Pareto Principle in Reselling

Last year my wife and I made a pretty significant decision in how we run our reselling business. We had been chasing every opportunity we learned of. Best Buy’s Daily Deals? Gotta jump. Kohls offering 30% off plus Kohls Cash (which also stacks with Kohls Yes2You rewards), jump! At some point last year, we made the decision that it was too much. So we took a step back and looked at where we got the most value, where we generated the most solid products and profit. We then utilized the Pareto Principle in reselling, which is the 80/20 rule that I’m sure you have heard everywhere–hopefully.

Applying the Pareto Principle in Reselling

Essentially the Pareto Principle states that 80% of value will come from 20% of efforts. In the case of reselling, we looked at all of the stores we sourced at regularly, Best Buy, Kohls, Target, Walmart, etc. We then looked at how much we were actually generating from those stores, and found those stores that we were clearly more successful at. From there, we made a few active decisions:
  1. Identify our core competencies when it comes to stores that clearly we are better at, like Target, Walmart.
  2. Accept that we can’t be expert with every store.
  3. Transition away from chasing every deal to going deeper in knowledge, and in most cases, deeper in inventory on the deals from our core stores.
  4. Ignore other stores on a regular bases.
  5. Treat truly good deals (e.g. shopping portals, Black Friday, quarterly bonuses) as one-offs, and analyze them in their own right.
    Specifically, I’m trying to avoid getting pulled back into chasing every deal
  6. As available, do measured tests with new product categories from stores I already know.
  7. Occasionally, spend an hour in a new store, but limit the engagement to just an hour.  

For most of the items in the list, the focus is on limiting, which might be counter intuitive.

Imagine the alternative – chasing all of this:

Pareto Principle in Reselling

The risk of pursuing everything… used under Creative Commons from Wendell.

Why Limit Ourselves?

Short answer: Because time is our most valuable resource. I’ve written before that there are only 168 hours in a week. It is entirely too easy to chase everything, get overwhelmed and either want to quit, or just become inefficient. The whole reason for doing any of this, is for the most efficient use of resources. 

The pursuit of miles and points is exactly the same – go for the highest return on invested time first. Whether its the easiest, lowest time investment like Redbird and Bluebird were. Its why the world after Redbird has been less written about. 

This isn’t just advice for weekend entrepreneurs, this is also advice for full time resellers. Really we shouldn’t just limit the Pareto Principle in Reselling, we should be mindful of time. We should be looking at inefficiencies and actively decide if we should accept them.

What have you applied the Pareto Principle to in your life?

2 thoughts on “Pareto Principle in Reselling

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