Hustle Lab Episode 8 : Profits!
You’ve hopefully been following my auction reselling experiment, where I bought a lot of returned goods at auction and resold them on eBay and Amazon.
The questions I wanted to answer were :
- Can I break even, or even make some money from this hustle, without any prior experience or track record?
- Does this scale well, such that I can make a meaningful amount of money by increasing the volume and effort?
- Is it worth the time it takes?
I have those answers now.
Can I Break Even?
Yes. As of December 15th, I broke even on the hustle, including all costs. I spent an initial £737 on product, plus some additional amounts on Amazon marketplace registration and shipping product around the UK. I made all that back and still have stock left to sell.
How Important Is It To Have Experience Or A Track Record?
Important, but not critical.
A lot of experience can be replaced with common sense and careful thought.
Some lessons always seem obvious with hindsight but cost you a little to learn the first time. It’s valuable to learn these lessons the hard way (i.e. by losing a little money or having to make an effort to overcome your mistake) because you understand better what went wrong and why.
A track record cannot be replaced with common sense, and there’s no doubting that stock will move faster when sold through an account with a lengthy history of positive ratings. Also, companies like Amazon and eBay will withhold a greater proportion of your funds for a longer period of time if you’re a new seller, so it takes more time to get your hands on your money.
This probably slowed me down a bit, but certainly didn’t represent some kind of insurmountable obstable
How Did I Do?
There are the numbers as they stand today. I participated in three auctions, the first one paid for on October 24th, and you can see how that put my balance deep into the negative.
That’s the initial cost of the hustle. You need stock to sell, and that stock has to come from somewhere. That requires that you lay out some working capital up front.
Other bits you have to pay for up-front include shipping the stuff from the auction house to you, and then from you to the Amazon FBA warehouse. There’s also Amazon professional seller membership fees, which are payable monthly.
The gradual increase represents sales, net of shipping and channel fees. That’s all the costs Amazon and eBay and Paypal charge for their services.
The sudden increase on December 13th was Amazon recognizing they had lost a ton of my stock and reimbursing me at cost for it. I would have made a lot more (about £250 more) if Amazon FBA hadn’t messed up big time on my first ever attempt to use them. At least their reimbursement process was fairly smooth.
As of December 14th, I have received enough money back from the sales to cover not only the initial costs, but also all the shipping costs. This includes bad surprises such as a number of refunds I had to issue because some of the goods weren’t up to standard.
As of December 22nd I was £170 in profit, and I have about another £200 of revenues to come in and about £50 of costs to go out, so when all is said and done, I can expect about a 40% profit on the entire project.
Is It Worth It?
Yes and No.
40% profit is a good number. £320 of additional cash in my pocket is not to be sniffed at.
However: I spent about 40 hours fussing over this project, and £320 divided by 40 hours is £8 per hour, which is more or less the UK minimum wage.
Or, to put it another way, I can make the same money flipping burgers.
That said, I can’t flip burgers on top of my current job, and I could scale this up and become considerably more efficient than I have been so far. This would make things much more profitable on a per-hour-worked basis.
What would be the benefits of doing this on a bigger scale?
- Bulk purchase of mailing supplies (envelopes, boxes, paper, etc)
- Spreading the cost of eBay and Amazon professional fees over a greater value of goods sold
- Improved presence on the platforms, particularly Amazon, because I’d be selling more stock for longer periods of time
- Shipping things in larger quantities to lower the average cost per item
- Sending greater quantities of supplies to FBA to take advantage of their pain-free sales process
- Benefiting from improved reputation and history on eBay and Amazon (I am still considered a “new” seller without feedback on Amazon, and have 10 positive feedbacks on eBay, which is very small)
- Greater experience regarding what sells, what doesn’t sell, and what products have margins worth taking advantage of
That said, even with all these benefits, this is not something I intend to turn into a major side hustle. I might take advantage of my accounts on eBay and Amazon and try to sell a little more through this channel, but I’ve learned another thing by doing this:
Selling stuff with other people’s brands on it means you’re always the second seller. Buyers obvuiously prefer to buy from the brand owner, and the only way you can shift your own product is to sell at a fairly deep discount. You also only have access to older, less popular products, otherwise there would be no secondary stocks for you to buy in the first place.