Are you selling what everyone else is selling? What distinguishes your store from others when selling on marketplaces like eBay or Poshmark? Is your sole competitive edge based on price?
Part 1: We need to talk.
My philosophy is that the Riches are in the Niches. The more unique a product you can sell (if there is demand for it), the more you can stand out when potential buyers are searching for your products. Let’s take a deep dive into transitioning from selling commodity items like generic clothes and shoes to specific markets like handbags, jewelry, beauty, sneakers, and more.
Let’s figure out why you are selling generic items in the first place. I am going to speculate about the reasons – you tell me if I am correct:
- You don’t have sources for unique, niche, or high-end products
- You don’t have enough money to buy quantities of unique, niche, or high-end products.
- The risk of buying these types of products keeps you from making the leap
Sources. Money. Risk.
What else am I missing? Tell me in the comments or in the Unlocked Reseller Group since this is a living document that will evolve over time to help you break free from selling what everyone else is.
Most people think the main issue is finding sources for these niches, unique or high-end products. They are wrong. If I gave you a source today that could sell you $25,000 worth of Louis Vuitton handbags at terrific prices, could you (would you?) come up with the capital to buy those handbags? The main issue for most resellers is money, so let’s talk about that first.
Part 2: The Money Mindset.
If you have access to unlimited capital and can spend as much as you need to source niche, unique and high-end products, you can skip this section and move on to part 3: Sourcing.
For the rest of us, cash is king and queen, and we need to learn how to get it cheaply, manage it, and keep enough of it to grow our business. And before we jump into a discussion about money, the last section of this post will focus on RISK and how that plays a huge factor when thinking about how to use the money for your business. Be sure to come back for that post!
It takes money to make money. We all know this is true, but it is even more poignant when you are a reseller. You must come up with the cash to purchase the items you want to resell, and you have to be smart about how you use that money.
In this article, we will cover the following topics about money.
- How much do you need?
- Where to get it
- How to use it
How much cash do you need for your business? I can tell you from experience that my first response is that you always need MORE. If your business is growing fast, access to capital is critically important to keep the engine of growth fueled.
A better way to figure out how much cash you need is to work things backward. Start with how much revenue (total sales) you want to generate each month, then calculate your expected profit margin after deducting expenses for the cost of goods sold (COGS) and selling fees (SF). COGS is what you pay for an item, and the selling fees will vary depending on how and where you sell your products. Some marketplaces like Facebook don’t charge fees, eBay typically charges around 15%, and Poshmark is 20%. I like to use the most expensive fee structure in my Cashflow System so that I am not surprised by higher costs than expected, but that’s just me.
Here’s how this concept looks for a simple $10K per month reselling business.
Total revenue expected: $10,000
Total Profit Margin expected after COGS and SF: 25% or $2,500
Other expenses (shipping, packaging, defective products, misc.): 5% or $500
Total Cash needed per month = $10,000 – $2,500 – $500 = $7000
This is a very simplified example, but you get the idea.
It’s also important to remember that when you are first getting started, your numbers will probably not be very accurate for this calculation. You may wind up with a 40% profit margin, or your expenses may be less. The key takeaway here is just to start and then adjust as you get data to update your specific Cashflow System.
So, where can you get access to cash? It’s never been easier to get money, but you need to be careful about what it costs you. Ideally, you have been able to set aside some cash to start or run your reselling business, so you don’t have to go out looking to borrow money. My comments below are focused on where to get access to capital if you do not already have some set aside.
I also want to point out that I am NOT advising you to borrow money for your business. I am not an accountant, nor am I a financial planner. Everyone’s situation is unique, and you must make borrowing decisions based on your situation. The sources below are what I have used in the past.
Sources for capital:
Your bank: Do they want to loan you money for your business? Probably not unless you already have a strong track record of profitability AND you have some assets to put up as collateral. I am not a fan of banks, but they do have their uses. 🙂
Credit cards: I have started a few companies just using my credit cards. Some suppliers accept credit cards, and some cards have cash advance features that are not crazy expensive. Credit cards can be a great source of capital, but they do require disciplined management. I spoke in depth about credit card financing on a recent episode of The Small Business Show https://www.businessshow.co/386/
Your home: If you own a home and have some equity, a Home Equity Line of Credit can be a very inexpensive way to get access to capital for your business. Should you risk your home equity on your business? I have done it over and over, but it is a personal decision.
Online Fintech: Companies like Paypal, Kabbage, and others will be glad to loan you cash for your business. It can be very expensive with high-interest rates and fees – so look closely at the terms and conditions before using these sources. I have used PayPal’s business loans a few times and found them to be helpful.
Marketplaces: eBay has a reseller funding service, and other marketplaces have begun to get into the act as well. These loans are usually based on your selling history with the marketplace.
Friends and Family: I put this one last because it is my least favorite. It can cause many problems, and unless you have a very solid relationship, I don’t recommend it. If you do wind up borrowing from friends or family, be sure you have a clear, written agreement, so each side knows what to expect.
If you must borrow money, you must also be diligent about paying it back. If you have a line of credit or some other loan, you want to pay it off as you sell your products. As the cash comes back in, pay off the loan to minimize interest expenses. You don’t want to get stuck living off of the loan – you want to be able to borrow the money over and over while you live off the PROFITS of your business. I am starting to sound like a parent here, but I think you get the idea.
Paying back money quickly is a good segue into the last topic: How to Use it.
Your capital is truly the lifeblood of your business. You will have to take risks and experiment, but those should be relative to your specific situation. When you are just getting started, taking a $500 risk on a new product may be too much, while later, you may be taking $5000 risks. It just depends on your unique situation, and only you can make that decision.
I am a huge proponent of starting small and doing proof-of-concept experiments to learn what works. If you can figure out how to make $500 per month in profit, you can scale that to $5000. If you can make a $5000 profit, you can scale that number up to the next level. Small experiments with tons of testing and recording of data are how you create long-term success.
Keep your expenses LOW. Especially when just starting out, you want to bootstrap yourself up to find success, in my opinion. This allows you to learn more by doing things manually, even if you could hire a service or use an App to automate things. Re-use packaging that is in good condition, get free USPS boxes, and constantly think of ways to stretch your investment. Once you start seeing your system work and profits are coming in, you can work on automating things, saving time, and building a brand for your reselling business.
Lastly – everyone’s definition of success is different. If your business is generating $1000 in profit for you each month and you can work from home with your kids, that is awesome. Don’t feel pressured to live up to someone else’s idea of what success is. You should be having fun, learning all kinds of new stuff, and feeling thrilled when you see some profits coming in.
Now that we have talked about money, part 3 will jump into everyone’s favorite topic: SOURCES and SUPPLIERS. Post your comments and questions below or in the Unlocked Reseller Group so we can keep the dialogue going to help everyone find success!
Part 3: Sources and Suppliers!
I often get asked, “Where did you buy those handbags?” It’s a great question, but it really should be phrased as, “How did you learn where and how to buy those handbags?”
Finding suppliers and sources for niche, unique and high-end products to resell is often more art than science. It also takes a lot of work, and it takes a lot of time. This is why most resellers won’t tell you where they purchase their products. We have a significant investment in time and resources to develop the relationships we have with suppliers.
Don’t be fooled by anyone that promises to tell you their supplier secrets if you just buy their course or subscribe to their newsletter. To be successful, you will need to invest significant time and resources.
Here are the steps I recommend you take to find great suppliers:
- Decide to do it and make a commitment. Stop and think about your definition of success. Once you have that figured out, decide to create a system to get you there. Most people don’t get past this point. They think about how great it would be to sell Louis Vuitton handbags, for example, but they don’t consciously decide to put in the time and effort to make it a reality. It will be hard; you will make mistakes (I call those mistakes tuition), but if you have decided to do this, you can make it happen.
- Identify who is succeeding at what you want to do. Make a list, keep it in a spreadsheet and add information as you learn more. This list should be the names of companies and people that are doing what you want to do. You should be able to answer questions such as: How much are they selling each month (check their sold listings)? What brands do they focus on? What marketplaces do they sell on? Do they have an e-commerce website? What social media do they use for their business? Follow all their social media and keep track of how they promote their business. Are they on LinkedIn? If they are, make a connection request and comment on anything they post on LinkedIn. Find the top 10-20 sellers of the products you want to sell. Capture as much data as you can about them and study it for similarities or trends.
- Ask for help. You know those 10-20 resellers you are studying? Reach out to each of them and ask to speak with them. What should you ask these people? How about this: “I am a new business owner, just getting started out, and I could use some help. Would you sell me excess inventory that you might have?” You can also just ask for advice, but I have found if you offer to buy something, it gets their attention faster. Be authentic and honest, and you will be amazed at how often other business owners will give you some time and information. You may need to try contacting these people many times before you get their attention. Use LinkedIn, social media, or a customer service email address if you can locate it.
Don’t expect to make any money on the products you buy from them – that’s not the point. The point is to open the relationship. You are making an investment in your future business. You may be able to sell whatever you purchase at your cost (plus selling fees) to get your money back, or you may even lose money on what you buy. That’s OK – this is your tuition as you make some great connections with your peers.
These connections are your foundation. You may get lucky and find one of these resellers that will be happy to sell to you at discounted prices. Many companies have an excess inventory – take me, for example, I currently am overstocked on Louis Vuitton Keepall travel bags, so I would sell some of those at my cost if I were contacted by another reseller looking for inventory.
This system works! It has worked for me, and I have used these relationships to make other connections, and I continue to use this process today to find new suppliers and resources.
- 4. Embrace Google beyond the 1st page. You want to learn how to use Google search to find suppliers – but with a twist. What search terms would you use to find suppliers? Product, Brand or Store Name + words like excess, overstock, job out, end of life, liquidation, and more. Use your imagination to mix and match words related to the products you are trying to source. The key here is to dig deep. Don’t stop on the 1st page of Google – everyone finds those sources. But how many people make it to page 5 or beyond? This is a key factor in finding more obscure sources.
- Beware “Wholesalers” and “Liquidators.” There are many so-called wholesalers and liquidation businesses that buy direct from companies, then break up their purchases into smaller lots to offer smaller resellers. In my experience, most of these so-called wholesalers and liquidators take too much of the profit off of the products they sell to make buying from them worthwhile. If you do want to try purchasing from companies like this, be sure to research online about other buyers’ experiences and perhaps ask the 10-20 new peers you found in section 3 above.
- Go direct. Most manufacturers and designers won’t sell to you due to their contracts with retailers and distributors…but you never know! You can connect with employers of these brands via LinkedIn and try to build connections that way. It can take time, but can you imagine how life-changing it would be if you were able to open up a direct connection with a company like Gucci or Prada, for example? Never stop trying.
- Don’t forget your personal network. Let me tell you a story. About 10 years before I got into the handbag business, I worked with a technology distributor to buy their excess products. I made some great connections at the company, and even after I sold my tech company, TechRestore, I kept in touch with some of these people. When Covid hit, and the cruise line industry was completely shut down, I got a call from one of these connections who is now working for a large cruise line company, and guess what they needed to get rid of? Hundreds of handbags that they stock their retail stores on the ship with. I bought over 500 handbags from this connection that I had made a decade before. Morel of the story: get involved, expand your network, and make more connections. You just never know where they can lead.
This is all hard work. It takes commitment and follow-through. Don’t forget to reward yourself when you have some success – anything that is leading you in the right direction – towards your personal definition of success. The key is just to stop doing what most sellers do: looking for easy things to buy, easy things to list, and then competing with everyone else.
These concepts work. I have used them repeatedly during my career to create companies and build wealth. I enjoy sharing this information and if you find it useful, keep in touch by visiting the Unlocked Reseller Group to join the conversation and learn more.
Cheers to our mutual success!
Shannon Jean
August 2022