Closeout merchandise is lucrative because of its nature. Merchandise is considered to be a closeout when its original seller loses the original sales venue for it. In other words, closeout merchandise can be a case of socks which were manufactured for an upcoming movie. Once the movie is no longer shown in the theaters, the movie licensed socks need to be sold as a closeout.

According to Donny Lowy, the success of a wholesale and closeout business will depend on how much their customers can make in the resale market, on their wholesale and closeout products. Therefore the pricing equation must reflect the profit margin that the reseller will have when they take their merchandise to their retail outlets.

As long as the wholesale and closeout customers enjoy a decent profit margin they will return to the wholesale or closeout vendor. This relationship can lead to an increase in sales volume which makes it worthwhile for a wholesaler or closeout dealer to sacrifice profit margins for long term sales revenue.

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