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I’ve been listening to the podcasts for a while now and finally decided to join the forum…
I’m a long time ebay and amazon seller… Sold my first item on eBay in 1999 and went full time January 1, 2002. My wife joined me full time 3 1/2 years ago and we haven’t looked back.
Seems like a great group and can’t wait to join the discussion!
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Sure, I love sharing my story…
I found eBay back in 1999 by randomly clicking on a banner ad at the top of a website. I remember that I was surprised at how active the site was and that some things I researched were bringing high dollars. My wife was about to throw out an old Atari 2600 with about 50 games, but I stopped her. I thought it would be a good test to see how eBay actually worked, so I posted each game in an individual auction – of course back then auctions were the only way you could sell. After watching the prices on those games go higher and higher and finally ending at a total of $700, I was hooked. Keep in mind, this was without ANY pictures on the auctions as I didn’t have a digital camera back then.
I started listing everything I could find in the house to sell, and once that was gone I started going to flea markets and auctions to find items to sell. Soon, our garage was full of stuff.
I dabbled in this and that and finally found my niche with media items (cds, movies, etc) and video games as these were easily available to me. About this time is when many small video rental stores were going out of business and I would buy out their inventory of VHS tapes. It was a quick turnover – list as quickly as I could and it would be gone after the 7 day auction. I was actually one of the first 100 sellers to reach 10,000 feedback on eBay. They sent me a certificate, a shooting star pin, and a jacket with my eBay seller ID embroidered on the front for my efforts.
My eBay income was matching my income from my job, so I made the decision that December 31, 2001 would be my last day in the corporate world.
When I went full time, I added scavenging as another source of products to sell in addition to the Media and Video games that were my bread and butter. I would mainly go to local auctions to get my products – there is this one great auction in my area where there are 5 auction rings going all day. It was great.
So, this went on for my first 10 years until about 2012 when I discovered Amazon. All the media items I was selling went great on Amazon. I became the “book” guy at the auction and got every book that came through. I kept eBay going through all of this (and sold my best item ever… a $3,800 book), but my focus had shifted to Amazon. It was not uncommon to buy an entire box of books for $5 and sell one book for $100. It was great.
But like most good things, this too was coming to an end. With the rising fees on Amazon and digital technology taking over the media category, I could see the writing on the wall that my business model must change.
So, I went to what was easily available and that was clothing. And let me tell you the abundance of clothing and the price that retailers are willing to get rid of their overstock is mind blowing. So, I started buying as much as a semi truckload of overstock clothing at a time. My business ballooned to 10 employees and a 7500 Sq Ft warehouse and everything was going great! We were making enough money that my wife even quit her nursing job to join.
Problem is that I didn’t love this business model and wasn’t passionate about it. With 10 employees, it had became a job. I longed for the days of going to the auction to find that one item for $5 that goes for over $100 on eBay.
So, we have decided we want a simpler business model and we are currently in the process of scaling back our employees and our business so we can enjoy life and not be stressed out about the business all the time. Amazon was as much as 80% of our business. Currently it is about 50% with eBay gaining ground every day. I love eBay. I have always preferred it to Amazon, but I was chasing the dollar and Amazon was where the action was happening. But, we are really shifting our focus from money to quality of life… Who knows, we may get this business back to just my wife and me.
Yeah, so I have been doing this full time for 16 years and couldn’t imagine doing anything else. It’s been a great ride so far and I am looking forward to the future!
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Jadowa,
I love your story!
Wow, that was quite a wild ride that you have been on. I thought you might have had some good stories when I asked, but I wasn’t expecting such a great story as that!
The thing I like most about your story is that you were able to change with the times to always make money. Also, you were able to change the business (or in the process) to match the lifestyle that you wanted.
I would call your story a great success that is still working its way out, as with all of us on this journey. I think you will be able to add a lot of good information to this blog in the future.
Mark
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I think we found out that all the extra employees just kind of evened out for us. For the sake of transparency, in 2014 with 2 employees our sales were $900K with $120,000 net income. Last year at our height with 10 employees we did $2.1M but only $150,00 net income.
However, we did give good paying jobs to our local economy. We hired 3 single moms that were previously on welfare and helped them stop living off the government. So, there was some good besides the small increase in income…
However, I would say the warehouse space IS worth the money. We pay $3000 per month in rent and that is the easiest check to write each month. When the business really started to grow is when we moved out of the garage and into a warehouse.
But like I said, we are undergoing changes again… I have found that I am not great at being a manager and that is not where my passion is… We’re tired of working 60 hours weeks. So, we are simplifying out business to meet our lifestyle goals. We have already let a few people go, but I’m not sure where we will go from here.
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It’s refreshing to hear the real numbers. Youtube guys say they gross $1-million on Amazon, but never say what they actually net after all is said and done. $150k is great money, but sounds like a lot of work to make that. Ten employees! 50-60 hours a week!
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Yeah… It is a lot of work for mediocre money. If you do Amazon FBA, you can count on about half of your money being eaten up with their fees. Granted they do all the labor once you send it in and this does include shipping. Then, returns on clothing on Amazon is OUT OF CONTROL. I have nearly a 20% return rate on clothing. Amazon does do a good job of receiving returns and if it is still brand new they will relist it automatically for you, but 20% return rate is crazy… (It’s 5% on eBay with the same type of clothing). It just speaks to the buying culture that Amazon has created… Great for the consumer, terrible for the seller… But, I’m one of the guys that embrace the fact that if I play in their world, I have to play by their rules. Where else could I even come close to my gross sales?
My average cost for the products I sold on Amazon was $1.70 and my average sale price was almost $15. These people that are saying a 3X profit margin is what you need to be successful, I just don’t buy it.
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Jadowa: Amazing information. I love hearing about your journey.
When looking at your numbers, you were at a 13% net margin in 2014, but that dropped to 7% last year. Was that due to an increase in costs to maintain the higher sales, or was that sales price erosion due to the market price declining for those items? Or was it something else?
Were those numbers for just eBay, or for all your business platforms combined?
I’m totally the numbers geek, so I love the analysis! 🙂
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From 2014 through 2017 my sales averaged about 70% from Amazon and 30% from eBay.
I would say the biggest reason for the decrease is the labor cost. I was paying employees to do the work that I used to do. My focus shifted more towards running the business and less about making money.
Secondly, Amazon has had massive increases in their fees over the last few years. For example, last year during Q4 they raised their FBA Storage fees by nearly 6 times. So, Q1-Q3 I was paying about $2500 per month in storage fees, but that ballooned to nearly $13,000 per month October-December. They are all the time raising fees… Just a couple weeks ago with 1 day notice, they raised their selling fees in the clothing category from 15% to 17% – which doesn’t sound like much until your are doing the volume I am.
Lastly, I think it was inventory selection. With the increased cash flow, I stopped doing as much research on the inventory I purchased. If I saw a deal, I jumped on it because I had the cash. Before, I would try to figure out how quickly I could sell the inventory and really scrutinized every purchase.
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jadowa: Thanks for the info. Sounds very familiar. We have been through that ourselves as we have grown (but to a much lower level). But I have seen this in some other small businesses that I have done accounting work for. Growth is good…but it can kill you too if you let it.
Have you done wholesale in your business in the past?
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I have never did wholesale… I just can’t get the math to work for me. I get the appeal of a steady source of inventory, but I feel it’s hard to find products with enough margin to overcome the fees associated with selling on Amazon or eBay.
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The problem I see with wholesale (especially on Amazon) is that once you find a profitable item and purchase a big shipment, then other sellers have software to identify your hot item…and quickly get in on the action, lowering the profit margin.
This is why sellers try to create “private label” items to attempt to squeeze out competition. But I’ve never met an Amazon/eBay seller that would admit to having a private label item that sold well year after year. It seems it’s just game of creating and selling new lines of different products. Never passive income.
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I’m finding that as well. Working on a couple of options now, but it is a lot more searching to find ones where the money makes sense. ROI is definitely lower, but if I can get the ASP high enough, then we can make more money per hour.
So were you just using RA to hit those Revenue numbers? That is a TON of sourcing and capital!
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Jay – I agree that it is not passive income. I know a couple people that do Private Label on Amazon and they are continually having to come up with new products and ideas. Once you get an item ranking well in Amazon’s search, there are things you can do to automate the process, but it’s just not my thing I guess…
T-Satt – I don’t do Arbitrage either – for the reasons you mentioned. I buy overstocks and closeouts from retail stores in large lots (sometimes a full semi). I know it is a gray area on Amazon to sell overstocks as NEW now (It wasn’t when I started doing it). But, the margins are 800-1000%. There is some extra labor in sorting and bagging it, but I have found this model works for me.
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