In this series, I'm sharing three tips that will prevent you from spending hours wandering aimlessly around big box retailers trying to find products to resell.
Last week, I discussed research and why it is an important part of retail arbitrage (RA). If you haven't read my previous post you can find it HERE. As a refresher, retail arbitrage is how many sellers start product sourcing. It's the first step up from sourcing one-off items (single items that you aren't likely to find again) at thrift stores and garage sales. RA allows a seller to find multiples of a product and in many instances continue to buy and sell that item over and over again making it a replenishable product. RA isn't as easy as walking into a store, selecting a random item, putting it in your cart, buying it and listing it for sale on Amazon or another marketplace. RA takes work.
TIP #2: Know Your Target Numbers
What numbers am I talking about?
Spending Budget: When you walk into a store to source you should have an idea of how much money you are going to be spending. This will help keep you focused and making smarter buying decisions that will help stretch your dollar the farthest. Putting every item in your cart that will make your target return on investment (see below) doesn't take other factors into consideration including best seller rank, number of FBA and/or merchant fulfilled (MF) sellers.
When you are just starting out, don't go to your first store and say, “I'm going to spend $1,000.” Why? because you end up putting really high expectations on yourself. If you don't meet those expectations how does that make you feel at the end of the day? Start small and get the hang of what you are doing before setting high spending targets.
Target Return on Investment (ROI): This can be a percentage or a dollar amount. For example, my goal is to have my ROI be no less than 50%. This means I will profit at least half of what I initially invested into the item. I also have a $10 target return per item. If I can't sell an item and earn $10 profit I'm more likely to stay away from it. Time is money and prepping, packing and shipping 5 items that will only many me $25 combined is not a profitable use of my time.
Many sellers start off using the 3x Rule. This can help you focus on items that will net you 100% ROI after cost of goods (COGS) and fees. For example, if I buy an item for $10 and sell it for $30 Amazon will take approximately $10 in fees. When I receive my payout I'll receive $20 back. $10 will cover my COGS and the other $10 will be my profit on the item.
I used the 3x method when starting out. It helped me understand how to analyze my purchases. However, when using the 3x method you will also leave money on the table. For example, I have started buying larger, oversized, higher dollar items. For example, I purchased an item yesterday for $60 and will sell it for $130. I will receive $32 in profit from the sale or 52% ROI. $32 can buy a lot more inventory.
Knowing your numbers is an important aspect of running a business. We often hear about sales figures and people forget about the numbers to consider BEFORE you buy. I highly recommend that you write your target numbers down. It helps me to look at them while you are scanning in the store to remind myself of my goals.
Later today I'll be jumping on Periscope to answer your questions about knowing your target numbers when sourcing. If you haven't downloaded Periscope to your smartphone, or other mobile device (iPad, tablet, etc), make sure you do it before 10:30am EDT so you're ready to ask your questions. If you can't catch the scope live, you'll be able to view it for 24 hours after broadcast.
What are you doing TODAY to move your business forward?
Interested in selling on Amazon with Fulfillment by Amazon (FBA) or know someone who is? Not sure where to start?
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