Reselling FAQ by @dailyrefinement

I’m writing this FAQ to myself, as if I were a beginner starting today, with all of the ideas and expertise I’ve acquired from being a full-time reseller since 2017. To succeed, I believe it requires a focus on creating the best possible experience for the customers AND your suppliers.

TLDR: Daily Refinement Reseller Cheat Sheet

If you did all of these, every customer would buy from you. You can’t offer all of these as a beginner, or even a seasoned veteran, but recognize that someone else out there, can. “Do the best you can, until you can provide better, then provide better.” @dailyrefinement

1. Provide the best experience for your suppliers: (With no supply, you have no business. Smile. Buy the most, with the least contingencies, and pay early and consistently. Let suppliers make the most money working with you, so they do business with you first and often. Don’t complain, and operate without drama. The best business card you can give suppliers is an excellent store and reputation. As my business and reputation have grown, more and more suppliers have been reaching out to me directly. I’m aiming to become my supplier’s best customer, and each relationship has taken years to cultivate. Be patient!)

2. Provide the most popular items to customers: (Best Brands, Best Styles, Most Trendy, Most Significant, Most Exclusive)

3. Provide the best buying experience: (Best Title, Pictures, Presentation, Item Specifics, Condition Description)

4. Provide the fastest shipping times: (Free, Same Hour Shipping)

5. Best Reputation: (Being known in your category will allow you to charge the most and sell through the fastest)

6. Best Customer Service: (Most Reviews, 5 Star or 100% Customer Satisfaction)

7. Fastest Customer Service: (<10 Minutes, Phone Call from Owner)

8. Lowest Prices: (This one is the most difficult to sustain, being cheaper than everyone else makes it hard to stay in business.)

It makes sense to think of these in an inversely as well if your sales aren’t doing well. Customers and algorithms will always recommend the best experience and deals, and hide bad experiences or deals. Just like in every industry, less than 20% of online sellers have 80% of the sales.

1. There’s not a strong reason for any good suppliers to work with them.

2. They don’t have popular items.

3. They don’t do a good job presenting the item or making it findable.

4. They don’t ship immediately.

5. Most sellers have little to no reputation, or a bad reputation.

6. They provide slow or no customer service.

7. They don’t have the best prices.

How to Become a Millionaire Reselling in 13-15 Years

• Step #1: Track your existing bills for the life you’re looking for. (Mortgage, Utilities, Entertainment, Transportation, Child Care, Insurance, Food, Pets, Family Assistance).

• Step #2: Set your savings goal at + $1,500/week after tax. Invest $1,500 a week into traditional investments for 10 years, and you turn $720,000 in principal into $1M with a 7% return. (Index funds, real estate, 401(k), SEP IRA, etc).

• Step #3: Write out a plan to sell enough items to pay your bills AND save $1,500 a week, then create a recurring to-do list that results in you selling enough items to achieve that goal.

  • Example for a Family w/ $5k/mo in bills:

  • $48k Gross Revenue Monthly

    • - $32k in Expenses Monthly

    • = $16k EBITA. (Earnings before interest, taxes, depreciation, and amortization, is an alternative measure of a company's overall financial performance)

    • -Taxes: $5k

    • = $11k net

      • -$5k for bills

      • -$6k for traditional investments

  • Weekly To-Do List

    • Owner/Operator Duties

    • Source 350 items x $30 + Shipping, Pay less than $3,500. (25 hours a week)

      • There’s no bulk version of this, you have to do it yourself by hunting via retail arbitrage, flea markets, thrift stores, consignment shops. You have to have a very specific route, and/or list of contacts to make this work. If you buy pallets, your ASP will be much lower, and you’ll need a much larger operation.

    • Photograph/List 350 Items (15 hours a week)

  • Daily Goals

    • $1,600 Revenue (Sell 54 items x $30+Shipping)

    • -$320 in platform fees (eBay, Poshmark, Whatnot, etc) (20%)

    • -$500 in COGS ($9.43 Average COGS) (31%)

    • -$160 (8 hours x $18/hr for a F/T w2 worker to help you prep and ship items) (10%)

    • -$30 ($900 Rent for 500 Square Feet to Store 5,000 Items) (2% Rent)

    • -$57 (Utilities, Supplies, or other expenses) (3.5% Other Expenses)

    • -$533 Pre-Tax Profit Daily (33% Profit)

  • Take 3-5 years to become an expert sourcer and lister, then repeat for 10 years.

FAQ

• Is reselling a fad?

  • No, people will always want a deal on new or used items, so there will always be a secondary market. Reselling is the practice of exchanging goods for payment, and that’s dated back thousands of years in various civilizations, including ancient Mesopotamia and Greece. As the barriers to entry shrink, more and more regular people can open a store, which makes it more competitive, but over time, more consumers turn to online shopping for convenience. Smaller sellers can operate with much less overhead, and offer deals and customer service large companies can’t compete with.

• Should I be a large reseller(>10 sales a day), or a small reseller(<10 sales a day)?

  • I would start as a small reseller f you have limited space, time or resources, I’d focus on one sourcing method, one platform, and a consistent schedule until you hit $100 profit a day. After that, you’ll understand the basics of success, and you’ll be able to scale on that platform, or transfer the basics to a different platform. When you start, selling multiple categories on multiple channels will hinder you from learning the basics. I don’t recommend cross-listing, it slows down mastering the basics. Most people switch to a different side-gig before getting to a $100/profit a day, and never reach this first goal.

  • Small resellers have the ability to run their business at home on their own schedules with less expenses and less complexity. Scaling to 10 sales a day requires no bulk buying or complex systems. I’d personally focus on one local or online sourcing strategy, and one selling platform, until you get 10 profitable sales a day x $10 minimum profit. $100 profit a day is 100% possible, and realistic, but it requires consistently sourcing and consistently listing. If you reach 10 sales a day, you’d be in the top 10% of resellers, and you can do that at home by yourself. No one accidentally averages 10 sales a day, this will require an intentional plan and consistent execution.

    • Daily Refinement Recommended Model for sellers seeking <10 sales a day.

      • Local sourcing at garage sales, thrift stores or flea markets. Spend 30 hour a week looking for 0-70 items that sell for $20+ more than you paid for it. Ideally, keep costs <$10 per item, but as thrift store prices rise, it might look like paying $20-$30 for an item that sells for $50+. When sourcing used items locally, my goal is to at least double my investment, i,e, turn a $10 purchase into a minimum $11 profit.

      • Online or retail sourcing for clearance deals, this is often called retail arbitrage. Spend 30 hours at the outlet comparing prices online and buy 70 items that net $10 or more. When doing retail arbitrage, my risk tolerance is spending $50 to make $10 profit, and I’d like to find at least 2 of the same item.

  • If $100 a day is not enough profit for you, and you want to turn reselling into a serious career, then I’d recommend a slightly different model. Larger resellers have more expenses, more complexity and take on greater inventory cost risk, but they have greater leverage from systems and economies of scale. From my experience, it doesn’t take 10x a long or cost 10x a much to have 10x more in sales. You can scale to 100 sales a day as a solopreneur, without any staff, if you have a simple process, and stay in one product category on one platform. Less than 1% of resellers, average 100 sales a day, and almost without exception, they sell in one category on one platform. The only difference is that they source from a multitude of places for similar inventory.

• When to make your first hire.

  • I recommend hiring someone to help you with shipping part-time once you’re averaging $300-$500 profit a day by yourself. Hiring too soon was one of my biggest mistakes, and it set me back several years in my progress. You can hire whenever you want, once you’ve mastered your craft. Most people hire out things they don’t know how to do, and it ends up costing more.

•  What profit margin do you recommend for resellers?

  • Beginner(<10 sales a day): I recommend buying something that you can sell for $20+ your investment or more, while spending $10 or less per item. As things become more expensive online and at the thrift store, it might look more like spending $20-$30 for something that sells for $50+.

    • Example: buy a sweater or a jacket at a garage sale for $10, with comparable sold listings at $30+ shipping.

      • Customer pays $42 ($30+9 for shipping + 3 for tax)

      • -$6 for eBay, Poshmark, Whatnot or other platform fees.

      • =$24 Deposited into Your Bank Account ($14 profit is 46)

        • Replace the $10 Item with Another $10 Item

        • Buy An Additional $10 Item that you can sell for $30+ shipping.

        • $4 Left

          • Save 30% or $1.20 for Taxes.

          • Pay Yourself 50% or $2.

          • Leave $.80 in Your Bank Account (You can use this later to reinvest in more items or equipment)

      • Repeat this over and over, and be patient, and you’ll fully understand the basics of selling online.

  • Experienced (>10 sales a day): I recommend whatever return you’re comfortable with on your investment.

    • Example: Spending $1,000 per item, to sell for $1,400+shipping per item, net $150 profit. 15% ROI

    • Example: Spending $1 per item, to sell for $20+shipping per item. Net $10 profit. 1000% ROI

    • Both examples have drastically different margins, return on investments, and time expenditures. Find the model that works for you and repeat it.

    • Build a reliable system to find product, and a reliable system to sell product.

• How much can I make when I buy pallets?

  • Typical liquidation companies operate from 5%-40% net margins, depending on the operational costs of the business. I know liquidation companies operating at gross revenues from $1M to $20M, and I’ve seen pre-tax owner incomes range widely from $50k to $2M a year.

• What can I expect from buying pallets?

  • Liquidation and closeout is a very complicated and messy business.

  • Expect days or weeks of delays for shipping, and complex logistics problems.

  • Expect weeks or months of putting money upfront and waiting for product to be counted, sorted and distributed, and often, the order will be canceled because it can’t be fulfilled or it’s been sold to someone else.

  • Expect orders to be completely incorrect, and expect some shipments to be stolen. Make sure you have Marine Cargo insurance.

  • Orders to be +/- 4% for inventory counts. A portion of inventory will always be missing, damaged or unsellable.

• Should I buy manifested or un-manifested pallets? (listed out items or random items)

  • Most companies have manifested goods, when they liquidate. After a broker buys it, they’ll take out the good stuff, and typically they’ll sell the rest of it un-manifested. You have to determine the level of risk you are wiling to take, but typically un-manifested lots make the most money.

• What is the best way to ship?

  • Aim for same hour shipping and the least moving parts possible.

  • If possible, ship every order, one at a time. The fastest companies in the world, ship one at a time, not bulk.

  • For bundle shipping, I recommend numbering everything, and picking all of the orders first.

• Where do I get brand name items?

  • Typically to get brand name items, you need a Brick and Mortar or a reputable online store. Most brand name liquidation is a scam.

• Do I need an LLC or Corporation to buy Wholesale?

  • No, you do not. you can get a resale certificate for free with just your social security number. You have to file a form each year to let your state know you don’t owe any sales tax for items sold online on platforms that remit for you.

• Is there a golden rule for how much to spend? Like a percentage off MSRP?

  • MSRP does not determine market value. I recommend buying at 25% of average sold values on eBay, and use a 90 day window to confirm it’ll sell in 90 days or less.

• What are the best ways to get a supplier? What are the best questions to ask?

  • As far as suppliers, you get what you are, not what you want.

  • Who do you typically distribute to, and what is your normal order size?

• How can I buy liquidation or closeout pallets from a reputable seller?

  • If you don’t have time to source, and want to try a much riskier model that doesn’t involve any sourcing, you can try bulk buying by the pallet or truckload.

  • A jobber is a person or company that buys goods in bulk and sells them to other companies or directly to the public. Jobbers are also known as wholesalers, distributors, or intermediaries. To find one, you can Google terms like wholesale, liquidation, closeout, clearance, discount, etc, or look locally at flea markets and conventions. You will not be able to choose which product or brands you buy.

  • If you are a frequent buyer of a larger seller, sometimes you can buy from them, but you’ll also be competing with them with the same inventory. 100% of my suppliers compete against me, and also take out the best product for themselves, which is called creaming the crop. That’s part of the territory if you are not buying DIRECTLY from the manufacturer/distributor. If you don’t have the relationship directly with the manufacturer or brand, you’re going to be picking from what’s leftover.

  • There’s still profit to be made, but if you are buying less than a truckload directly from the manufacturer/brand, expect to break even or worse, you do not know which part of the inventory you are receiving, even if it’s manifested. Your shipping costs will eat up all of your profits, depending on the location of the goods.

  • If you find a supplier, typical gross margins are to sell items you find for 2x your purchase price per item. This is called keystone pricing. Keystone pricing is a pricing strategy that involves doubling the wholesale price of a product to determine the retail price. It's a common pricing method for retail stores and e-commerce businesses. This is why I strongly encourage people who are starting to buy things one at a time at a flea market or thrift store where 3x-10x is more common. As a beginner, you’re going to make a lot of mistakes, so it’s nice to have a larger buffer for error.

    • Example:

    • Buy one pallet or 200 Pairs of Shoes @$10 each(not including shipping)

      • This is why local pickup is advantageous, shipping charges can add up quickly if you’re shipping LTL(Less than Truckload).

    • Sell for $20 each. It’s not realistic to assume more than a 2x return on liquidation or closeout inventory, because there’s a lot of shrinkage(the loss of inventory or money that a store experiences due to theft, damage, fraud, or seller error). The closer you buy from the manufacturer, the less risk of bad inventory because less hands have touched it, but the manufacturers themselves don’t even know the state of their inventory most of the time. Returns have higher margins, but more processing.

    • Operating expenses vary from 20-45% ($4-9) depending on how much you pay for space and labor.

    • Net Profit Per Item would be $1-$6 per item on average.