Reselling Merchandise Part 1 – Why Resell?

Oren is the owner and writer of Oren’s Money Saver.  He guides would be resellers at orensmoneysaver.com. You can also follow him on Twitter @OrensMoneySaver.

You’ve probably read his site before if you read our recaps, as he consistently finds deals and posts useful content. Today is part one in a series he has agreed to write for us on the basics of reselling merchandise. Without further ado, here’s Oren!

Why Resell Merchandise?

Reselling merchandise has become one of my favorite ways to manufacture spend. You are often able to put huge amounts of spend on your credit cards and make a good profit on the money relatively quickly. Whether you are interested in cashback or miles/points, reselling merchandise can meet your goals quickly and is an important adjunct to your manufactured spend strategy. Hitting credit card thresholds is a cinch when you are buying $400-$700 products and you buy multiple of them.

Traditional manufactured spending is usually focused on getting your costs down as close to nothing as possible and if you have a really good technique, you hope to make a small profit. Rinse and repeat. For reselling merchandise, your goal is a decent profit with points/miles as the essential gravy that makes it all worthwhile. A $20 profit on $1,000 of traditional manufactures spending is good. Your profit margin is far too small if that’s all you are earning when reselling merchandise.

Benefits of Reselling Merchandise

Portals

Buying merchandise from your computer has the benefit of portal bonuses. There is rarely a reason to exclude real shopping from a portal bonus. This can be the difference between a break even deal and a lucrative one. Most of the deals I encounter are great deals solely because of the portal bonuses. Even if you just break even on the sale, if you earn 10-15x miles per dollar spent, that could be well worth it.

Then there are portal bonuses. You can earn extra miles for spending more money during certain portal bonus periods. That’s a lot easier to do if you can just buy a couple extra iPads. Maybe you will only make $5, but you might earn 4,000 extra miles.

Stacking Multiple Avenues of Savings

Buying merchandise to resell involves the same tools you already know to save money on everyday purchases, but because you do it a lot, you continually perfect them. A purchase can involve a portal to buy a discounted gift card, a portal to buy merchandise, a coupon, loyalty points and a rebate. That’s a lot of dipping. You can’t do that with traditional manufactured spending or even with reselling gift cards. Everybody goes crazy when Office Max offers $15 off $300 of Visa Gift Cards, and you should, but reselling is like that all the time.

Status at Retailers

I now have the highest level status at Staples and Best Buy due to buying merchandise I’ve never used for myself and I’m working on Sears too 😉 I earn 5% in Staples Rewards for purchases at Staples with extra ink recycling and an extra 25% in bonus rewards at Best Buy and a longer return policy. If I ever want to buy something for myself, I already have the elite status.

Can be Pajama Money

Often the best and quickest deals are available to you right from your computer in your pajamas. You only have to put on clothes to ship the merchandise (unless you schedule a pickup or you don’t mind going to the UPS store in your pajamas).

Since it can be done from your computer it also isn’t terribly time intensive. (No more waiting 20 minutes between loads at KATE!) The longest part is finding the deal. Ideally, you want to find a deal that is repeatable so that you spend even less time.
Real Spending

You know how your Old Blue Cash Credit Card only has $504.95 or $1007.90 charges on it? I’m sure everyone at American Express knows what that means. I know – you buy a soda to hide your Manufactured Spending, but I think American Express still knows what you are doing. With reselling merchandise, that’s a thing of the past. Your spending becomes real spending with high amounts of variability. That’s a good thing. There is no embarrassment when you call after a fraud alert trying to buy $2,000 of gift cards at CVS.

Shutdowns Less Likely

We’ve all seen the demise of our favorite MS techniques. Mint, Vanilla Reloads, etc etc. You will always find merchandise somewhere. Apple won’t stop making iPads because you buy too many. In fact, they will make more. The deals change but the basics are the same

It’s Actually Pretty Easy

Many people (including myself before I started) think that reselling is difficult. It’s actually pretty easy. Stick with known items where you can make a good profit and you will be fine. Selling on Amazon and eBay is easier than it seems and things sell faster than you think when you buy the correct products.

Downsides of Reselling Merchandise

Reselling merchandise is not all flowers and strawberries. There are a lot of possible negatives that come along with reselling. Here are a few:

Float

Reselling merchandise requires a large float, just in case. The turnover time can take a while. You need to buy the merchandise (sometimes with a gift card which can add time). The merchandise needs to be shipped to you. You need to ship to Amazon/eBay. Often I am waiting a few days for more merchandise to pile up for time and shipping cost reasons. Then it needs to sell on Amazon/eBay and you need to wait for Amazon/eBay to pay you. It is very possible that you may need to pay your credit card bill before you are paid, especially if it took some time for the item to be sold. That’s where you need to have your float available to tidy you through the lean times.

Prices can go down

I do a lot of electronics reselling. There are product cycles and the price starts high and continues to drop slowly until the new product comes out and then it drops a lot. Then it is time to move on to the next generation of the same electronic device. If you aren’t careful, you could buy the same item for the same price and one time it could be a great deal and a month later it could be a bad deal.

Organization

You need a lot of organization and spreadsheets. You have to make sure all the portals track and file a claim for those that don’t, the gift cards you bought are used, you were paid, nothing got lost, etc. That’s another time consuming area.

Returns

The most annoying part about reselling. You sold your item, added your profit to your spreadsheet and then you get hit with return for a “defective” item, which is a way for the customer to not pay for return shipping. Now you likely need to sell it again and at a lower price. It happens and it is a part of reselling. Your margins needs to be high enough to withstand returns, though we will discuss them in more detail in a later post.

Lost items

Amazon sometimes loses your item. They will pay you back but not as much as you would have received from someone else (my experience has been about 90% of the value I would have received after Fulfillment by Amazon fees). The good news is that the item can’t be returned anymore.

Fraud (eBay)

Beware of fraud, especially with gift cards on eBay. You might sell the item and it was a perfectly good gift card but the customer files a chargeback. PayPal will be of no service to you for a e-gift card and it may be difficult to get paid for a physical gift card too. That’s just a straight loss.

Collecting/Paying Taxes

Once you sell enough merchandise on Amazon, Amazon will issue you a tax form for your revenue. You also may be obligated to collect sales tax which Amazon will not collect for you without a professional account ($40 a month).

Speak to your accountant about the tax implications of reselling merchandise.

Danger – Craig’s List

I don’t know how prevalent this is but when you sell on Craig’s List, you are selling to a stranger. There could be a definite danger at the meetup. I recommend public, well lit places during the day for the exchange.

Banning

Stores don’t like resellers. Their sales are for everyone not just for one person buying them out. If a store, like Staples, eBay, Kohl’s etc. thinks you are a reseller, you may get banned without an appeal process. After that, you might not be able to take part in deals you would have done that have nothing to do with merchandise reselling. Slow and steady wins the race.

Future Posts

In future posts, I hope to discuss where to source deals, how to stack multiple savings together, how to ship to Amazon, dealing with returns and much more. Stay tuned, this will be fun!

Note from Will (DoC): A big thanks to Oren for the first in this series, I’m excited for the rest to hit the site. If you found this post interesting, then you’re really going to enjoy the rest of this series. I also encourage you to check out Oren’s site and also follow him on Twitter. I can almost guarantee you that you’ll learn a lot.