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Is This the Fastest Way to Make Money Part 3

Updated on November 17, 2012

Avoid buying pitfalls and maximize profits.

In the last post about problems with buying and selling used merchandise I gave you some scenarios that may have scared you off the process of dealing in second hand merchandise. Don’t be scared off. The whole idea of pointing out the pitfalls is to give you a honest look into the industry. There are many pitfalls with any venture and if you start dealing in used merchandise you will probably find more than I have listed here. The whole business can be quite rewarding and I would say that over 90% of your dealings will go well. What I written here is to help you reduce your losses.

Close only counts in horseshoes.

Picture the following scenario. Say you are buying a model train. Online research and the price guides say that Brand X locomotive, Model 321 is worth $2000. You get excited and make an offer on the train piece because it is Brand X locomotive and it is model 321A. You offer $400.00. The offer is gladly accepted. You are so happy and you rush home and look at the item online again but this time you type in 321A. You panic. Your mind races “What! It says it’s worth $25.00 how can this be? I just saw it for $2000.00”

This happens more often than I would care to know. Model 321 was the collector’s edition with special gold trim and a real working horn. There were very few made. Model 321A was the production edition that all of the kids in the city got. Every toy train dealer in town has a box full of model 321A. One dealer you talk to laughs and offers you his box of model 321A just to get rid of it because he can’t sell them.

Don’t forget this this happens in all venues of merchandise. It could be collector plates, pottery, furniture and all sorts of things. If you have watched Antiques Road Show often enough you have seen the appraiser talk about all of the work of a certain craftsman and how valuable some of his work was. After a great build-up he says “Unfortunately the craftsman made thousands of this model and the value is quite low” “Thank you for sharing your item with the world”

Knock Offs, It's not just for Gucci

Knock offs exist outside the world of Gucci hand bags and Rolex watches. In the antique market there are plenty of them. It may look like an old rocking horse or I may look like an old Windsor rocker but it could be from the shipment that just came from overseas. This is especially true of glassware and the antique glassware market has been ruined by knock offs. I remember walking into a dollar store and seeing what looked like very old glassware right down to the excessive mold lines from an older era. I was at an antique market and saw a dealer selling off her ruby glassware for one fifth of what I used to get for the same thing. She was getting out of glassware altogether because of the imported knock offs. Again knowledge is power. It doesn’t hurt to strike up conversations with other dealers and asking why they priced their merchandise the way they did. It can lead to some interesting and enlightening discussions that you can later verify online.

Weight, Size and Fragility

Everything is against you here unless your item is very valuable. An antique pump organ may only be worth $100.00 depending on condition and it may cost you $200.00 to move it. It’s not likely you will get a buyer for such an item. Likewise are large breakable objects. I was once looking at a large but not too valuable collection of military memorabilia in a glass case. I was about 1000 miles from home. There was no way I could move that collection intact and all I could picture was a pickup truck bed full of glass shards. Item weight, size and durability must always be taken into consideration as part of the purchase price

Shipping costs can kill a deal.

While the cost of moving and delivering items local can be a challenge think of the challenge of shipping some items. If selling on eBay you must develop your own criteria for selling inexpensive items. For instance the buyer must be willing to pay for shipping and the product must fit into an envelope (of any size). More valuable items can withstand the financial pressure of shipping costs however for low value or bulky items you have to think about the final cost to the buyer. The buyer will figure costs into the equation before the final sale is made and that will affect your bottom line.

I would advise you never to estimate shipping charges or you may have a rude awakening one day. Your estimate of $20 may turn out to be $50 and your buyer will want you to honour the original price with shipping. A visit to a website, a call to the shipper or bringing the item in to the shipper's office for a price is always advisable.

Vehicle and related costs

We have seen oil prices rise dramatically and the cost you incur in collecting merchandise for sale can be staggering. You may think you got some good deals after a week of traveling around to look at merchandise but don’t forget to factor in the number of tanks of fuel and cost per tank. Likewise insurance and maintenance costs will rise as you use your vehicle. It’s wise to keep a spreadsheet of costs. While it’s nice to have money coming into your hands, cost control plays a big part to help you keep some of those profits.

Repackaging and drop shipping

Repackaging refers to a purchase you made in bulk and items are repackaged for sale individually. I had an offer to buy a container load of clothing very cheaply but there were no labels, including sizes. It was a good deal but it would have been labour intensive to make the deal work. The cost of labour and new packaging forms part of your costs.

Drop shipping refers to having a wholesaler or manufacturer deliver items for you and they are “white labelled.” The buyer doesn't know that you did not personally ship the item. In principle it is a great way to operate an online business and it can work quite successfully. My caution to you here is to ensure the wholesaler/manufacturer does not steal your customer list and cut you out of the market. Get good references before setting up an operation like this. The other problem that may occur is missing components, late delivery and damage from shippers. How will your drop shipper deal with this. Is the drop shipper willing to take back defective goods? Will he coordinate product recalls? What percentage will the firm allow for returns? All valid questions if you find product via this route.

Conclusion

The list is not exhaustive. I'm sure you can add to the list in the comments. However buying and selling merchandise used and new, can be fun and profitable. I still do it from time to time depending on what else is going on in my life. You must have a competitive spirit and the determination to follow though if you want to make a full time living like this. No sense in having a warehouse full of merchandise. Keep it selling, warehousing costs you money. Now you are armed with some of the basics of how to make money in this industry and some of the pitfalls to watch for. Good luck in your venture!

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    • rajan jolly profile image

      Rajan Singh Jolly 

      5 years ago from From Mumbai, presently in Jalandhar,INDIA.

      A fitting finale to this series. Thanks for all these valuable tips. Voted up, useful and interesting.

    • mpropp profile image

      Melissa Propp 

      5 years ago from Minnesota

      Great series, I enjoyed all 3 hubs. My husband and I have had some fun cleaning out our house and selling odd items on ebay and craigslist. I can't quite imagine trying to do it as a way of making a living, but I will admit it is a little addictive. Thanks for all the good advice!

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