling.
Even with the threat from manufacturers trying to regain control of their marketplace channel, business is good for Connelly. “We’re going to do $1 million in sales on Amazon this year, $500,000 on eBay, some small amounts on local marketplaces. And I’m only in month nine of this business,” Connelly says. But even he is considering a pivot. He and his girlfriend, who is also his business partner, have started seminars teaching others how to get into the business reselling some pallets to smaller resellers.
When asked about how these liquidation businesses affect the manufacturers, Connelly cites a constitutional amendment called the “first sale doctrine.” The logic of this argument is that once a manufacturer sells an item (whether to a retailer or on a marketplace), they relinquish all IP rights for any further sales or uses of that product.
“If brands have an issue with it, they can campaign to have the law changed,” says Connelly. “Brands might hate it but they need to understand that Amazon is a shared listing space for people to sell inventory they own. I have the right to sell it.”