I tried to quit reselling.. you won’t believe what happened next!

I dipped my toes into Reselling in Q3, and decided to pretty much quit in Q4.  For those in the reselling game this sounds a little weird, because Q4 is where the cheddar is, but I think it will all work out….

Reselling is a vastly profitable gig, far more so than any MS I’ve encountered.  For every $100K per month WF story I can produce a $1M a month reselling story.  Points and miles are a secondary thing.  As I mentioned recently in my post, Reflecting, I no longer track points and miles earned, but to give some perspective, I’ve cashed in about $2000 in store loyalty points this week, and probably earned that again in points and miles.

I seeded my company with $6,000 in what is a very complicated financing system, you could think of it as Float 2.0, where I would use multiple credit sources and varying IRR inventory to extend the $6,000 into $20,000 of ‘Floated’ inventory.  The cycle took about 3 months to go from owning no Inventory to getting everything in the warehouse.  I have not touched the basis of the $6,000, nor have I paid a taxable distribution, and I’ve pulled about $3,000 out of the company tax free.  Taxes.. you have to love them.  I called this concept ‘living in the pocket’ when discussing this with a fellow financial blogger, FQF at a recent NAPFA conference.

In my short time exploring this gig I met some really smart people, I attended Trevor’s ResellingDo and shared some great stories, and beyond that, learned a lot from the team at Mile High Reselling Club. Also, you’ll find that once you put a bit of effort in, the broader community is a big help too.

The right way, and the wrong way, to resell

I’m a noob, but here’s my two cents of wisdom.  The MSers and Miles and Pointers get into resale because they are desperate to keep their addiction alive.  These guys get into serious trouble quickly.  The classic approach for many is that they would go after a fast moving, big ticket item, such as an iPad.  The problem with this is that fraud, returns, and gating make for huge penalties if you get caught by them, and they can destroy everything.

Great reselling comes from two channels:

• Clearance
• Replens

To be involved with clearance items, you need a team of strong people working with you.  I saw (and left) this side of the gig quite quickly.  Clearance chasing involves being willing to drive 100 miles to pick up some product, and knowing before you depart how much of it is in the store, and at what price.  Most of the time you know this information before the store does….  This gig is hard work, but very lucrative, I don’t do this.

Replens are ‘replenishable’ items that you get a consistent profit on.  The problem with replens is that once the item is announced, the price tanks and you lose out.  It’s a really weird game..  for example, I recently had an item that I held exclusivity on and was selling at $35, I go on a business trip, go out of stock, and someone is selling on that replen listing at $31! 

Understanding store loyalty programs and extreme stacking opens up many opportunities, but takes time, time where you need to Float, or Live in the Pocket™.  I used this strategy to during my illustrious career as follows:

• Buy cost $8000
• Receive Inventory valued at $17,000
• Sale price of inventory $20,000

The reason that the above was possible is that I could use a gift card to lower the buy cost, and I could leverage a store loyalty system to double my inventory purchases.  With the buy side so leveraged I was happy to accept a minor gain between $17,000 and $20,000 on sale, and sometimes sell even at a ‘loss’ because cashing out $17,000 for $16,000 with a basis of $8,000 is not a bad gig.

Quitting the gig

My Inventory is in for Q4 and my store credits are cashed out.  I no longer look for clearance or other things.  I’ve learned two store systems, and will dive in on either quickly and aggressively.  If a key event occurs at either, I’ll buy beyond what I might have started with originally.  This means transactions are larger, but less frequent. I can continue to resell but with no more than a few hours of work every week or two.  My sales are down, but I have my time again.

If you want to get into reselling here’s a few pointers:

• Look for products that sell in the $30-150 range.
• Learn how loyalty systems can stack, and how to earn and burn the rewards.
• Know when the sales and clearance times are coming.
• Learn about rank and speed of sales.
• Learn about the technology needed to set up your system.
• Don’t be afraid to pay to join a group, this is a money business and if people are teaching you, pay them.

So.. am I really out of the game? Perhaps not, but it doesn’t control me.  I’ve not done any MS for several months, but if I wanted to go buy a giftcard I do reserve that right.  If I happen to sell $50K of inventory in November, I may just go out and buy $50K more… but the change for me is that I’m not a Reseller, I’m just an observer of the game.