Tuesday, May 31, 2016

Turnover Tuesdays - A Year of Reselling

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.

We have now finished 52 weeks of Turnover Tuesdays.  Today is week 53.  That's crazy!  It's been a wild year for me and I hope for everyone here too.

Things have changed a lot in the last year and I want to share my thoughts on how things have gone, major things I've learned and what I hope to accomplish going forward.  I don't have all the answers and I've made many, many mistakes along the way but hopefully someone can take from it and avoid the same pitfalls I made.  Maybe someone can help me avoid mistakes as well!

Looking at The Numbers

You can see that in the last year I had slightly more than $500,000 in sales.  (I didn't start in April since I only had $1,600 in sales that month).

I am on pace for similar sales this year not including an increase in sales.  That means I might do closer to $750,000 for year 2016 but who knows.

That's really great in terms of overall sales and growth trajectory but I am not happy with my results from last year and even the beginning of this year and it has nothing to do with my sales numbers.

Return on Investment/Profit Margin

The reason I am not happy with my previous results has nothing to do with sales numbers and everything to do with my average return on investment (ROI)/profit margin.

When I first started, I would be willing to buy something that was close to 0-5% profit margin (not including the extras like shopping portals, credit card points, loyalty points, gift card savings etc.), sometimes even less when the extras were even better than usual.

At this point, if someone mentions a deal that might have a 20% ROI, I am not interested, even if it is a fast seller (with very limited exceptions).  I try to only consider 30%+ and obviously I prefer if it is significantly better.

That means my sales numbers may go down which is tough to watch, who doesn't like seeing sales continue to climb, but ultimately it isn't about sales.  It's about profit.  If my profit increases, is even the same or a little less, it's fine that my sales have decreased with them.  My risk and float decreases as well alongside it.

Think about it this way.  Which would you choose?  You can either buy $50,000 worth of inventory a month at 10% ROI and earn $5k or buy $15,000 worth of inventory a month at 30% ROI and earn $4,500 a month.

If you asked me when I first started I would have chosen the first.  In fact, I'm still tempted as I'm writing this to say the first but I now know which one I prefer.  I will take the second type 10/10 times.  The reason is because of time investment, float, returns, storage fees and general risk.

If I need to find $50,000 worth of sales every month that takes a lot of time to find.  Any time I'm spending on my business is time I'm not spending either finding other better deals, looking for better streams of income or having time with my family and friends.

Returns - In addition, when you have $50,000 in sales you also have $50,000 worth of sales that can be returned.  Even if returns are only affecting your margins by about 1% (I probably underestimated the impact but let's keep it at 1% for arguments sake), 1% of $50,000 is $500.  1% of $30,000 is only $300 so your advantage is now only $300 a month. If returns increased to 2% of your margins, the difference is now only $100, etc.

Float- $50,000 in sales also requires a tremendous float, especially if you aren't selling items immediately and it can really throttle your growth if you don't have unlimited capital.

Storage Fees - Often times, getting a high volume of sales means buying lots of the same item and hoping they sell at good profits.  Hopefully that works far more often than not but if you have 100 or more of something that isn't selling well, the storage fees can wreak havoc on your margins.

General risk - The more money you have in inventory, especially new inventory that you don't have a history of selling, the greater the chance that something tanks and you end up losing money on that deal.  In addition, if your margins are 30%+, especially 100%+, if prices tank, you might still be ok.  If you are at 10% or less, price decreases are a problem

Your profit margins will by far have the biggest impact on your final numbers.  It's obvious but bears repeating all the time.

Avoiding High Priced Items

I've changed my approach a lot.  I used to be all about those iPads.  It works nicely but there is a lot of risk involved in high priced electronics for a return or even possibly fraud.  Think about it as buyer.  If you buy something for $500 and it doesn't work perfectly, you know you are returning it immediately to make sure the return window doesn't go away.  If you bought it for $15-$20 you try to justify your purchase so that you don't have to go through the annoyance of returning it.  That means I I'd rather sell $15 or $20 items than $500 items.  Also, someone who is going to have a fraudulent return (return a different item or missing accessories) probably won't bother with $15-$20 items.

It's been months since I bought an iPad and I'm still trying to sell out my current stock at good prices and I'm not sure how soon I will buy more.

It's not just iPads though, I avoid most high priced items unless the margins are fantastic.  Hard for me to say this, but risk avoidance has played a larger and larger role in my reselling business.

Avoid Unknown eBay Sellers

eBay is one of the largest market in the world for counterfeit goods.  If you buy from eBay and sell on Amazon you are putting your account at risk if you don't know the seller is legitimate.  You may be buying counterfeit goods and not realize it.

Buying from Target, Newegg, Best Buy, Toys-R-US, etc on eBay is totally fine but buying from "thegreatestdealsever" who has 10 ratings is not safe.

Take Reviews Seriously

If the item has a large percentage of 1, 2 and 3 star reviews and they keep saying that it breaks after using it 5 times, it probably breaks really quickly.  Guess what, if it breaks after 5 times it's getting returned to you.

Sell good products!

Treat Reselling Like a Real Business

You should treat reselling like a real business because it is a real business.  That means collecting sales tax, paying income tax, possibly incorporating your business and not being afraid to delegate tasks to increase overall profits.

You should be looking for ways to decrease your overall tax burden with legitimate tax deductions (for another post) and even possibly starting a 401(k) to help save for retirement while decreasing your taxes.

I've also learned to outsource tasks.  There are a lot of aspects to running your business.  You will never be able to do everything yourself while continuing to grow and have some time for yourself.  Offload some of your tasks that can be done by others.  I don't pack much anymore, I pay others to do most of it.  It hurts my margins but gives me valuable time, time I can use to increase my overall profitability.

You can keep doing everything yourself for as long as possible but it may come to a point where you can be using your time doing more valuable tasks.

Good Tracking

If there is one thing I have learned the hard way it's that Amazon's inventory software is not great.  Amazon loses, damages, accepts returns that never happen and just has some bad math (I need to get back to that series).  You are eligible for reimbursements for all of these items if you only knew to ask.  That can be a few hundred to thousands of dollars of month of lost profit which you don't even know about.  If you have a good tracking system (or pay someone else to do it for you), it makes a big difference to your bottom line.

Chasing Sales vs. Developing Go to Purchases

There are a few basic categories of sellers.  Some chase sales and some try to sell the same items over and over again and a combination of both.

I started off as the first type of seller.  It's exhausting and time consuming because you are always looking for the next great deal.  In addition, you need to contend with tons of other sellers looking at the same channels and finding those same exact deals and sales

Unless it is so good you can't avoid it or you are buying for a different reason try to avoid sales which are available nationally to everyone because everyone will find them.

I've now tried as best as possible to find more purchases I can continue to purchase over and over again.  It's far less time consuming and usually involves less competition as well.  It can be more difficult to find but hard to protect but well worth it in my experience.

A go to purchase usually is a good purchase even when you buy it at full price.  Other sellers are looking for sales so it usually keeps the eyeballs off.  You might have to retrain yourself though.

In Store is Annoying but can be Better

Reselling has made me fat and lazy, as opposed to Vinh who lost weight because he stayed with MS.  I guess that's the tradeoff.

Either way. I like deals that are available online because I don't have to go anywhere or do anything.  However, there is also a lot more competition for the same reason.  If you go in store to buy something that isn't available online, you can do much better.

Slow and Steady Wins the Race - Avoid Bans

There are some retailers which are more ban happy to resellers than others.  All my orders from Best Buy are now autocancelled (if anyone knows a way around that please let me know - orensmoneysaver @gmail.com), I am not allowed to earn Toys R US rewards though they let me order.  There is another store I am banned from but I wont' reveal the name since it isn't a reselling haven yet.

Do yourself a favor, don't get banned.  You want to buy from these stores for a long time so don't give them a reason to ban you.

Challenges of Going Big 

A few weeks ago I said, Go Big or Go Home.  I still believe that to a point.  However, I now realize that my storage fees were significantly larger than some of my peers.  I've scaled back a little bit how much I purchase of any one item unless I am positive it will sell fast or if it is a limited time purchase.  Just because I can buy 100, doesn't mean I have to.  Buy 15. send them, as they sell buy more and send those in.  You don't have to let yourself run out of stock but you now have 30 days from when the stock gets in before you are paying storage fees on those.

In addition, I've had to really lower my price on some items because prices went down and I didn't see the path to increased prices.  Better to lose some money now than continue to pay storage fees if prices aren't going to increase.  I'm giving the stinkeye to that fiery temptress.  That is far less likely if you only have a few of lots of different items since you can sneak in 3 or 4 sales.  100 unites is a lot harder to sneak in.

Avoiding Purchases Just for Shopping Portals 

I love shopping portals.  I mean, I love shopping portals! You are making the purchase anyways, why not get some extra money.  Personally, for the last couple of months every dollar I make from shopping portals goes right into my IRA.  I plan to be fully funded for myself and close to it for my wife by the time my Discover Doubling money comes through.  To me it is found money which is much easier to put away for the future than taking from other sources.  It never makes it into another bank account.

I still buy for the portal every once in a while when it is just too good to pass up but I almost never make purchases for the shopping portal.

What happens when you buy something that is breakeven but you were banking on the 15% from ebates and the portal doesn't track or worse, it's rejecting the claim because it's a purchase made for resell because of your quantity?  You just bought something that was breakeven to begin with and prices may go down further.

When portals are gravy, you can live on your profit and invest/save/travel with your gravy. When everything is in the portals, it's far riskier.

Discounted Gift Cards

Discounted gift cards are amazing but at this point I can't track their balances anymore.  Therefore, I only purchase discounted gift cards from reliable exchanges like Raise, Gift Card Mart, MPX app, Gyft, PayPal Digital Gifts etc. and use them immediately and in their entirety.

Here is a nice little guide on whether to pay for an item with a gift card or buy it with a credit card instead

Talk to Others - Keep on Learning!

As I've mentioned, I've changed my style dramatically over the last year.  That's only possible because I talk to friends a lot about reselling.  They make me critically evaluate what I'm doing right and show me how what I'm doing could be better or if I'm just plain making a mistake.  I'm constantly learning new tricks and bits of information and I recommend everyone do the same.  Talk to others, everyone has something you can learn from.  It's the easiest way to get better and it's enjoyable too.  Unless you evolve, you will become obsolete.