What Inventory Should I Buy to Resell: The Four Most Important Considerations
If you are new to the world of resale, this is your landing page. It may take some time to get your mind to flip into “seller mode” from “consumer mode”, but once you’ve made that pivotal shift, you’re ready to tackle your clothes buying habits. Are you ready to stop spending money on clothes and start making money instead? Ready to pull another lever and get closer to financial freedom? You don’t want to waste any more time or money on the wrong merchandise, so here’s my top 4 tips for sourcing items (either for your own use first and then to sell, or directly for resale).
This is the first and most important consideration (and the easiest, generally). If the brand has a strong presence on the selling platform and decent quantities being sold, it passes the first test. However, even if the item looks high quality, if there are few to no listings of that brand on the selling platform, it’s unlikely buyers will be looking for that brand. Don’t give in to the temptation and think you will be the seller who can sell it anyway. The exception would be if there are few items listed of that brand but many items in the “sold listings” section, in that case you found a low supply/high demand item and you would likely be interested in buying – given other criteria is met. The list would be super long to try and tell you every brand that does and doesn’t do well, not to mention you can google and find that out, so I’m not going to spend the time on that here. The idea is the brand has to be expensive enough when buying new that there is room for you to buy low/sell high. If the original retail is super low to begin with, there with rarely ever be profit margin there.
Once you have identified a solid brand, the next part is much more nuanced. You have to decide if the style is appropriate, and unfortunately, this is a quickly moving target. Hence the reason I recommend quality basics over trendy styles. I love well-made sheath dresses, pencil skirts, and cardigans for this reason. They can sit for much longer without going out of style and tend to have consistent demand through the years. However, that said, there is still room to capitalize on the current popular trends – there are pattern trends that come and go (plaid/gingham is popular right now as I’m writing this; we gorged ourselves on chevron and now we’re sick of it. Polka dots have historically maintained a steady position, and so on.) Similarly, there are color trends (dark greens are popular right now, the market is weary of wearing coral pink, etc.). Now when you get to specific detail trends, you must exercise extreme care (cold shoulder is losing steam, ruffles come and go in popularity, bell/flare sleeves are still holding on, for now). Until you feel more confident, stick to those quality basics, or add in just a few trendy things here and there as you feel inclined but realize you can’t plan to coast with those items, you’d need to be more intentional on moving them out the door, post-haste.
If the item has passed the brand test and the style test, move on to the condition test. Does is smell like smoke or moth balls? ALWAYS pass, do yourself and your buyers a favor! Is it heavily pilled or faded? Pass. Stains, rips, holes? ALMOST always pass, unless you are willing to do some simple mending/laundering. It does take time to learn what stains are and aren’t likely to come out. A loose button is easy to fix, a seam coming apart can be easy to fix, but it depends largely on the material. Sweater knits mend better, thin polyesters typically don’t mend well at all. A hole not anywhere near the seam of an item, where it’s visible even when mended, is a big waste of your time. BEWARE of cashmere and merino wool. They are great items to sell when they don’t have holes, but they are incredibly prone to holes that will decimate any resale value. If you buy them, check them very diligently and store them very carefully, such as in plastic bags and then in a plastic storage tub. So, if the item looks clean and in excellent condition, move on to the final test.
If you thought getting through the style test was tricky, hold on to your seat. Imagine you are in a store, thinking about buying an item you feel certain is a high-demand brand, desirable style, and excellent condition. All that is left is to determine is if the price meets your desired turn around margin. This is going to vary for every person. No one else can place a value on your time and efforts but you. Hit the pause button at this juncture. Remember: there are several things you will have to do with the item you’re considering reselling. These include photograph the item, create a listing, store the item, answer any questions about it, possibly negotiate offers on it, and finally, ship the item when it sells. Crossing my fingers that I haven’t caused you to shut down and lose interest. This really is a worthwhile endeavor, I promise! Now, what minimum profit are you looking for, after all costs, what, indeed, is your time worth? Here is an example with some thoughts to keep in mind.
The item above that you are holding, let’s say it is a basic sheath dress, quality brand, no issues, lovely style. The asking price is 8.99.
- Don’t forget that it’s 8.99 plus tax! That tax is part of your cost of selling, it’s easy to want to minimize the cost in your mind and maximize what you’ll sell for. Be honest and realistic in your calculations.
- Don’t neglect the selling platform costs. They vary wildly, I know some that charge closer to 9.15% but have other fees stacked on top of that, some that are a flat 20%, so know the costs upfront.
- Are you also paying a payment processor, such as Paypal? They take a cut on top of the selling platform unless this service is built in to the total percent you pay, such as on Poshmark or Etsy.
- Shipping cost. We’ll cover shipping in great detail later, but for now you just need to know that heavier items (surprise, surprise) cost more to ship and can on occasion be a deal breaker if the margin was small to begin with. Think heavy winter coats, or tall boots, these are cases where shipping costs may prevent it being worth selling.
- It’s always going to be an estimate as to what you can sell for, but try to go with a reasonable range and go from real market research. For the above example, let’s say 22-27$ plus shipping is the average expected selling range.
Now it’s time for a little mental math, we’re heading into the weeds, but don’t be afraid:) Let’s go with 25$ sales price less 9.45 total purchasing price+tax. We’re left with 15.55$. Subtract 9.15% for sales/3% payment processing costs. Yes, PayPal also charges a 30 cent flat fee for each payment processed so we really should account for that, too. Don’t forget the 12.15% is on total sale including (gasp) shipping if you sell on Ebay, but we will build that extra fee leveraged against shipping into shipping, so just take 12.15% off the 25$. Also note, state/federal taxes are not included in these calculations. That is a long story which I do hope to address in a future post.
12.15% of 25$ = 3.04$+.30 process fee = 3.34$
15.55$-3.34$ = 12.21$
Are you happy with that turnaround? If so you buy, if not you don’t. Do I really do that much math with each item I’m looking at? Yes and no. I expect a slightly different sales price on each item, so the actual cost of it is of supreme importance. I don’t really go through all the percentage fees/tax calculations but I do have in my head the average sales price to cost ratio. It’s helpful to work through the above calculations across multiple sales price to cost scenarios. At some point you won’t need to do it manually but if you’re starting out it is very helpful to count the cost up front so you aren’t spinning your wheels to make 2-3$. I still use an excel spreadsheet to calculate all these costs when an offer comes in that I’m on the fence about, it really helps me break through the emotional aspect of whether or not I think the offer is fair and see it more as a math problem where it either does or does not meet the desired turn around margin. There is a lot more to learn and consider about offers and that will be detailed later (such as how long have you had it, how much supply/demand is there, when to step back from desired turn around and when to hold tight, etc)
There you have it. Those are the basics of what to think about when you’re evaluating merchandise for resale. Does it have a strong brand-name? Does it have an enduring or desirable style? Does the condition meet your necessarily high standards? Does the price allow enough room to reach your target turnaround such that your valuable time is well-spent and appropriately rewarded? Your next step will be listing your items for sale, whether from items you have sourced or items you might already own (a great starting place for beginning learners, by the way!). Coming soon to a blog post near you, HOW TO CREATE LISTINGS WITH PURPOSE AND PIZZAZ!