3 Tips for Finding Success in the Secondary Market

By business.com editorial staff,
business.com writer
Jan 09, 2013
Image Credit: Monkeybusinessimages / Getty Images

Secondary markets are increasingly becoming big businesses via cyber stores and an ever-expanding array of possibilities. Many aspiring entrepreneurs are seeking a sound way to further their profits from goods or services that did not find customers through the traditional means of primary markets.

You might have overlooked this growing sector, but profit margins can be large and reliable in the secondary market, aka the world of overstock reselling.

What is a Secondary Market?

A secondary market can be any market where instruments such as stocks, bonds, products, or services can be resold or used. In the car industry, the term aftermarket is commonly used to describe parts and accessories sold by secondary retailers. For many goods, a product cycle exists:

  • If the product is not sold by the retailer, the retailer then has access inventory that, in many cases, is returned back to the vendor or sold to a wholesaler or liquidator
  • The wholesaler or liquidator then redistributes the goods to a variety of discount stores, different wholesale companies, and online vendors. These vendors can then sell the products to customers at a discounted rate.

In essence, it's a second chance for the product to find a customer and for secondary market entrepreneurs to gain a profit from the resell since they only paid pennies on the dollar for a salvaged high quality product, many times in bulk.


3 Tips for Identifying and Utilizing Your Market

1. Where's the Deal?

You might have merchandise within your own venture that is ready to redistribute in the secondary market; items that are falling short in sales or are not "cutting edge" anymore. However, you might also check out other wholesale possibilities such as electronics, appliances, clothes, sporting goods, or craft items.

Even if merchandise didn't fly off the shelf, certain customers still seek those deals on necessary or vintage items. Think about those older computer or appliance parts that owners still need. Anything can be a viable market as long as you can buy low.

The margin of profit is typically high compared to primary market products. In most cases, the initial retailer will already account for a loss on surplus inventory and expect a low recovery cost. This provides you the opportunity to buy name brand items at affordable prices. You can pass this savings on to your customer and still achieve a serious profit.

2. Sell What You Know

In most cases, this will be your stepping stone into a secondary market. You have a product or service that needs a different outlet to succeed. Even when branching out, try to initially choose products and markets that you know.

This familiarity helps in finding reliable markets, leads on affordable merchandise, and an initial customer base. In addition, you know the product, which allows you to determine a reasonable purchase price and a decent, but profitable, selling price. Your prior knowledge of the product also helps if your purchased merchandise has any defects or needed repairs.

3. Create an Intelligent and Practical Plan

As with any new venture, your success is directly correlated to a sound and detailed plan. Finding great deals and suitable outlets for secondary market products takes time, focus, and research.

A critical step to planning is creating or finding viable outlets for your purchased products. How or to whom are you going to sell them? Internet marketplaces are a reasonably affordable platform to redistribute your merchandise. Secondary market outlets like Burlington Coat Factory, TJ Maxx, and Big Lots have found success in establishing virtual and concrete stores

After achieving initial success in selling a product that you know, you should begin to diversify your inventory. Just as a solid investment portfolio contains a wide array of options and possible risks, a sound secondary market entrepreneur should work to build a reliable and needed inventory that contains variety.

Secondary markets provide a great opportunity for success. By obtaining low-cost, closeout merchandise from wholesalers or retail stores, you have the potential for large profits. By creating a plan that includes market analysis and steps for diversification, you can continue to grow in a rewarding arena.

Photo credit: tulsaibuyhouses.com

Bio: Joe Martin is Founder and President of Merchandize Liquidators, a closeout and liquidation wholesale company specializing in selling overstock and customer-returned merchandise from major stores back to the market for a fraction of the original wholesale cost.  Joe started his business as a college student with an initial investment of $375 and grew it into a #34 ranking by Inc in the Business Products & Services Industry.  A thought-leader and entrepreneurial expert, Joe welcomes anyone to reach out to him @M_Liquidators.

business.com editorial staff
business.com editorial staff
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