Tuesday, January 10, 2017

Turnover Tuesdays - I've Violated All My "Rules"

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.

Selling on Amazon has been a wild ride for me.  It's turned from a hobby/manufactured spend tool into a real business in a short amount of time (I made my first sale in April 2015).  I know it's a bit cliche to say it but the only thing that has remained constant has been the change and evolution of just about everything.  From the type of deals I look for, the strategies I employ and Amazon's ever changing fee structure, I'm constantly changing my business model.

I've Broken A Lot of My Rules

Rule #1 - Go for the Miles

If you looked at my inventory after about 6 months of selling you wouldn't recognize it now.  It was full of electronics and high priced electronics mostly.  It would be normal for me to have 20-40 iPads after a sale at Best Buy or Staples.  At first I was buying when I was going to basically break even after portals, gift cards etc.  That didn't last long.  Then I wanted at least 5% ROI, then 10%.  Now, it's been a long, long time since I bought an iPad.  The profit just isn't possible for it to be worth my time.

Mostly that is a change of reselling being a source of miles (and cashback) to a source of income.

I still think that if done properly, reselling can be a great way to earn a ton of miles from credit card points, portals, portal bonuses and the like.  If you are interested in that, iPads are probably still the way to go.  They are expensive, sell well, return rates are more limited than some other electronics and are sold by the right stores.  You have to be careful to buy the right products (not Apple Watches!) at the right prices or returns will make your miles very expensive.  That being said, it is very possible to earn a profit (albeit small) while earning miles.  If I had unlimited time I would still do iPads in addition but I don't so I won't.

Rule #2 Retail Arbitrage vs. Online Arbitrage

For a long time I heavily preferred Online Arbitrage (OA) vs. Retail Arbitrage (RA) for all the reasons I mentioned here.

I still like doing OA rather than RA for the same reason but I find myself doing a lot more RA than I used to.  It's more annoying but that keeps out competition.  I try to sell items that may not even be available for the rest of the country to do RA, let alone OA.  Profits are usually better per item even if the volume is lower.

The number of SKUs I was managing was starting to get too large and it was hard to check on every SKU. Items that are available nationwide online tend to have tons of sellers and profits can erode quickly.  You either need to sell fast or last.  Selling fast wasn't much of an option for me so it usually meant I sold last.

Rule #3 - Don't Worry about Storage

For a long time I basically didn't worry about storage fees.  That was a relic of the iPad days.

When you sell last a lot storage fees start creeping up.  Also, iPads are small so storage is very minimal.  As the average price of the items I was selling went down, storage fees became a larger percentage of the overall sale structure.  If I paid $.10 a month for an iPad that sold for $300 and I had a profit of $20, that's not a big deal, but if that same item sold for $10 with a profit of $2 and I paid 4 months storage, it might not be a dealbreaker but it becomes an issue to deal with.

As I outlined here, I have a plan to cut my storage fees significantly.  It should make a difference.

Rule #4 - Buy Every One-Time Deal That Seems 30% ROI or Greater

Don't get me wrong, this strategy has worked nicely but it's tough.  My inventory had ballooned to over 11 pages of SKUs. I've since paired that down (I'm almost on page 8 - long way to go) and until I get that under control I don't plan on buying very many one time deals.

Having too much inventory leads to unused capital, increased storage fees, increased long term storage fees and decreased profits as prices decline.  That being said, it also leads to increased brain suck time which is the worst part.  I would much rather be looking for the next replenishable deal or distributor deal and I can't when I'm dealing with repricing old inventory from a one time deal or a refund from a deal I wouldn't have bought now anyways.

Amazon is a constant game of reevaluation.  The information that was true a few months ago may not be true now.  What was working a few months ago may not work now.  If you keep doing the same thing, you may see your profits erode and not know what to do about it so keep making sure that you are on the right path.

If there is an even better path, don't be afraid to abandon your previous path slowly or quickly.

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
Week 70  - Prices Always Come Back Except When They Don't
Week 71 - Past Performance is No Guarantee of Future Results
Week 72 - Automation Beyond Amazon
Week 73 - Some Quick Holiday Tips
Week 74 - Update on Miles vs. Cashback Opportunity Costs
Week 75 - Pricing for the 4th Quarter Madness
Week 76 - Returns, Returns, Returns
Week 77 - Reimbursement
Week 78 - Q4 for Accelerated Inventory Turnover
Week 79 - How it is Going Outside of Amazon
Week 80 - 2017 Goals