9.26 Liquidation.Com

Liquidity Services, Inc. is an online auction company providing manufacturers, retailers and governments with an electronic marketplace to dispose of, liquidate, and track goods in a reverse supply chain. The company also offers valuation, appraisal, inventory, marketing, sale, and logistical management of assets, warehousing and inspection of inventory, plus collection and dispute mediation. The company has over 700 employees and is headquartered in Washington DC. {15}

The company was founded in 1997, was profitable from the 2002 fiscal year, seeing revenue grow at a compound rate of 27% since fiscal year 2002. The economic downturn helped its fortunes. {12} Over 1.6 million professional buyers were registered on the firm's online marketplaces in 2012, and 2011 financial year results were: Sales: $558.5 million (up 30%), Operating Cash Flow $39.9 million (up 25%) and EPS $1.05 (up 78%). {15} Fiscal year 2012 also saw excellent results: revenues $475.3 million (up 41%) and adjusted earnings before interest, taxes, depreciation and amortization of $110.1 million (up 109%). {20}

Business Model

Liquidity Services offers a reverse supply chain — i.e. instead of a supply chain efficiently pulling together all the components of a manufacturing process, the reverse chain finds the best market for items surplus to demand, be they overstocked, customer-returned or salvaged items. The market is surprising large, perhaps $58 billion in 2004 in the US alone {2}, and Liquidation operates three online marketplaces: Liquidation.com, Govliquidation.com and GoWholesale.com. A fourth, Liquibiz.com, a UK marketplace, has recently closed.

Sellers tend to be government departments (especially US Defense Department), manufacturers, distributor and large retailers (the latter commonly experience customer returns around 7% {3} {9}).

Purchasers tend to be leading manufacturers, distributors and etailers (especially eBay merchants). {16}

Online auctioning allows sellers to realize prices twice what would been achievable and some 80% of goods offered are sold. Liquidation commonly take a 20% commission. {16}


Liquidation initially faced several problems:


Liquidity initially had no brand name, but sales grew steadily through:

1. Organic search engine optimization, and then ppc marketing through Google and Overture (now Yahoo) ads.
2. Design of clear, easy-to-use and informative websites. {5}
3. Ads placed in trade periodicals to emphasize the professionalism and trustworthiness of the company.
4. Opt-in email marketing of addresses collected from their sites, often accompanied by simple questionnaires used to target customer interests more closely.
5. PR campaigns to get the company noticed by the mainstream press. {16}
6. Tracking customer behavior and refined the registration process.

Company Size

An important step was the acquisition in December 2007 of Information Management Specialists, Inc. and its GovDeals, Inc. subsidiary for approximately $10 million in cash. Liquidation became an exclusive partner of the US Department of Defense for the sale of all usable US military surplus. {6}


Liquidation offered a range of essential services, including collection, asset lotting, accurate description, invoicing, tracking and payment collection.

Points to Note

1. Slow growth of a company through progressive Internet marketing.
2. Range of services (and expertise) needed to gain customer confidence.


1. Explain the Liquidation.Com business model.
2. What Internet marketing techniques did Liquidation employ?
3. How did Liquidation build its brand name?
4. Who are Liquidation's important customers, and how are they secured?

Sources and Further Reading

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