Yesterday I wrote Introducing Fulfilled by Sears, another marketplace option similar to Fulfillment by Amazon. Well, while I was researching, it occurred to me that the numbers could work out for something bigger than just standard reselling.
The Concept
Hypothesis:
Could Fulfilled by Sear (FBS) be used to “mint” points as part of a repeatable process? Lets go a step further, could FBS be the Perpetual Point Machine that FrequentMiler (and the rest of us) have sought?
For reference, this is FrequentMiler’s criteria a Perpetual Point Machine:
- The Perpetual Point Machine (PPM) may take effort and money to setup initially, but must not take much effort or money to keep it going.
- The PPM must be able to generate hundreds of thousands of points per year.
- The PPM must do no harm. In my earlier post “Perpetual Point Machine… Not!” I described a failed scheme to buy gift cards with gift cards and earn miles each time, indefinitely. The problem with that scheme is that, if it had worked, it would clearly harm the retailer who would have been responsible for buying all of those miles.
- The perfect PPM would also somehow do some good for the world, not just for the recipient of the points. Kiva loans are a great example of this, but the number of points that can be accrued annually is limited by the amount of money you have available to loan. For most people, this won’t come anywhere near the goal of achieving hundreds of thousands of points per year.
Assumptions:
- Buying through Sears earns you miles whether its directly from sears or a FBS seller.
- Requires a multiple person system.
- Buyers are double dipping for gift cards, either by leveraging gift card purchase deals (like this FrequentMiler QuickDeal, and this)
- Deal is significantly better with shopping portal bonuses seen in the past (e.g. in 18x back in June)
- Includes the $39.99 FBS monthly fee, required when selling over $400.
- For the purposes of this post, all miles equal $0.01.
Theory:
The percentage of fees can be brought down to ~9.5% or so (for the example below), through scaling purchases. As such, those fees can be fully offset by portal multipliers and significantly discounted gift cards (~20% off for example).
Testing
First, lets review one of the examples that I had used for the comparison, the Nexus Tablet:
Asus Nexus Tab 16GB FBS Analysis
| Asus Nexus Tab 16GB | Fulfilled by Sears |
|---|---|
| Cost | $143.08 |
| Item Price | $199.00 |
| Shipping | $0 |
| Revenue Subtotal | $199.00 |
| Marketplace Commission | $16.14 |
| Pick and Pack Fee | $1.00 |
| Shipping | $0 |
| Order Handling | $0 |
| Weight Handling | $0.70 |
| Storage | $0.00 |
| Inbound Shipping | $0 |
| Customer Service | $0 |
| Net Cost | $17.84 |
| Net Revenue | $181.16 |
| Margin | $38.08 |
| Percentage Fees (not including $39.99) | 9% |
As you can see, I’ve added the cost (according to BigHabitat’s post), as well as the percentage fees, and the estimated margin.
So, lets test the theory out with a single unit.
| Quantity | 1 |
| Cost | $199.00 |
| Seller Fees (inclusive $39.99 fee) | $57.83 |
| Percentage Fee | 29% |
| Miles Multiplier (assumes current 5x double dipped) | 10 |
| Miles Earned | 1,990 |
| Rough value of miles | $19.90 |
Pretty lackluster, right? But lets change some of the variables. First we go with quantity:
| Quantity | 20 |
| Cost | $3,980.00 |
| Seller Fees (inclusive $39.99 fee) | $396.79 |
| Percentage Fee | 10% |
| Miles Multiplier (assumes current 5x double dipped) | 10 |
| Miles Earned | 39,800 |
| Rough value of miles | 398.00 |
| Cost per mile | $0.010 |
Now we’re starting to get some place. The table above has 20 units sold, and assumes the current 5x portal (AAdvantage as I write this), being double dipped. Of course this just brings the cost per mile to a penny a point. We can do better.
| Quantity | 20 |
| Cost | $3,980.00 |
| Seller Fees (inclusive $39.99 fee) | $396.79 |
| Percentage Fee | 10% |
| Miles Multiplier (assumes current 9x double dipped) | 18 |
| Miles Earned | 71,640 |
| Rough value of miles | 716.40 |
| Cost per mile | $0.006 |
We really make progress when we tweak the multiplier. The table above has the same 20 units sold, but this time assumes the a 9x shopping portal bonus, as we saw back in June and at other times. It further assumes the double dip to make it 18x. This brings the cost per mile to $0.006 a point. Now we’re actually cheaper than some Manufactured Spending techniques.
Wrapping Up
It’s clear that there are some variables here, the biggest of which is Sears’ portal bonuses. I would argue that if history is any indication, the higher portal bonuses will return. With enough scaling, and perhaps a large enough group, this strategy could in theory work out to generate significant miles in a repeatable fashion.
Looking at the FrequentMiler’s criteria, its hard to say how well this lines up. It can be mostly automated, in theory, you could make the initial investment and not have to make continued significant investment. But does it harm? I’m not sure. On the one hand, the retailer would have to buy the miles, but on the other hand, they are receiving compensation.
This is a thought I came up with on an idle Tuesday night. I have not tested it. I’m not sure what the legal ramifications could be. I make no claims. I’m just trying to look at a different angle.
What do you think? Is this a game changer?
Thanks for the shout out. And welcome to the PPM dreamers club 🙂
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I also dreamed up a Sears Marketplace PPM a couple of years ago, but I never pursued it because it crossed the my line that is determined by: “am I willing to tell my wife about this?” My version involved a buyer and seller and fictitious computers that appeared to be shipped to a tax free state.
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I’m not sure I fully understand your idea here, though. What is the buyer doing with the tablets? Are they going back to Sears to be sold again? And, if so, are you accounting for shipping costs to send to Sears?
@FrequentMiler – Thanks for your comment! So my concept is that the buyer in turn ships them back to Sears to sell again. I love the ficticious computer idea, and can see how it would cross the line. I’m still not 100% one way or the other on how this one fits in that grey area, but feel like everyone pretty much gets their “share” so to speak.
In the rough math I provided in the post, I did not account for shipping, that would probably add another percentage point. Of course, what I didn’t account for is if the buyer were able to scale the 20% off Sears GC’s such as your QuickDeal a couple of days ago.
Trevor,
Don’t forget if you are a ShopYourWay Max member you are getting 2% in SYW points on the purchase! So there’s $80 to pay for the shipping. Get the costs down lower by jacking up the price of the item, so generating more float on less physical items, and marketplace items tend to be higher priced anyway. Better yet, get rid of the shipping altogether as Sears Marketplace has lots of sellers who ship directly.
The problem… if Sears is like Amazon they will issue a 1099. Now you have to include in your tax return, and calculate your cost basis, which of course was the inflated amount you paid yourself on Sears Marketplace. I’m not sure if the IRS will appreciate the creativity, efficiency, and novelty of having yourself on both sides of the transaction. But maybe if you kept it under $20k… or created multiple seller accounts. And gift cards do work on Marketplace items…
@Bighabitat – great point on the 2% SYW! Every little bit helps. If my calculations prove accurate, staying below $20k spend still nets just under 400k miles…
Now that Sears is sadly no longer paying out portal points on Sears Gift Card purchases, we can put this one to bed.
I’m not so sure… Still opportunities when Sears is paying out significant portal points, especially considering the Discover double cashback… Even if Discover Deals is *just* paying out 10%, you could get 20% cashback. Could then add then 5% that turns to 10% cashback quarterly bonus, on up to $1500.
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