# Liquidation Strategies Playbook

## Overview

When a SKU is classified as Kill, simply removing it from the catalog wastes trapped capital. This playbook provides structured exit paths for maximizing recovery on discontinued inventory.

## Strategy Matrix

| Strategy | Best For | Expected Recovery | Timeline | Effort |
|---|---|---|---|---|
| Markdown sale (own channel) | Branded items, loyal customer base | 40-70% of retail | 2-4 weeks | Low |
| Flash sale / deal site | Volume clearance, price-insensitive buyers | 20-40% of retail | 1-2 weeks | Low |
| Bundle with top sellers | Complementary products, low per-unit cost | 60-80% effective value | Ongoing | Medium |
| Return to supplier | Supplier accepts returns, within policy window | 50-80% of cost | 2-6 weeks | Medium |
| B2B liquidator | Large quantities, commodity products | 10-25% of retail | 1-2 weeks | Low |
| Donate (tax write-off) | Unsellable but usable inventory | Tax deduction value | 1-2 weeks | Low |
| Destroy | Expired, damaged, or worthless inventory | $0 (cost to destroy) | 1 week | Low |

## Strategy Details

### 1. Markdown Sale on Own Channel

**How it works**: Reduce price progressively on your own website or marketplace listings. Start with 30% off, escalate to 50%, then 70% over defined intervals.

**Best practices**:
- Create a dedicated "Clearance" or "Last Chance" collection
- Set a calendar: Week 1-2 at 30% off, Week 3-4 at 50% off, Week 5+ at 70% off
- Use email marketing to drive traffic: "Final clearance" messaging
- Set a hard deadline after which remaining inventory moves to the next strategy

**Watch out for**: Brand dilution if clearance becomes too prominent. Keep clearance items separate from core collections.

### 2. Flash Sale / Deal Sites

**How it works**: List inventory on deal-focused platforms or run time-limited promotions.

**Platform options**: 
- Amazon Lightning Deals or Outlet
- Flash sale sections on Shopee/Lazada
- Closeout marketplace platforms

**Best practices**:
- Price aggressively — the goal is capital recovery, not margin
- Set clear inventory limits and time windows
- Factor in platform fees when calculating recovery rate

### 3. Bundle with Top Sellers

**How it works**: Package Kill SKUs as free gifts or add-ons with popular products to increase perceived value while clearing inventory.

**Best practices**:
- Match bundles logically (same category or complementary use)
- Frame as "bonus gift" rather than "clearance item"
- Calculate whether bundle reduces margin on the Keep SKU beyond acceptable levels
- Set bundle quantity limits based on Kill inventory on hand

### 4. Return to Supplier

**How it works**: Negotiate return of unsold inventory to the supplier, usually for credit toward future orders.

**Best practices**:
- Check supplier return policy before assuming this is possible
- Negotiate early — suppliers are more receptive before the product is truly dead
- Accept store credit if cash refund isn't possible
- Document all return shipping costs in the recovery calculation

### 5. B2B Liquidation

**How it works**: Sell bulk inventory to professional liquidators at steep discounts.

**Best practices**:
- Get quotes from at least 3 liquidators
- Understand whether the liquidator will resell on your same channels (could undercut your prices)
- Negotiate FOB terms — don't pay for shipping to the liquidator
- Minimum lot sizes apply; batch Kill SKUs together for better quotes

### 6. Donation

**How it works**: Donate inventory to charitable organizations for a tax deduction.

**Best practices**:
- Verify the organization's 501(c)(3) status (or local equivalent)
- Document fair market value for tax purposes
- Obtain and retain donation receipts
- Calculate whether the tax benefit exceeds alternative recovery methods

### 7. Destroy

**How it works**: Last resort — physically dispose of inventory that has no recovery value.

**When appropriate**:
- Expired products (food, cosmetics, supplements)
- Products with safety recalls or defects
- Inventory where storage cost exceeds any possible recovery
- Products that cannot be donated due to regulatory restrictions

**Best practices**:
- Request destruction certificates from FBA or 3PL
- Document the write-off for accounting purposes
- Factor in destruction fees

## Decision Tree

1. Is the product returnable to the supplier? → **Return to supplier**
2. Is the product complementary to a top seller? → **Bundle**
3. Is the brand premium and margin allows 30-50% off? → **Markdown sale**
4. Is there high volume (100+ units) of commodity product? → **B2B liquidator**
5. Is the product usable but unsellable? → **Donate**
6. None of the above apply → **Destroy**

## Recovery Tracking

For each liquidated SKU, track:
- Original inventory value (at cost)
- Recovery amount received
- Recovery rate (%)
- Strategy used
- Time to liquidate
- Lessons learned

Aggregate this data to improve future Kill execution speed and recovery rates.