Factory overproduction is a category of liquidation merchandise that is created due to the nature of the relationship between factories and their trading accounts. Overproduction occurs when a factory is producing goods for an upcoming season and wants to ensure that it will have enough stock to meet the demand of distributors, importers, and wholesalers. For example, if the end of the school year is fast approaching and the factory is producing party dresses, you’ll want to run your machines at full steam to ensure you have enough supply for dress wholesalers who buy to resell to dress stores. . Although the factory runs the risk of overproducing merchandise, it would rather have a small loss in excess inventory than lose wholesale customers who will switch their purchases to another manufacturer.
If a large department store runs out of enough products to sell, it will take no chances next season and will give its orders to the factory competitor. While many producers research market demand so they can manufacture the correct quantities, it makes more business sense for them to produce additional products to meet any unexpected demand. Also, if the factory has additional wholesale dresses available, it can oversell its products to new retail accounts.
Not all overproduction can be bought from factories. If Jones New York places an order for women’s suits to be made, he does not want to overproduce suits. If there are additional suits made by the factory, they are expected to be destroyed. As the licensee, Jones New York would be the only entity entitled to sell those items. To purchase branded inventory from a sawmill, you will need written permission from the brand owner. A safer route would be to buy generic, unbranded merchandise, as you would not be required to seek a release document for liquidated merchandise.