Best Practices for Buying Returned and Excess Merchandise

The secondary market for returned and excess merchandise is booming—and for good reason. As consumer returns surge and retailers look to offload unsold inventory, savvy resellers and entrepreneurs are jumping at the opportunity to scoop up discounted goods and turn a profit. From big-box stores clearing out shelf pulls to eCommerce giants liquidating overstock, there's no shortage of inventory.

Resellers, discount store owners, and sellers on platforms like Amazon, eBay, and Whatnot are sourcing products at a fraction of retail prices. With the right strategy, these goods can be resold for healthy margins—making it one of the fastest-growing niches in the resale economy.

But success in this space takes more than finding cheap deals. It requires a keen eye, trusted sources, and a well-thought-out process. Below are the best practices to help you make smart, profitable decisions when buying returned and excess inventory.

1. Understand the Types of Returned and Excess Merchandise

Not all inventory is created equal. Before purchasing, it’s essential to understand the main categories of returned and excess merchandise, each with its own level of risk and resale potential:

• Customer Returns: These are products sent back by customers for reasons like incorrect sizing, buyer’s remorse, or minor defects. Some returns are unopened and in like-new condition, while others may show signs of use or require minor repairs. To recover value and clear warehouse space, brands often work with specialized return buyers or liquidation partners to offload this inventory.
• Shelf Pulls: Products that were removed from store shelves due to seasonal changes, packaging updates, or overstock. These items are generally new and unused but may show minor wear from handling or have price stickers.
• Overstock Inventory: Brand-new items that never made it to the retail shelf due to excess supply. This is often the safest category in terms of condition and resale value.
• Liquidations or Mixed Lots: These can include a combination of returns, shelf pulls, overstock, and even salvage items. They typically offer higher potential margins but come with greater risk and variability.

Understanding the differences helps set expectations, align purchases with your resale model, and reduce the chances of costly surprises.

2. Research the Supplier or Liquidator

Choosing the right supplier is just as important as choosing the right inventory. The secondary market is full of potential—but also risk—so it’s crucial to research liquidators and wholesalers thoroughly. Look for reputable sellers with strong reviews, clear terms, and transparent listings that include item conditions and detailed manifests.

Avoid suppliers who offer vague descriptions, lack a return policy, or don’t respond to questions. Building relationships with reliable sources not only protects your investment but can also unlock perks like exclusive inventory, better pricing, and early access to high-demand deals—giving you a real advantage in the resale game.

Pro tip: Join reseller groups or forums to get real feedback on liquidators before you buy.

3. Always Review the Manifest

A manifest is a critical tool for evaluating any returned or excess merchandise lot. It provides key details like item descriptions, quantities, retail prices (MSRP), and sometimes condition or UPCs. Reviewing the manifest helps you understand what you're buying, assess its alignment with your sales channels, and gauge the resale potential before committing to a purchase.

Be cautious of inflated MSRPs and vague listings, cross-check values using tools like eBay sold listings or Amazon FBA calculators. Watch for red flags such as missing condition info or excessive quantities of the same item. If no manifest is available, understand that you're buying a blind lot, which carries greater risk. Smart resellers always review the manifest to ensure the deal truly makes sense.

4. Start Small and Scale

When entering the world of returned and excess merchandise, it’s wise to resist the urge to buy in bulk right away. Starting with a small lot or test pallet allows you to assess the supplier’s reliability, the true condition of the items, and how well they sell on your preferred platforms. It’s a low-risk way to evaluate the accuracy of manifests, measure ROI, and understand the overall resale potential.

By tracking your early results—resale prices, turnaround time, and unexpected expenses—you can learn what works and what doesn’t. Once you’ve built confidence in a supplier and product category, you can scale up strategically. Gradual growth helps you fine-tune your strategy, minimize risk, and lay the foundation for a profitable, sustainable resale business.

5. Factor in All Costs

The listed price of a pallet or lot is just the starting point. Many new resellers overlook the full range of costs involved in turning that inventory into profit. Beyond the product cost, you need to account for shipping and freight (which can be substantial), storage fees, refurbishment or repairs, and the time and labor it takes to process, list, and ship each item.

Platform fees, potential returns, and customer disputes also chip away at your margins. To truly evaluate a deal, calculate your total expenses and determine your break-even point. The smartest resellers look past the upfront bargain and focus on net profit after all costs because that’s what ultimately separates a smart buy from a money-losing mistake.

6. Know Your Market and Resale Channels

To make the most of your inventory purchases, it’s important to align them with the right resale platforms and understand your target audience. Each marketplace caters to different types of products and buyers, so matching what you buy with where you sell can significantly impact your margins.

eBay is ideal for used electronics, returned goods, and unique finds, while Amazon is better suited for shelf pulls and overstock in like-new condition. Whatnot is perfect for live selling, collectibles, and trending items. Flea markets and bin stores are great outlets for bulk, mixed-condition inventory, and platforms like Poshmark, Mercari, and Facebook Marketplace work well for clothing, home goods, and casual resale.

Platforms like The Reseller Source can help you source inventory based on your preferred resale platform—whether you sell online, run a bin store, or manage a discount retail space. By understanding who you're selling to and where they shop, you can fine-tune your sourcing strategy and maximize profit potential.

7. Stay Organized and Compliant

Staying organized is essential for resellers who want to grow and protect their business. Use a simple tracking system to log purchases, costs, item conditions, and supplier details. Monitoring sales performance, profit margins, restocking needs, and slow-moving inventory helps you stay in control and make informed decisions.

On the compliance side, know the resale rules of each platform, some restrict certain categories or require specific item conditions. Always be accurate in your listings to avoid penalties. And don’t forget to keep solid financial records for taxes and long-term planning. Good organization may not be flashy, but it’s the backbone of a sustainable and scalable resale business.

Conclusion

Buying returned and excess merchandise offers resellers a unique opportunity to source inventory at deep discounts and earn solid margins if done right. Success in this space depends on understanding the different types of inventory, thoroughly researching suppliers, reviewing manifests, and factoring in all costs beyond the purchase price. Starting small allows you to learn the ropes with minimal risk, while aligning your sourcing with the right resale channels helps maximize your profit potential.

To build a sustainable and profitable business, stay organized, track your performance, and remain compliant with marketplace policies. The secondary market isn’t a get-rich-quick scheme, it’s a smart play for those willing to put in the work. By following best practices and making informed buying decisions, you can turn returned and excess goods into a reliable revenue stream that scales with you.