Tuesday, December 1, 2015

Turnover Tuesdays - Toys and Retail Arbitrage vs. Online Arbitrage

For those who are not familiar, I started a series a while back called Turnover Tuesdays. Every Tuesday I like to highlight one item that I have resold. This will include profitable and non profitable sales. I hope that there is always something to learn.






The vast majority of the time I source online.  Sometimes I source in store.  Let's talk about one particular item I bought in store.  I was near a Walmart so I checked out their clearance section.  Download the FBA scanner app and look at this tutorial from Tagging Miles on the app before you start.

The Item - Lego Classic Box


As I mentioned, I was in the Walmart Clearance section and I saw 23 of these Lego Boxes in the clearance section for $25.  That's $26.75 with tax for me.  I bought all of them (there were actually more of them but they were damaged).  I haven't seen any in multiple Walmarts since.

I spent $615.25 on the 23 of them.




Credit Card Points 
I used my 2% card for $12.30 in cashback


Shopping Portal

In store purchase so there was no portal!  That's annoying!



Loyalty Points

Walmart has no loyalty points.



Fulfillment by Amazon Fees


I sold all of them at $45.94.  If you look at the link above you will see that I sold far too quickly.  I could have made another $3 each.

Fees at $45.94 are a whopping $11.30! Shipping was about $.50 each.  I didn't send them in immediately.  I sent one at a time as I had room in a box to save money on shipping since I wasn't in a rush. It just added a little bit of weight to each package.



The Haul  




Total is ~$1,056 from the sales with $269.10 in fees total, for a total haul of $787.52.

$786 is better than the $615.25 by ~$172.  That's a return of about 28%.  Not too bad

Here is how the numbers work
Cash = ~$172
Credit Card Points = ~$12
Portal Points = $0
Loyalty points = $0

When you combine the credit card cash and portal cash, you earn an additional $12.

Your takehome is now $184 or a return of ~30%.  I like 30% margins, they are nice.





In Store vs. Online



There is no question that my preference is for online purchases.  There is the pajama factor which is very enticing.  There is also shopping portals and the fact that I can usually spend a lot more money online than in store.  Usually the stock is higher and the transaction is quick.  There is no time spent getting to the store or waiting on line (unless you were trying to buy from Target yesterday)




In addition, when you buy online things come with a box and are often ready to go right back out.  That's a big deal if you are buying something large in store.

There are few benefits to in store.  The store has a lot more difficult time tracking you as compared to your online account, especially if they don't have loyalty points.  You can find some great deals in the store that are more expensive online since the store has limited shelf space.  Also, you may go to the store and find nothing to buy or limited stock in what you want.  That's rare if you know where to look, but especially for the novice this can happen.


Once again, my strong preference is for on line over going to the store.


Toys, Toys, Toys


I have started to move strongly into toys, especially with the holiday season.  The Amazon fees can be huge!  I paid 25% in fees on those lego blocks, but it can be worth it.  I will take 30% margins on a fast seller all day.

In general, I find that the margins on toys are higher, but the item is cheaper.  If you buy a $5 toy and earn 50% margin, you are still only earning $2.50.  If I only earn 10% on a $400 iPad, I'm earning $40.

If I can buy 100 of the $5 toy great, I'll go for it.  If I can only buy 1, probably not worth the effort.

It also makes a big difference on your capital requirements.  In order to make $1,000 a month at 10%, you need to float $10,000.  At 30% margin, you only need to float about $3,000 for the same $1000 payoff.  That can make a big difference quickly.


Just be aware that if you have quick sales now, that doesn't necessarily translate into quick sales in January or February after the holiday season.
Posted by Oren at 9:44 AM
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