Tuesday, October 11, 2016

Turnover Tuesdays - Prices Always Come Back, Except When They Don't

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.

The previous posts in the series can be found at the bottom of this post.

Race to the Bottom

A Race to the Bottom is when one seller undercuts the price followed by more and more sellers undercutting.  Prices plummet in a hurry as sellers are racing to lower the price.

When an item goes on sale from one of the big retailers, there is almost invariably a race to the bottom.

My favorite saying is that you either need to be first or last to sell anything.  First because the prices are still high or last when prices finally recover.  Obviously, first is far preferable but not always possible if you can't get your inventory in fast enough or you bought too many to sell before the race to the bottom begins.  So I often find myself waiting for the price recovery to sell (unless I get impatient).  That is usually a good strategy.

Patience, Patience, Patience

As I've said many times.  I usually have to exercise a lot of patience.  The vast majority of the time this works out very well for me, though storage fees can be a bummer.

Here a couple recent examples of sales that required more patience than I would have liked but I'm happy I waited. 

I'm still in the middle of selling many of these but I can talk in generalities.

I bought 40 of these from eBay back in November for $66.49.  That's almost a year ago at that point.  You can see from the Keepa Chart that the number of sellers increased for a while and then precipitously dropped at some point.

You can see that I was originally selling for $140.  I could have sold out pretty quickly at a cheaper price when more sellers came in but I didn't.

I continued to raise prices as more and more sellers sold out until I was selling for almost $200.  That's a profit of over $100 per sale.

I did have 5 refunds, all at the higher price but they were all sellable as new again so they didn't cost me much.

Here is another example - A Kohl's Special

This is an item that goes on sale from Kohl's periodically.   It costs about $60 normally and sometimes go on sale for $30 or even $10.  Then you can get Kohl's promo codes to take another 20-40% off

When you look at the Keepa Chart you can easily see when Kohl's has a sale.  I can verify this by when I purchased as well, it corresponds to slightly before the number of sellers skyrockets.

How much the price recovers completely corresponds to how quickly it is before the next sale

In May and July I was only able to sell for $47-$50 (trying to avoid Long Term Storage fees - which I did), but it took a while for a new Kohl's sale to come and you can see that I started selling for $69.99 and even $79.99.  A profit of over $40 each and over 200% ROI.  That's only because of patience and waiting out all the sellers.  At some point Kohl's had another sale so I had to lower for my last couple (I'm almost out) but it allows me to start the process again :)

This is Great, Except When It's Not

This method works the vast majority of times for one time deals.  You have to monitor sales since the process starts again after a new sale but as long as there is no new sale prices will continue to climb.

This does not apply to deals that can be replenished.  Those have their own set of rules.  Typically they go up in price until it is viable to buy again and then another round of sellers comes in and the process starts again.  You don't always want to maximize the price for that.  If it maxes out at $18, you may want to be sure to sell out at $17 rather than sell a few at $18 and have more sellers come in and drop the price before you have sold out.  Anyways, back to our topic.

Sometimes, even on one time sales this doesn't work.

Here is one example:

I bought these headphones back in February from eBay for about $150.  They were selling for about $250 at the time.  I thought it would be a quick and profitable flip and it hasn't worked out that way.  8 months later the price is around $150.

If you look at the Keepa chart the price should be trending up since there are so many sellers gone but it hasn't moved in months and months and I'll show you why I think that is the case.  It may not be true but I would be surprised if I'm wrong.

Look at the sellers who are left.  Focus Camera, Beach Camera, Amazon and Adorama.  These are all huge names in the business.  They all have tons of inventory.  The reason the number of sellers are down is because people just want out.  They are tired of waiting.  The problem is that the big sellers are all still there.

Not only that, but I actually bought it on eBay from Focus Camera which means that they don't mind the $150 price at all.  That's what they sold it for originally so they might be happy to keep the price there indefinitely.

So what's my plan?  Any other time of the year and it would be time to just give up.  Sell now and lose out but there is no such thing as a fire sale in October on toys or electronics.  I will wait a few months and try to sell in December.  There is a chance that the current inventory will be gone and prices shoot back up.  If that doesn't work, well then I spent a year with $750 of headphones that I sold for $600 after fees and learned an expensive lesson:  Patience works out great, except when it stinks.

Week 64 - The Buy Box
Week 65 - Amazon Restrictions and the Future of Selling on Amazon
Week 66 - Fun with Inventory Reimbursements
Week 67 - Q4 Storage Fees
Week 68 - Start Your Own Listings
Week 69 - A Long Tail Sale and Calculating Storage Fees