Recently, Marketplace took a closer look at Costco’s return warehouse operations. Today, we focus on where many of these returns end up: liquidators, third-party sellers focused on buying and reselling returned or damaged merchandise.
At 9am, the Box Truck has already arrived at American Liquidations in Connecticut.
Co-owner Dasti Lenga said: “This is a mix of apparel and shoes.”
American Liquidations buys truckloads of excess inventory and returns the merchandise for resale. We sell to other businesses, not to everyday shoppers looking for deals. Their customers are places like shops with scratches and dents, and individuals willing to buy complete pallets of random items, take them apart, and resell them on sites like eBay and his Poshmark. That’s actually how Lenga got his start.
“My first pallet — I bought it for $1,800, delivered it to my house, threw it on Facebook Marketplace, and a guy gave me $1,100 and a Ford Escape,” he said.
Weird deal. But after selling the SUV, Lenga made his $1,300 profit and reinvested it.
“One palette became two palettes. Two palettes became three. It started as a side business and then blew up out of nowhere,” he said.
Clearing is a growing part of the retail industry. According to the National Retail Federation, in 2022 Americans will return $800 billion worth of merchandise. Because sifting through returns is time consuming and labor intensive, many retailers sell returns to third-party sellers, liquidators.
Everyone from publicly traded companies to individuals working in garages is playing the liquidation game. And the industry has grown beyond household names like TJ Maxx and Marshalls.
Lenga left his job as a private equity analyst a few years ago to take up this role full-time. Today, American Liquidations has her eight employees and her 40,000 square feet of warehouse space. It feels like organized chaos, with random items neatly lined up, from lawn mowers to hand lotions.
“You know, it’s a big risk to venture into a space like this,” Renga said. “It’s a lot of overhead, a lot of moving parts that we had to figure out before. let it soar.”
Companies like Target and Macy’s only sell returned merchandise by the truck. Lenga buys up to 60 trucks per month, each holding about 25 pallets. And since he buys them out of sight, every delivery is literally a giant mystery box.
“Sometimes I hit home runs and other times I get a lot of stuff to throw in the trash,” he said, pointing to the Home Depot items section.
What is a home run?
“These are brand new doors. These things sell for thousands of dollars each. They’ll have the materials there to resell the items to get,” he said.
And what is an unexploded ordnance? “These Christmas trees,” he said. “Yes, this is a product that does not sell well.”
It’s January. Christmas is a whole year away. And the wood looks a little junky. It has branches sticking out in all directions, as if it had been used or displayed in a store. This is a big part of the liquidation game: find treasure buried in trash.
Across the room is an array of Sam’s Club palettes. Each item is wrapped in vinyl, so you can only see it from the outside. Spy ninja coffee maker, hunter rain boots, and bounty paper towels.
“Bounty paper towels are a $20 package, so $25,” he said.
This Sam’s Club Hall retails for up to $85,000. Lenga pays only a fraction of that. His profit is about 35%.
And remember, Lenga is really the middleman here. He sells to people like Mark Dumschott browsing American Liquidations stores near him. During the day he installs a sprinkler system. Reselling is his family’s new side business.
“I come in maybe twice a day to see what they have on the tool because the turnaround is incredible,” he said. “What goes in and out of here is unbelievable.”
Dumschott buys pallets, opens them, photographs the items, and sells them on eBay. And lately people are interested in everything in his garage.
“Oh, where did you get it? Where did you get it?! Oh, I can’t tell you. I don’t know. I’m not going to reveal my secret,” he laughed.
The last palette his family bought was shoes. He said they made about $10 for the pair.
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