News

Sep 17, 2023

Liquidation company profits from retail slump

When businesses close, all those shelves, equipment and fixtures need to go

When businesses close, all those shelves, equipment and fixtures need to go somewhere. And people launching startups want cheap stuff to outfit their new business.

Enter Larry Morgan and Ryan Babineau of RL Liquidators LLC in Sacramento. They have a thriving liquidation business and in October plan to launch a second business — an online auction for store fixtures. Both ventures take advantage of the key trend in today's retail world: high turnover.

Each of the men was laid off during the recession, had families to support and faced foreclosure on their homes. Babineau was trying to pay the bills by buying and selling contents of storage units. Morgan, who had once worked with Babineau, followed suit. Soon, to save money on gas, they started driving together to auctions.

Through a liquidation sale of a Sam's Club in Sacramento, they stumbled into a new venture and later, a partnership. At that sale they spent $1,200.

"At the time, $1,200 was a lot of money. I was freaking out," Morgan said. "The very next day we made almost $3,000."

They figured, Morgan said, "this is a business we can support our families on."

That was a little more than a year ago. Now RL Liquidators, launched to take advantage of the new economy, buys and sells primarily retail fixtures, restaurant equipment and material-handling items such as conveyor systems and forklifts.

Morgan and Babineau go all over the West Coast to buy products at closing stores, including Walmart, Target, Office Depot and Talbots. Independent shops also call, and once in awhile they’ll accept an estate sale.

"I still don't know how some of the people get our phone number, but they do," Morgan said.

Morgan and Babineau anticipate sales of $600,000 to $900,000 this year and have average monthly revenue of more than $60,000. They employ three people and lease 25,000 square feet of inside and outside space along Richards Boulevard.

Morgan's brother has a Salt Lake City warehouse for his liquidation business and collaborates with RL Liquidators.

"We have zero debt. We don't owe anybody a penny," Morgan said. And that has put their personal finances on a strong footing as well — even though "a year ago we were getting ready to be kicked out of our houses."

Their customers include retailers, manufacturers and consumers, especially those buying shelves for their garage or a showcase for a collection.

"We find there is this unbelievable demand" for so-called gondola store shelving, Morgan said. Manufacturers don't want to talk to customers spending less than $50,000, he said, so smaller businesses wind up spending big bucks to have used shelving shipped from liquidators across the country. RL Liquidators gets calls from people all over the United States looking for gondola shelving.

Rich DePatta, owner of Hangtown Market and Hangtown Discount Cigarettes in Placerville, plunked down $1,000 for gondola shelves, a live bait cooler, a freezer and other items for his market. He called the purchase from RL Liquidators a "super deal" from "unbelievably nice people." He said he would have spent $2,500 with an online vendor.

"They’ve got anything and everything you can ever imagine needing," DePatta said. And RL Liquidators’ general manager "even stopped by the store to see how it looked. That's above and beyond."

Big Table Media, a Sacramento TV production company, bought some street signs to make a bar cart for a home makeover show it produces for a national cable network.

The team at RL Liquidators was "pretty knowledgeable" about their inventory, said Tiana Yen, senior associate producer. She liked that she got to look before buying, as opposed to buying online.

But Morgan and Babineau also will have an online option. They’ll invest $15,000 to $20,000 to buy online auction software, create a website and learn the software system to create an online auction.

They expect sales to dwarf those of their first business.

"We’re thinking about a million dollars of revenue in the first week," Morgan said.

The challenge, he said, will be "finding enough stuff."

"California's definitely an untapped market for the online auction," said Dan Stanton, owner of Cleveland-based RCI Auction Group, which specializes in restaurant equipment.

He's looking for an independent contractor to set up shop in Southern California or the Bay Area.

In more than five years in the online auction business, Stanton said he's seen the market explode to 30 to 40 players from two to three. Much of that is due to the economy. In addition, people have become more comfortable buying equipment they haven't seen in person.

Stanton expects the industry to expand further. But when the economy improves and fewer retailers need a place to unload their fixtures, the newer players will struggle, he said.

Most people assume business is good for RL Liquidators because so many companies are failing in the anemic economy, Morgan said. "That's partially true," he said.

"The economy's been our best friend," but not for the reason most people think, Morgan said. It's more about the number of new businesses that are being launched in the down economy.

"The risk of starting a business is far less than not starting one," he said.

In this new economy, educator Steve Currall said he's "encouraged by the resourcefulness and the flexibility that many executives and companies are showing."

"It's that flexibility that will spawn new companies and jobs," said Currall, dean of the University of California Davis Graduate School of Management. "For the region, anything we can do to create the condition to foster this enterprising approach to be more pervasive will be good for the economy.

"Lots of great companies have been created during economic downturns," he added. "That enterprising spirit is what will fuel the recovery of the regional economy."