The  surplus business involves the buying and selling of surplus goods; Surplus items may include excess inventory, discontinued products, returns, or equipment that is still functional but no longer in use. 

This business allows businesses to get some return on "dead" stock and others to get stock at a cheap price to sell in a low-cost channel.

What is surplus

Sometimes we can look at the surplus stream and say a product is not selling too well but surplus does not necessarily mean there a product is unpopular. It can also mean that in order to meet a certain price point I need to over-produce due to economies of scale so I sell at one price to my usual customers who buy only a certain amount and a surplus buyer buys the rest (me-too energy drink brands being the best example).

Excess inventory, discontinued products, returns

• End of range, season etc.

• Wholesale clearance: selling the last of a lot

• Short dated

• Shop-soiled

I also want to introduce a another category that I have seen in clearance stores:

Straight to Surplus
This means that a product is sold exclusively in surplus stores it was not sold in mainstream stores, usually when its a big brand it could be a custom order for a certain market that was pulled and they want to clear the stock, it could mean that the launch was cancelled at the last moment and it was decided at the last minute not to take it to market. It could be offcuts repackaged in a clever way. But I want to share another straight to surplus model: small manufacturers who's product do not meet the standards of retail stores. As a manufacturer you are able to keep the cost low if you cut certain corners on manufacturing and packaging but then major retailers won't stock your product. You might need special packaging and barcodes, and you need to be tax cleared and have race-based quotas. But if you selling to a surplus shop they not going to have the same standards like PicknPay Checkers. While it might not seem like it there are actually businesses that set out like this and are able to make a profit selling exclusively to surplus channels. Sometimes launching a product can be expensive especially if you have to meet all the "Western" standard imposed by major brands. I like to think of straight to surplus brands like a "direct-to-video" film and like smaller studios can make money there so can smaller companies.