There are entire clothing businesses based on buying and selling what is called seconds. The potential for seconds is large because many consumers do not mind if the design is slightly askew, or if the logo is misspelled, and at the same time, the production of defective merchandise is a normal consequence of the production cycle. Also, companies such as Apple, Starbucks, and Google will order novelty items, hats, and shirts for corporate promotions, they will refuse goods if they are not in perfect condition. The screen printer who now has to take these items back will sell them to dollar and discount stores to recoup some of his production costs.
Wholesale salvage merchandise is a product category used in the wholesale and closeout business to refer to merchandise that has either been damaged, or has been exposed to a situation in which the potential for damage is high. Salvage is a term that was first used to refer to products that were transported on trains that derailed. For instance, if a train was transporting a container of electronics, and a derailment took place, the insurance company would pay the owner of the load for the damaged electronics. The insurance company would then take possession of the damaged merchandise and dispose of it through wholesale channels. A salvage buyer primarily purchases inventory that could have become distressed due to an accident, fire, or flood. While the salvage buyer can purchase this type of inventory for literally pennies of the original wholesale cost, he must sort the products out and try to repair any damaged merchandise.
The salvage category is appropriate for a retailer that has access to consumers that can tolerate slightly damaged merchandise in exchange for the implicit savings. A salvage reseller should consider purchasing items where the potential for damages is diminished. For example, a television has a much greater change of being damaged if a truck transporting it crashes, than a pair of jeans would. And because it is much easier to sew clothing than it is to repair general merchandise, most experienced salvage buyers will prefer to focus on apparel, and soft goods for that matter. Because of the nature of this wholesale category, it is imperative that buyers inspect the goods in person, so that they can ascertain what percentage of the inventory can be sold as is, and the cost involved in repairing any damaged items. If an inspection is not possible, the buyer would want to obtain a low enough price that will mitigate his risk in making a purchase sight unseen.
Closeout merchandise is lucrative because of its nature. Merchandise is considered to be a closeout when its original seller loses the original sales venue for it.
In other words, closeout merchandise can be a case of socks which were manufactured for an upcoming movie. Once the movie is no longer shown in the theaters, the movie licensed socks need to be sold as a closeout.
Since the original event the socks were produced for has passed, the socks must be sold at a steep discount in order to find a buyer. As you can see, if you purchase this closeout at the right price you can make a good deal of money when you resell it. The question now becomes how to sell the socks? First thing you need to remember is that in order for the socks to be sold you will need to be creative. If you simply try to offer the socks for sale you might not find any buyers. The movie is already old news and people might not be interested in any product related to it.
A creative solution for selling closeouts is exporting. If you buy the merchandise cheap enough you can sell it to a poorer country where the people will not care what is printed on the socks, but where their concern is the quality and durability of the socks. You can also market this closeout to collectors. Many old consumer items find a strong market in the collectible market. Take a look at the selling prices on eBay for old Star Wars licensed merchandise. There is plenty of money to be made in the closeout business provided that you use your creativity in finding the right closeout buyers.