Overstock merchandise is leftover merchandise that is sold at a reduced price to cover the cost of the initial investment. Closeout merchandise usually refers to returned, discontinued or never-purchased goods that are sold at a significantly discounted price.
Overstocks and closeouts are often the result of poor inventory management. When anticipating a high sell-off potential, a manufacturer may overproduce goods or a merchandiser may purchase too many goods. In many cases, merchandisers buy high amounts of goods because the initial cost is lower when purchasing in bulk. However, failure to sell all of the purchased goods can result in a profit deficit, unless the merchandiser or manufacturer can find another outlet for unloading the overstock merchandise.
While individual resellers can buy and sell overstock merchandise, many nationwide resellers, such as Overstock.com or TJ Maxx, make long-term arrangements to buy excess goods from merchandising partners. Since overstock buyers often pay well below the suggested retail price, they often build a customer base by passing on the savings and selling brand-new, and sometimes high-end, goods at a discounted price. Closeout merchandise is less consistent in quality because the goods may be damaged floor models or used products returned by customers. They may also be new goods that failed to sell and are being unloaded as part of a business liquidation.