How to Liquidate Ecommerce Inventory: 101 Guide (+ Examples) 

Every business, at some point, has to deal with excess inventory. Whether the surplus results from unexpected demand changes or inaccurate forecasting, it’s a hassle to deal with – and it eats away at your bottom line. So before you incur too much loss from inventory holding costs, you’ll want to find ways to liquidate it. 

In this post, we’ll cover inventory liquidating is, discuss common liquidation strategies, and share tips and best practices for liquidating your ecommerce inventory.  

What is inventory liquidation? 

Inventory liquidation is the process of selling your surplus inventory, often at a significant discount, so you can quickly convert your assets into cash and free up warehouse space. Liquidating inventory provides an influx of cash for your business, which you can re-invest to stock up on better-selling inventory that generates revenue. 

Here’s when you should liquidate inventory 

Inventory liquidation can be very effective, but it’s not a one-size-fits-all solution. Rather, it is an approach that should be used sparingly, and only in situations where it’s really necessary. Here are some of the common and justifiable reasons for ecommerce stores to liquidate their inventory. 

Overstocking or deadstock 

Sometimes, ecommerce business will end up with more inventory than they can sell, or inventory units that are (for whatever reason) unsellable. This can be due to: 

• Supply chain issues that delay inventory’s arrival, at which point demand has decreased 

• Inaccurate demand forecasting, which leads a business to overestimate demand levels for a particular product  

• Inaccurate inventory data, which leads a business to believe they have less of a product than they actually do 

• Inventory obsoletion, in which a product expires or becomes obsolete before it can be sold  

Regardless of the cause, overstocking often calls for liquidation, as you’re paying to store inventory that you’re unable to sell (and keeping capital tied up in stagnant inventory). Getting rid of excess stock and deadstock allows you to make room for new inventory with higher demand while freeing up cash to invest elsewhere in your business. 

Product lifecycle changes 

As the lifecycle of a product approaches an end, you may notice a decline in demand. This means you’ll end up with products that are incredibly slow to sell.  

By liquidating these items, you can free up capital to invest in newer product models and variations, which are more likely to drive sales. 

Seasonal demand changes 

Seasonal merchandise can take up valuable storage space while incurring high inventory carrying costs. Liquidation sales are a great way to get rid of off-season products and free up room for new and relevant items. 

Financial pressure 

Finally, some businesses may have no choice but to liquidate stock if they’re experiencing financial pressure. When you have capital tied up in unsold inventory while still paying to store said inventory, it can squeeze your profit margins. Liquidation is one of the fastest ways to improve cash flow and ease financial strain. 

Inventory liquidation methods and effective strategies 

Once you’ve decided that liquidation is the best option for your business, you’ll need to choose a method for liquidating your inventory. There are a few different liquidation strategies that brands use depending on their customer base and business model. 

Discount sales 

One of the most popular ways to liquidate inventory is by offering discounts. For example, you could run a flash sale with deep markdowns to encourage customers to buy your products before time runs out. This is ideal for items that are going out of season soon or approaching the end of their lifecycle. 

Product bundling is another effective method, as it allows you to get rid of excess inventory by bundling the surplus items with faster-moving items. You could take this approach with items that people are likely to need along with the fast-moving products. 

For instance, if you’re trying to liquidate headphones, you could bundle them with your best-selling computer.   

Alternatively, you could bundle the same products to introduce bulk discount offers so that people buy more items at a time, allowing you to quickly get rid of excess stock. This is especially effective for products that people might want to buy in multiples, such as home supplies. 

“The thing I love most about ShipBob’s dashboard is the product bundling capability. I can’t explain how many conversations we’ve had internally trying to figure our bundling before we worked with ShipBob. You would not believe how hard it was to configure bundles so that the customer sees it as one unit, but it would get split into different picks when it got to the old 3PL’s fulfillment center.

But with ShipBob, it’s so simple. You log on to your dashboard, put whatever products you want in a bundle, and it’s created as its own “primary item” on Shopify with the composite products as sub-items. When an order comes through, it triggers the system and gets fulfilled seamlessly. It’s super easy – that alone would have been enough to make me want to switch to ShipBob!”

Stuart Jones, Co-Founder of Canvas 

Online marketplaces and auction platforms 

If you’re not getting enough sales on your existing sales channels, you can make use of third-party platforms to leverage their existing customer base. Marketplaces like Amazon and online auction platforms like eBay help you tap into a massive audience that’s seeking great deals. Offer your goods at a lower price to appeal to potential buyers so you can quickly get rid of unwanted inventory. 

Direct sales to liquidators 

Some companies specialize in liquidation, providing an effective way for businesses to get rid of excess inventory quickly and efficiently. These liquidation companies will buy your surplus stock in bulk, so you don’t have to deal with the hassle of running and managing a sale. However, it’s important to carefully vet the company you’re working with to make sure that you’re getting a reasonable deal.    

Bulk selling to retailers 

Alternatively, there are retail businesses that will purchase your excess stock for resale. You may have to negotiate a deal and sell your inventory at a discounted price (since the retailers will have to make a profit), but decreased profit margins are still better than throwing the goods away (which delivers zero ROI). 

B2B liquidation channels  

Some brands opt to liquidate inventory by selling excess goods to other businesses, which will typically use the products themselves.  

You can either find a business to sell to directly, or use B2B liquidation channels and wholesale ecommerce platforms that will connect you with bulk inventory buyers such as liquidators, retailers, and wholesalers such as Liquidation.com and Overstock Trader.  

Depending on the platform, you may either list your inventory for sale or host a liquidation auction to attract potential buyers. Either way, it is generally quicker and simpler to offload inventory via a B2B transaction than waiting for individual consumers to purchase individual units on your ecommerce platform.  

Expert tips for liquidating ecommerce inventory 

No matter which way you liquidate inventory, there are some best practices that help make it easier. Here are some strategies for simplifying and optimizing the inventory liquidation process.  

Time your liquidation efforts 

Timing is the key to successful inventory liquidation. If there’s simply no demand for your product, it won’t matter that you’re selling it at a deep discount – you may still end up with unsold and devalued inventory, making it even harder to generate profits from them. So be strategic about when you’re holding a liquidation sale, so it doesn’t clash with changing market trends and consumer behavior.  

Timing your liquidation efforts requires accurate demand forecasting, as accurate forecasting enables you to offload inventory before demand dries up completely. Look for patterns in customer interest and seasonal trends so you can see when demand starts to decline, and run discounts or sales before then. 

For instance, say your brand sells winter clothing. Since demand for winter clothing starts to decline as the weather warms up, you may want to start offering discounts on winter clothes before winter is over. That way, you can at least start to liquidate inventory while there’s still interest in it.   

Plan marketing and promotion ahead of time 

Simply running an attractive sale on your website may not be enough. You will also need to raise awareness about the sale and pitch it to the right shoppers so that you can attract and convert more customers.  

Invest in various marketing strategies and ecommerce promotions to spread the word about your liquidation sale. Notify your email subscribers, create enticing social media posts, and retarget existing customers with strategic ads on social media platforms. Make sure your customers know when the sale is taking place and what types of products they can expect to buy at a discount. This will build anticipation for the sale to go live, preparing your customers to make a purchase long before the discounts are available. 

Planning your promotional efforts ahead of time will help you ensure that your liquidation strategy immediately has an impact as soon as it goes live. This will also help speed up the liquidation process, allowing you to save on storage costs and improve cash flow as quickly as possible.  

Monitor and apply findings to future liquidations 

The most effective way to manage your inventory liquidation is by reducing the need for liquidation in the first place.  

Monitor how your existing liquidation strategy is working so you can adjust your inventory management and plan your procurement more strategically to avoid overstocking altogether. Performing regular inventory audits will also help you identify inventory buildup and address them before it goes out of control. 

Additionally, the insights gained from analyzing your current efforts will help improve any future liquidations. Perhaps you discovered that selling your inventory in bulk to another business was more effective than running a flash sale on your DTC website. In this case, you might want to focus only on B2B channels for your future liquidations. 

How ShipBob turns inventory management into an asset 

Ideally, your business won’t have to resort to liquidation. The goal is to always have enough of the right inventory on hand to meet demand – and to achieve that balance, you’ll need effective inventory management.  

That’s where a supply chain partner like ShipBob can help. With the right combination of technology, best practices, and expertise, ShipBob’s solutions make it easier for brands to manage their inventory and avoid liquidation scenarios.  

Industry-leading inventory analytics 

ShipBob’s inventory management software provides you with the real-time insights you need to optimize your inventory levels, minimize costs, and stay stocked. Through ShipBob’s dashboard, you can: 

• View and track real-time inventory levels across channels and locations, so that you always know exactly how much inventory you have on-hand 
• Assess SKU velocity and inventory turnover to identify fast- and slow-moving products, and pinpoint which products to reorder (to avoid overstocking products that won’t sell)  
• Monitor storage cost per unit to quickly identify when liquidation is needed 

“I can’t say enough about ShipBob’s software and reporting capabilities. It really has made things easy for us to look at the data and make better decisions. Not all partners are set up that way – oftentimes when you’re using other providers’ technology, you have to pull the data yourself, and there’s a lot of work to be done on the back end. I often brag about ShipBob’s software. We’ve actually shown it off to other software partners to say, ‘We want your system to tell us the things that ShipBob’s software tells us.’ You can tell that ShipBob’s platform was built with the mindset of making their customers’ lives easier.”

Ryan Steffenson, Senior Manager, Channel Operations at Tonies 

Demand forecasting data and tools  

ShipBob also offers merchants the data and analytics they need to improve their demand forecasting, and subsequently avoid liquidation scenarios.  

Using real order data tracked over time in ShipBob’s dashboard, you can easily identify trends, patterns, and other insights into demand, and plan your procurement accordingly. That way, you know exactly how much of which SKU to reorder to ensure that you have enough inventory to meet demand, but not so much that you’ll end up with ghost inventory or deadstock you need to liquidate. 

You can even set up automatic reorder notifications in ShipBob’s dashboard, and receive a notification whenever a SKU’s stock level hits a certain threshold. This enables you to time replenishment correctly, so you neither stock out nor overstock your inventory.  

Distributed inventory across a global network 

With dozens of fulfillment centers across the US, UK, mainland Europe, Australia, and Canada, ShipBob enables you to place your inventory in or near the locations where that inventory is in highest demand. This way, you can send inventory to the regions or areas where there’s a market for it and avoid resorting to liquidation.  

ShipBob’s ideal Inventory Distribution Tool even calculates the most optimal split of inventory across ShipBob’s network which will minimize your shipping costs and times to deliver a better customer experience, no matter where your shoppers live.  

Simplified outsourced fulfillment and shipping 

Whether you sell inventory or liquidate it, you’ll need a strategy for getting inventory where it needs to go. ShipBob’s outsourced fulfillment solutions help you manage the logistics of storing, fulfilling, and shipping out your products so you can keep inventory moving through your supply chain.  

ShipBob takes care of the entire order fulfillment process, so you don’t have to lease warehouse space, receive and stow inventory, or pick, pack, and ship orders yourself. Even if there’s a sudden spike in sales due to liquidation, ShipBob can flex with your order volume and still fulfill your orders quickly and seamlessly. 

“We’ve scaled so much, and there have been zero hiccups in fulfillment with ShipBob. I don’t think even as we keep scaling in the years to come that there will be any hiccups there. That cannot always be said of brands that run their own warehouse. Running your own warehouse, you have to go out and hire very experienced people, invest in equipment, build in automation – and often, you’re wasting a lot of time, energy, resources, and human capital for a sub-par result. Why do that when a partner like ShipBob exists, and makes fulfillment so easy at a fair price?”

Tyler McCann, Co-Founder of Taste Salud 

Effective returns handling 

ShipBob can manage your customer returns, including those for liquidated items, while minimizing complications and costs. You can set return preferences for liquidated products so that they’re quarantined or discarded appropriately instead of being put back on the shelves. That way, you won’t have to deal with the hassle of liquidating them all over again. 

For more information on how ShipBob can help you manage inventory and avoid inventory liquidation, click the button below to get in touch with an expert.  

Liquidating inventory FAQs 

Below are answers to the most commonly asked questions about liquidating inventory.