Reselling Drawbacks Merchandise & Gift Cards
Earlier this week I shared how a love of miles/points turned into a reselling business with over $1M in revenue in 2017. My previous post has a lot of information about my business’s growth and my journey overall (and I recommend reading it before reading this), but I thought a series of more detailed posts would also be helpful to readers.
Today I will talk about some of the frustrations of building such a reselling business. While earning millions of rewards points and a nice profit is certainly both fun and exciting, it isn’t all roses when it comes to this type of business.
1. It’s A Job
One of the terms people often use in today’s society is “Side Hustle”. I think this term is a bit misleading since it sort of downplays the fact that a person is indeed working another job. Some call driving Uber a side hustle. Nope, it’s a job. As is blogging, becoming a famous Instagram influencer or anything else.
When it comes to reselling, this comes in to play as well. Whether you’re simply selling a few iPads or you scale up to my level or beyond, this business will take your time and your energy. From product sourcing to bookkeeping and much more, there are many things involved in running a successful reselling operation. It is far from passive income.
2. Organization is Key
At any given moment I am dealing with mounds of merchandise, tons of gift cards and money coming and going from various places. On the merchandise reselling side I have inventory being stored, shipments going out, products that require pricing adjustments and unfortunately returns coming back. On the gift card reselling side I have thousands of dollars coming and going as I buy and sell. This sort of thing isn’t for the easily overwhelmed.
Adding to the feeling of being overwhelmed is the realization that you need to figure out how to be organized and you generally won’t find someone with a simple solution that helps you do it. Certainly any guidance you get will have to be adjusted for your business and circumstances. In other words, you’ll most likely have to learn the hard way. I still feel like I am not as organized as I need to be and that is after years of refinement.
3. Selling on Amazon is Challenging
Selling merchandise on Amazon can be incredibly lucrative, but also can be incredibly frustrating. Since Amazon’s Marketplace has grown to dominate, the company often adopts harsh policies to punish sellers who violate their rules. Unfortunately legitimate sellers can get caught up in this as well.
From overly generous returns to companies threatening to sue you for selling their products, it feels like the Wild West at certain points. Amazon also loves to simply ban companies from selling even if they did nothing wrong, so that always looms large over you as well. I’ll have an entire article coming soon dedicated to this topic.
4. Selling Gift Cards is Challenging Too
So maybe you want to forego dealing with physical merchandise and would like to sell gift cards instead. While it certainly can be simpler, it is harder to scale up and then there is the fact that you always have thousands of dollars floating around. If everything went as planned then life would be easy, but it doesn’t.
Have you ever had a gift card go bad for no apparent reason? I have. Have you ever had a gift card hacked? I have. These things cost time and money. At best you can hope to get your money back, but at worst you can be out a lot of cash. Just ask Vinh from Miles Per Day who lost thousands just the other day from a stolen package of gift cards.
5. Making Money Costs Money
The old saying that you need to spend money to make money is true. On the base level you will have to pay for commissions when you resell merchandise and in some cases gift cards as well. If only it was as simple as buying something for $5 and selling it for $10. Once you factor in referral fees, shipping fees and returns that $5 profit isn’t cutting it.
It also pays to spend money for tools that make your job easier. If your goal is growth, then you’ll learn quickly that you need to rely on tools to help you get there. Of course nothing in life is free and you’ll soon find yourself spending money every month just to make more. As long as you keep your business growing and profitable this isn’t necessarily a bad thing, but if your business staggers then it can be costly.
Bottom Line
Over time I’ll write a whole series of posts about what I have learned while reselling. While I certainly enjoy it most of the time, as you can see there are quite a few things that keep it from being happy happy joy joy 24/7.
Do you resell merchandise and/or gift cards? What do you see as the biggest frustrations and drawbacks of such a business? Please share your thoughts in the comments!
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[…] You need to put up with a lot of crap in reselling. You have been warned! […]
You need to include important things like registering and paying Sales tax with every state you do business in, for a FBA business that’s a lot of states. There’s also the IP claims, Copy Right claims, and the threatening C&D letters you get from companies who don’t want you selling their stuff. Having 30 large appliances get delisted because of a malicious claim can leave you holding the bag. Not to mention the nightmare the accounting is to keep track of everything.
Currently fighting with a collections agency that ABC Gift Cards sicked on me. They emailed me to tell me that one of six gift cards that I sold them 4 months prior was invalid. When I told them they either needed to produce evidence to support their case or leave me alone, they referred me to a collections agency for $800.
GC reselling has dried up for a small-timer like me anyway. But your point about things going south for no apparent reason — and despite doing everything right — rings true.
Seven or eight years ago, it was pretty easy to get random drugstore merchandise for free at Walgreens. Often, you could actually get paid to take the merchandise off their hands. The problem would be that you’d wind up with a bunch of stuff you didn’t actually want. Many of these items would retail for $5 to $15, so I thought I’d try selling them on ebay. I was generally successful in selling the merchandise, but between the shipping cost and Ebay’s fees, my margins were low — and this was on merchandise I had gotten for free! At that point, I concluded that reselling was not for me. Too much work for too little money.
A very nice followup post. After the first piece, a lot of people were frothing at the mouth to jump in to reselling. At least may bring in a dose of reality. Keep up the good work.
This post sounds a LOT more realistic than your last post on how easy/difficult it is making money reselling.
Shawn, I put together a small group several years back for selling computers on amazon FBA. One of the owners ran the local private mailbox and fedex shipping location which helped tremendously. As you stated in your article Amazon was our biggest issue with lousy accounting and returns policy. We netted $60k on $300k of sales plus the value of points. It was just too much grief on the backend dealing with amazon. Thanks for the series
over 20% net profit is amazing (and extremely hard now days selling on Amazon) considering the FBA fee can be about 10%!
The FBA fees plus the referral fee are over 15% for almost every category.
I would have to go back to a full time job if my net profit margin was only 20% !Either expenses beyond COGS are too high or you have low ROI products.
Net profit should be after all FBA fees, etc. Or at least that is how I see it. This is why I showed how I bought products at about half of what they sold for on average. Those fees eat up so much, but it’s still possible to make a decent profit.