What is a Salvage Grocery Store?

A salvage food store is simply a smaller grocery store where the bulk of the inventory is sourced from a reclamation centers. A grocery reclamation center collects shipments of box-damaged, expiring or distressed food (and non-food) items from large grocery chains like Safeway, Raleys, Walmart, Krogers etc.  The job of the reclamation center is to try and recover as much capital as possible from distressed inventory.

• Grocery items with major damage including large dents, opened inner packaging, leaking and no product labels are simply thrown away.

• Grocery items with minor denting, damaged packaging, odd lots and near dating are placed onto pallets and resold at liquidation pricing to salvage food retailers.

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Cha-ching! You’ve hit the jackpot… right!? Or have you?

I remember the fun part of receiving truck loads of pallets of very valuable merchandise. Most of it was surplus and liquidated goods. I remember rummaging through the “treasures” and digging through the pallets and sorting out all of the high end merchandise.

The more exciting part was getting to play with them.  After all, you need to test them right?

Well, as I purchased the loads, I would evaluate the manifest, calculate my costs and determine the return on investment that I needed to be profitable.

When the shipment came in, I would hunt through the pallets, knowing exactly what I was looking for. I would specifically find all the camcorders, digital cameras and high end items. I always loved to see the boxes of items such as Sony Digital Camera’s, top end DVD recorders, Bose surround sound systems, in demand tooling equipment and tons of other profitable items!

I can remember counting the dollars in my hand from being able to turn some pretty healthy profits on all of that merchandise BEFORE I sold them.

You can also imagine the disappointment of opening a box and finding it full of junk accessories or a camcorder in pieces! Ouch!

That is a serious high to a very serious discouraging low in a split second!

The sad truth is this is often the reality of liquidated and surplus products in the salvage and surplus business. This is why it is absolutely essential BEFORE purchasing surplus inventory to:

1. Calculate your costs.

2. Determine your needed return on investment.

3. Know the type of product you’re purchasing and understand that you must take into account the defect percentage BEFORE you purchase…

4. and having a plan to know what to do with that defective merchandise.

Before you purchase, make sure to ask your closeout liquidators or salvage dealers some questions. There are several important questions to ask but one that you always need to remember is to find out what percentage of defective product you can expect.

If it is an empty box, make sure you let your dealer know so you can obtain a credit for that missing product.  Most people who purchase surplus products don’t understand the fact that many of the items are returns, recalls or items that have been damaged by the customer or by the store staff.  Product can also be damaged in shipment.

Unfortunately, too many people buy closeout or surplus pallets without knowing some key pieces of information This can really end up costing you a lot of money on the backend. Without this information you are running the risk of losing a lot of money.

I could share too many stories about people who have told me all about the great deal they found from a salvage dealer or at a salvage auction. They think they have hit the jackpot with closeout merchandise that will make them a fortune!

The sad part is when their excitement turns to despair when they realize their jackpot pallet is actually a junk pallet full of defective merchandise or broken products! Ouch again!

Don’t let this be you. The bottom line is:

1. Know and understand what type of surplus products you are purchasing.

2. Know your investment costs.

3. Determine the percentage of defects to expect.

4. Realize it will happen and have a plan to move them.

5. Remember things are not always as good as they seem and things are not always as bad as they seem. In other words keep a realistic expectation and don’t get to high or to low. Don’t become a yo-yo.

You can be profitable selling surplus goods and closeout merchandise but don’t forget these key steps.

1. Keep reasonable expectations.

2. Do your homework before the investment.

3. Always ask the key questions.

If you do these, you have a much better chance at turning your investment into profits!

What happens when large warehouses filled with hundreds of thousands of dollars worth of inventory catch fire?  If properly insured the company that owns the inventory will be indemnified for the loss.  Once a settlement is reached for the insured, the damaged inventory will become property of the insurance company that just wrote a large claim check.

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The most important thing to know is that while there are reputable surplus and salvage businesses, the industry is filled with even more unscrupulous ones who are just waiting to take advantage of new and unsuspecting buyers. There is no doubt that great deals can be had, but they require a good deal of time and research on the part of the buyer. The second most important thing to know is never, ever take the word of a surplus and salvage dealer as to the condition or specific contents of a merchandise grouping.

Important tips when dealing with a surplus and salvage company:

Do some background checking – Once you have some merchandise you are interested in, do a thorough online search on the company. Enter the company name in Google and see if any information turns up. Then, go to various wholesale websites and search for the company name in the forums, and post a message asking if anyone has any information about the company. If the negative feedback is overwhelming, it would be smart to start looking for another company.

Here are some tips for researching any wholesale supplier.

Ask the condition of the merchandise – True, you may not be able to believe 100% of what a supplier says, but you still may be able to get some useful information, especially if the company has a good reputation.

Ask what percentage of the lot is “throw away” – In the surplus and salvage industry, it’s expected that a certain percentage of the lot is completely unusable. Typically, you can expect to trash 15 – 30 percent of what you receive. Unfortunately, that is just the nature of this business.

Inspect all the merchandise first hand – It is imperative that you hop in a car or buy a plane ticket and look at the merchandise yourself. Pick through the lot so you can see the contents and their condition for yourself. Many suppliers are known to “cherry pick” their merchandise when it comes in – going through the entire shipment, putting the good stuff aside and selling the rest to unsuspecting buyers. If you decide to purchase a large amount of merchandise, it is very important that you see the pallet or container being loaded onto the shipping truck. If you can’t be there, hire an inspection company to supervise the loading. Suppliers have been known to switch merchandise before the lot ships.

Make a small initial order – For your first order, order small. The dealer may try to convince you to purchase a truckload or pallet, but stay strong and order just a box or two. This will allow you to see how things go with the company and the merchandise before you commit to tens of thousands of dollars in product.

Use a credit card or escrow for payment – You’ll find that many surplus and salvage dealers insist on wire transfers for payment. As the buyer, you need to insist on either credit card or payment through an escrow account. Both are protected forms of payment that offer you insurance against a shipment full of junk.

As long as you follow these tips, you’ll increase your chances of finding quality surplus and salvage goods. Once you have been in the business a while, you’ll have built a list of trustworthy companies that you can rely on for good merchandise.