Make Money with Apparel: How To Turn Closeout Inventory into Online Revenue
Why Most “Make Money Online” Advice Misses the Mark
Entrepreneurial forums overflow with bold promises of easy riches. Launch a drop shipping empire! Let digital ads make money while you sleep! Start a side hustle and watch the dollars pour in! But here’s the reality: most online ventures crash and burn. E-commerce is a fierce battleground, and more than half of the failed start-ups in a recent study were e-commerce businesses. Many owners overlook the challenge of standing out online. The so-called side hustle experts gloss over the steep costs, the tough learning curve of digital marketing, and the cutthroat price wars that can leave your profits bleeding.
That doesn’t mean online commerce is a lost cause. It means you need a strategy built on action, not empty promises. The winning formula? Smart purchases, quick inventory turnover, and a laser focus on the right customers. Lately, flipping overstock apparel and closeout branded goods has become a standout approach. You don’t have to launch your own clothing line or burn cash on ads. Instead, you can profit by snapping up undervalued inventory from established brands and reselling it online. This guide will show you how to turn excess clothing into real income.
What Is Discount / Closeout Apparel?
Excess inventory, not counterfeit goods
Mountains of unsold clothing often pile up in company warehouses, the result of overestimating demand, canceled orders, or even a simple change in packaging. This dead stock ties up both cash and valuable storage space, so brands are often eager to cut their losses and move it out the door. Closeouts—items permanently dropped from a retailer’s lineup—might be last season’s styles, discontinued designs, or products with updated packaging. Liquidators swoop in to buy these goods in bulk, then resell them to online shops and discount stores. Marketplaces like B Stock Solutions connect resellers with truckloads of returned clothing from big names like Macy's, Nordstrom, and Kohl's. Because liquidators can buy this merchandise for pennies on the wholesale dollar, they can offer deep discounts and still turn a healthy profit.
It is crucial to know that the bargain-priced clothing from these resellers is the real deal, not counterfeit. The low prices reflect slow demand or outdated stock, not fake merchandise. While closeout lots might have scuffed boxes or minor cosmetic flaws, the products themselves are always authentic—especially when it comes to items like jewelry.
For more tips and tricks, see our fashion blog “How Much Does It Cost To Start A Fashion Line?,” which explains how to check materials and markings on gold and silver pieces.
Why Apparel Still Works Online (Despite the Competition)
High demand and category familiarity
Shopping online for clothes is still one of the most popular activities people do on the internet. Stores like TJ Maxx, Ross, and Burlington generated over $101 billion in sales in 2024, and the number is expected to increase by 5% yearly. In 2021, approximately 70% of their sales came from clothing and shoes, proving that shoppers continue to purchase them. Retail shoppers have nothing to figure out, and they know what size they need and what fits. Selling clothing below the recommended price is something people want. For new shoppers, $30 for a designer shirt is a good price.
The Catch: Return and Logistics
While shoppers enjoy their purchases, a massive 25% to 40% of online shoppers return their purchases. The apparel industry has been impacted greatly by this. In 2021, a study by Coresight Research found that approximately $38 billion in online apparel purchases were returned. In 2021 alone, more than $18 billion of purchased apparel was returned to stores. Numerous reasons account for the refunds: people order the wrong size, expect a piece of clothing to fit a certain way, or want to try on more than one item with their order. Make sure to pay attention to your returns, or your bottom line will be impacted.
Discounts encourage buyers to take a small risk. People are more willing to take a small chance when the price is lower. They are more likely to overlook flaws when they spend less and therefore are less likely to want to return the product. However, you still have to deal with reverse logistics, clear policies, and return rate pricing.
How the Discount Apparel Model Actually Works
Source Discounted Inventory
The first step is securing products. Options include:
Closeout suppliers and liquidation marketplaces - places such as B Stock Solutions, 888 Lots, Via Trading, and BlueLots auction off lots of returned or overstock apparel from big retailers. Liquidators purchase items at 30-60% below wholesale and, at times, even buy stuff for pennies on the dollar.
Brand liquidations and factory overruns - manufacturers sometimes liquidate unsold products from canceled orders or due to seasonal shifts. Building relationships helps to direct buy from factory overruns– extra production runs beyond the purchase orders.
Local closeouts and estate sales - some wholesalers clear apparel locally. Networking with local businesses may uncover small parcels.
Build a Simple Online Storefront
This model does not require elaborate branding. Just a basic Shopify store or a marketplace account (eBay, Etsy, Facebook Marketplace) will do. Off-price retailers excel by keeping their marketing spend low: for example, Ross spends only 0.4% of revenue on advertising, compared to Macy’s 4%, and they sell through their stock in 6-8 weeks. Aim to replicate that streamlined approach with ready-made templates for your store, and focus on high-quality images and clear descriptions rather than bells and whistles.
Price Driven by Velocity, not Ego
In off-price retail, margins are a byproduct of turnover. For example, products procured at 30% of their wholesale cost can be sold at 60% off retail and still produce reasonable margins. A good example is TJ Maxx, which reports 10.5% operating margins while retailing at these insane price points. Pricing should be set based on how fast you wish to convert your stock into cash. Don’t wait for the “perfect” customer. It is better to take markdowns that drive sales than to hold for a price that may not be worth it to the consumer.
Move Inventory Efficiently
Avoid emotional attachment to SKUs. Inventory is meant to be sold, which drives profits that can be reinvested into the business. Identify bestsellers using data and replenish fast-moving items. Complement demand with aggressive markdowns and bundled items to free up storage space. Consider the cost of returns when making reorder decisions, especially if you are seeing a spike in returns.
Use Traffic Wisely
There are a few types of traffic to consider: Direct (e.g., email, sms), paid (e.g., IG/Google Shopping ads) and marketplace promotions, and SEO (e.g., optimized listings for search and social media). Around 90% of e-commerce businesses fail because of a lack of marketing and visibility, so spend a little money on ads and focus on SEO for a short time while you monitor demand. Maintain customer service because marketplace algorithms often favor sellers with good feedback and fast-moving inventory.
What Makes This Model Work (and Where People Go Wrong)
What Works
Here are some tips for being successful in the retail industry, especially if you're just starting out.
Find a niche you enjoy, and stick with it for a while. Whether it’s athleisure wear, workwear, or something else, develop an understanding of the size runs, product seasonality, and buyers’ preferences. This narrow focus will also help you with photography and listing.
Calculating only the landed costs of a unit (purchase price, shipping, customs, platform fees, and estimated return costs) can be misleading. Because return rates range from 24% to 40% for many retailers, you need to factor in the cost of returns when calculating your margins.
Usually, off-price buyers will turn inventory within a 6 to 8-week window. If an item is selling well, you want to reorder it. If it’s not selling, you want to mark it down to recover your and the buyers’ capital.
Liquidation lots can contain counterfeit products, so make sure to check for branded tags, quality of materials, and packaging. If it’s an accessory, the TGO blog offers some tips to help identify counterfeit jewelry.
Where People Fail
New sellers often make the mistake of buying large quantities of mixed inventory without understanding the different sell-through rates for each item type. Start small, learn your market, and scale gradually.
Ignoring refund rates – You sell something for $10. A customer buys it, and then returns it. This means that your profit is now $3. You need to factor in that processing a return costs $6, so now your profit is gone. This is called the refund rate, and it explains how a quarter of your sales could be refunded.
Misestimating storage and fulfillment fees – When you store too much product, you pay storage fees, and your cash is tied up in excess inventory. Overprediction of demand or systematic inventory mismanagement leads to excess stock. This leads to carrying costs that exceed business profit. Businesses like Ross have lean operations, enabling them to achieve a 10.5% profit margin while minimizing excess costs.
Treating it like passive income – Operational businesses like Off-price retail need active sourcing and analytics, just like customer service. Most e-commerce businesses fail for this reason.
Realistic Economics — What the Numbers Can Look Like
Gross and net margins
Setting aside operating expenses, traditional net margins for retail clothing stores are around 7%, while Target's gross profit margins are around 53%. Off-price sellers take a different approach: they purchase merchandise 30–60% below wholesale and run their operations lean, achieving operating margins around 10.5%. If you're considering reselling discounted apparel online, you might see improved margins on some items. However, keep in mind that platform fees and high return rates can quickly eat into your profits. For example, pricing too aggressively or overlooking logistics can make a big difference. With return rates averaging 24.4% in apparel—and return processing often costing about 66% of the item's price—it's easy for margins to vanish unless you plan carefully.
Example Scenario
Let’s say you buy 50 Nike hoodies at a liquidation auction for $6 each, and after $2 in shipping and fees, your total cost is $8 per hoodie. You list them at $18 each, which is 60% below the average retail price—a great deal for buyers! If about 20% of the hoodies are returned (similar to the average apparel return rate of 24.4%), and it costs 66% of the item’s price to process those returns, your net revenue per sold hoodie will likely drop to $3–$4 after all fees and returns are accounted for. Selling the whole lot could earn you a profit of $150–$200. If you scale up to several hundred units a month, you might see net profits of a few thousand dollars. That’s a solid return, though it may not be huge for the effort involved. The real potential is in the cash flow: you can use your earnings to buy into new liquidation auctions and keep the cycle going. Just remember, moving your inventory quickly is key!
Who This Model Is (and Isn’t) For
Good fit
Here’s how we see the roles breaking down with these business models:
Hard Data Operators – If you love spreadsheets, hunting for deals, and tweaking margins, you’ll thrive with this model. Success comes from understanding the numbers and moving quickly when opportunities arise.
Organized Chaos Entrepreneurs – Managing returns, packaging, and shipping is at the heart of this business. If you find satisfaction in putting systems in place and keeping things running smoothly, discount apparel could be a rewarding fit.
DIY Enthusiasts – This model lets you roll up your sleeves: you’ll be merchandising, taking photos, chatting with customers, and managing inventory daily.
Not Ideal For
Passive Income Seekers – This isn’t the place for passive income. Selling off-price inventory means you’ll turn stock every 6 to 8 weeks, and if you’re not around to handle it, the business can stall.
People Unwilling to Handle Returns and Complaints – Expect about 1 in 4 orders to come back; it’s just part of the game, and handling returns well is key to keeping customers happy.
Anyone expecting instant scale - Building a reliable supply chain and a loyal customer base takes time. There’s plenty to do and lots of off-price inventory out there—patience and persistence pay off.
Creative Entrepreneurs - Building a quality brand takes time and is not often associated with off price goods. So if you’re highly creative consider working on a luxury concept.
How This Fits Into a Broader “Ways to Make Money” Strategy
Reselling discounted clothing isn’t the only way to make money online, but it does have some unique advantages—especially if you’re already running other businesses. While freelancing, consulting, and content businesses rely on your personal skills and expertise, discount apparel is all about smart operations and quick moves. You can find deals, list inventory at a profit, and keep things moving.
If you enjoy juggling multiple projects, this business model might be a great fit. The operational discipline needed for discount apparel can actually complement your other online ventures and add a steady, practical income stream.
When managed well, discount apparel fits right alongside other income streams like freelancing or consulting—these can give you extra cash to reinvest in inventory. If you run a content business, you can even cross-promote your store to help sell more apparel. Just remember: keeping off-price sales to no more than 15% of your overall sales is a smart way to protect your brand’s reputation and profits. Think of discount apparel as a valuable side hustle, not your main focus.
Final Verdict
Most “make money online” ideas skip over the real risks and day-to-day challenges—but discount and closeout apparel is refreshingly straightforward. It’s less about building a flashy brand and more about getting value from inventory others have overlooked. Your success comes from finding good deals, keeping operations efficient, and pricing items so they move quickly.
The market is massive, with off-price apparel sales passing $100 billion, but the real wins come from working smarter, not just chasing hype. If you take the time to learn about logistics, returns processing, and handling excess stock, you can build a steady, sustainable business by giving surplus clothing a second life online.
