One of the first questions a potential customer asks us is, “What is the value of my excess inventory?” While this may seem like a simple question, the answer is far more complex than just looking at inventory costs or MSRP. In the world of discount and closeout retail, traditional valuation methods don’t often apply. We always tell our clients to forget what they think your inventory is worth—what truly matters is what discount retailers such as TJ Maxx, Big Lots, or Ollie’s are actually willing to pay. Just like any transaction, the price depends on what the seller will sell it for and what the buyer will ultimately pay for it; that is the value.
Traditional inventory valuation takes into account factors like cost of goods, MSRP, depreciation, product quality, and category. While these metrics are useful for accounting purposes, they don’t reflect what a discount retailer or wholesaler will offer. Instead, professional excess inventory buyers in this space focus on two key questions:
- Will my customers buy these items?
- And at what price will my value shoppers and price-conscience customers pay?
In this article, we will examine several key factors to determine how much you can get for your inventory. Some of these play a major role in pricing and overall value. We’ll break down the top factors to help you better understand what your overstock inventory is worth. First, we’ll start by explaining the difference between branded and unbranded products and how this affects their value, which is the most critical factor.
The Value of Branded vs. Unbranded Inventory
When evaluating the value of an item, it’s important to determine if it’s ‘branded’—a concept that can be more complex than it seems. In traditional retail, products are often labeled as either branded or unbranded, but this distinction is misleading. Every product has a brand, whether it’s a well-known name or a small private label. The real question is not whether a product has a brand behind it, but how recognizable and desirable that brand is to consumers. Brand recognition is the ability to identify a product through visual or auditory cues like logos, colors, or packaging.
However, recognition alone isn’t enough. Brand preference—built on trust, familiarity, and past experience—is what drives customers to choose one product over another. In discount retail, understanding this distinction can determine whether a product gets a high offer or an offer that leaves much to be desired.
Product Category
The broader the appeal of your product category, the more potential buyers there are, increasing your chances of securing a better offer. Everyday essentials like bed sheets or candles have widespread demand, making them attractive to a variety of discount retailers, from home goods chains to general merchandise stores. The more retailers that can stock your product, the more competition there is among buyers, which can drive up your final offer price.
On the other hand, niche products face a tougher challenge. For example, if you’re selling equestrian gear, your pool of potential buyers is significantly smaller. Unlike household goods, which can be found in stores like Burlington, Marshalls, or HomeGoods, specialized items have fewer retail outlets willing to carry them. With limited demand and fewer competing buyers, offers tend to be lower, making it harder to recoup costs on excess inventory.
Product Packaging
As the saying goes, first impressions can make or break a sale, and packaging plays a crucial role in capturing customer interest. Products with well-designed, high-quality retail packaging tend to command higher value than those with basic or no packaging. When shoppers browse a discount store’s shelves, they often make split-second decisions. A product with professional, eye-catching packaging appears more premium, even if the brand itself isn’t familiar. Retailers know this, which is why they place greater value on items that look polished and ready for in-store display.
E-commerce brands, on the other hand, often rely on minimalist or bulk packaging, which can put them at a disadvantage in the discount retail space. Without a strong shelf presence, these products can appear generic or lower quality, reducing their perceived value. While brand recognition may be limited, great packaging can help bridge that gap by making the product visually appealing and instilling confidence in the buyer. In many cases, investing in better packaging can mean the difference between a product ending up in a bin store or a top discount retailer.
Read our blog – The Economics Of Selling Excess Inventory To Discount Retailers.
Minimum Advertised Price
Keeping a close eye on how your products are priced across third-party marketplaces is crucial in protecting your brand value. When products are resold online at deep discounts, it can undermine your perceived retail pricing and make it harder to maintain profitability. Suppose your items are constantly available at lower prices on platforms like Amazon, eBay, or Walmart Marketplace. In that case, discount retail buyers will take notice—and it can directly impact how much they’re willing to pay. Often the lowest price found online is where they draw the comp from, not the highest.
Discount retail, corporate buyers conduct their own online research before making an offer. They typically use the lowest price they find online as the benchmark MSRP, regardless of the actual suggested retail price. From there, they cut it down by another 50% to determine what they will resell the item for. This means that if third-party sellers offer your product at steep discounts, your margins in the discount retail space will shrink even further. Being diligent about monitoring and controlling your online pricing can help protect your brand’s value and ensure you get the best possible offers from retail buyers.
Industry Trends
In addition to the specific factors related to this particular inventory, we must also take into account broader macro events that can impact pricing and demand. A recent example highlights this point clearly. A direct-to-consumer rug company contacted us with excess inventory. They were low on cash and needed to liquidate much of their inventory. Their rugs were beautiful, high-quality products manufactured by the same manufacturer of the largest industry player, who commands top ricing.
What they didn’t realize was that they weren’t the only ones facing difficulties. Five of their competitors were also struggling and had begun flooding the market with hundreds of thousands of similar rugs. As a result, the increased supply drove prices down significantly. When many companies deal with similar challenges, like changes in demand or competition, there’s often an oversupply of inventory available to the discount market at lower prices, making it harder to sell products at their original value.
Large Quantities Available
Another trait that impacts the offer price is the number of units available for purchase. When a retailer considers investing in hundreds of thousands of units as part of an inventory liquidation, far exceeding their typical purchase volume, they take on a higher level of financial risk. To justify this significant commitment, suppliers often need to offer a lower price per unit to make the bulk purchase more attractive. This price reduction incentivizes the retailer to place a much larger order than they would under normal circumstances, as they must be confident that the potential profit margin offsets the capital tied up in such a large inventory. Furthermore, once the retailer acquires these large quantities, they may need to discount the item even further for their customers to ensure they can sell through the excess stock efficiently.
The Customer of the Retailer
Understanding the buyer base of the retailer is crucial when determining the appropriate pricing and positioning of your product. Each retailer caters to a specific demographic with distinct purchasing habits and price expectations. For example, stores like Five Below, Dollar General, and Dollar Tree primarily sell lower-priced goods, meaning they have strict limitations on how much they can charge their customers. If your product does not align with their established price structure, it may not be a viable option for their shelves. On the other hand, off-price retailers such as TJ Maxx or Nordstrom Rack often carry products that originally retail for over $100 but are offered at a discount, allowing for a different pricing strategy. Understanding these nuances can help you tailor your pitch to meet the retailers’ specific needs while ensuring your product remains attractive to their customer base.
Additionally, many retailers have a set price ceiling that dictates what they are willing to pay per product category. For example, they pay $2.50 for bed sheets, regardless of quality.. This predetermined pricing structure significantly influences the offer they can extend to suppliers. If a retailer’s customer base primarily seeks budget-friendly items, they must acquire products at a low enough cost to maintain their expected margins. Failing to account for these pricing constraints when trying to sell overstock inventory could result in a misaligned proposal that does not fit the retailer’s business model. Therefore, it is essential to research and understand the retailer’s pricing strategy before pitching your product, ensuring that it aligns with both their target consumer’s spending habits and their internal pricing framework.
Variations in Quantities
Another factor that affects the price you can get for your excess inventory is the scope of the available stock. When there are dozens of different SKUs with significant variability in quantities, it creates challenges for buyers who must sort, manage, and optimize the inventory for profitability. A mixed inventory with inconsistent quantities can be difficult to integrate into existing supply chains, leading to inefficiencies. As a result, buyers may offer lower prices to offset the added complexity and effort required.
This inconsistency requires additional effort on the buyer’s part to determine how best to utilize the inventory, making it less attractive. Buyers prefer more predictable and uniform stock levels, as it simplifies their purchasing decisions and maximizes efficiency. When inventory are more evenly distributed, it allows for easier resale, distribution, and cost control. The more work a buyer has to do to make the inventory viable, the less they are willing to pay for it.
How To Calculate the Fair Value of Your Excess Inventory?
Now that we have discussed all the factors to consider when valuing your inventory—such as branded versus unbranded products, packaging, and volume—let’s shift our focus to how to calculate the value of excess inventory. It is important to recognize that the valuation methods for branded overstock differ significantly from those used for unbranded surplus. By understanding these differences, you can ensure that your excess inventory is fairly priced, enabling more informed financial decision-making.
In the following discussion, we will explore both scenarios in detail to provide you with a comprehensive understanding of excess inventory valuation.
What is the Value of My Branded Excess Inventory
When a product has strong brand recognition and preference, traditional valuation metrics like MSRP (Manufacturer’s Suggested Retail Price) and MAP (Minimum Advertised Price) become relevant again. These products maintain their perceived value regardless of the retailer because consumers already trust the brand. Big-name brands are often backed by massive marketing budgets that reinforce their desirability, making them a safer bet for both retailers and shoppers. For branded products, it is a matter of factoring in the “new” MSRP, as the item has been substantially discounted.
Let’s start with the basics here.
Typical Retailer and Wholesaler Margins:
- Retailers: Typically pay between 50% and 80% of MSRP, with premium (A-tier) brands often near the higher end.
- Wholesalers: Generally pay around 30% to 50% of MSRP.
For this example, let’s use a dress shirt that was recently sold at TJ Maxx.
Branded Original Scenario
- Assume a dress shirt has an original MSRP of $100.
- A retailer’s cost would be between $50-$80, and a wholesaler’s cost would be between $30-$50.
Branded Discounted Scenario: That dress shirt now sells at TJ Maxx for $25 (75% off retail price)
Calculation: A retailer would pay between $12.50 and $20 (50%-80% of $25) and a wholesaler would pay between $7.50 and $12.50 (30%-50%) per unit.
The Result: When we compare $7.50 to the original $100 MSRP, that means that a discount wholesaler can end up paying as little as 7.5% of MSRP.
What is the Value of My Unbranded Excess Inventory?
So, what happens to brands that lack high brand recognition and preference? Without the power of brand loyalty behind it, discount retailers categorize these products as “unbranded.” In this space, buyers don’t rely on traditional MSRP or MAP to determine pricing. Instead, they set a benchmark based on what customers are willing to or typically pay for that “product,” regardless of brand.
For instance, ABC discount retailer know that their customers typically pay up to $20 for queen-size bed sheets. That essentially becomes the default “MSRP”—even if your product is made of linen, high-end thread count, or Egyptian cotton, which are all great selling points in more “traditional” retail. These unique differentiators take a backseat to price, which is what discount retail is all about. Whether you originally paid $2.00 per set or $50.00, discount retailer buyers will make $30 the default MSRP. If it’s a more niche type product, retail buyers will look for a “similar” product on Amazon and use that as the default price. As an example, if you manufacture a kid’s fishing rod, the buyers will do a query on Amazon, find the cheapest price of a “similar” item, and cut that price in half as well to be the default MSRP for their discount retail customer base.
For this example, let’s use a dress shirt that was recently sold at Bob’s Clothing Surplus.
Unbranded Original Scenario
- Assume a dress shirt has an original MSRP of $100.
Unbranded Discounted Scenario:
- Discount retailer always sell dress shirts at $15 a unit, regardless of the original MSRP or brand. That is the price that discount shoppers pay for this category of product.
Calculation: A retailer would pay approximately $7.50 (50% of $15), and a wholesaler would pay around $5 (30% of $15) per unit.
The Result: When we compare $5 to the original $100 MSRP, a discount wholesaler can end up paying 5% or lower compared to the MSRP.
In this example, unbranded items often sell for much less than their branded counterparts. This is because branded products are specifically sought after by customers, while unbranded ones simply fall into the same category. Retailers and wholesalers also price them differently—branded items use MSRP as a base price, while unbranded items follow broad category pricing. This shows that a recognized brand can add significant value, allowing products to command a higher price, whereas unbranded items must compete based solely on their category. Ultimately, customers are willing to pay more for a product they trust, giving branded items a clear pricing advantage.
Also, read our blog – The Dirty Truth of MSRP in Discount Retail
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Conclusion
The value of your excess inventory extends far beyond traditional metrics like cost of goods and MSRP. In the discount and closeout market, the true worth of your products is defined by what professional retail buyers—like TJ Maxx, Big Lots, Ocean State Job Lot, and Ollie’s—are willing to pay. By understanding the valuation models these buyers use, you can make more informed decisions and set realistic expectations when determining whether to sell your excess inventory. This market-focused approach ensures your strategies are aligned with actual buyer behavior rather than internal assumptions.