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Your listing time seems right in line with ours. When we are doing shirts and jeans, we are 3-4 minutes per listing. Photo and shipping prep (we fold each item and put in a clear poly with the SKU on it for easier storage and quick shipping) is about 4-5 (mostly due to the shipping prep time). Photo edit and submitting the listing is about 1 minute.
Agree on the batching to be efficient. That is our process now.
Oy…the days when I started…doing one item cradle to grave…took forever!
Paulo:
For some comparison purposes, for our business in 2017, COGS was 23% of Net Sales, Shipping was 22% of Net Sales, and Fees (PayPal and eBay) were 10%. These are by far our largest costs, and the others are minimal. Your shipping looks about right, but your Raw Material is double what ours is. (Side Note – What other costs are you putting in COGS?)
Being double what we are isn’t necessarily bad, but it depends on the dollars you are generating. We all have the 3 T’s of constraint (Time, Talent, Treasure). If you don’t have the capital to invest in 2x model (like you are now at a 46% COGS), then yes, your strategy of lowering your COGS is the first place to start.
However, if Time was your constraint, and you wanted to make more money per hour worked, then you can afford to be at a 2x model, as long as the Average Profit per Item (API) is where you want to be (and you have a ready supply). This is also assuming that STR is a push, so not a “long tail” vs “quick flip” scenario as well.
For example: We have one source of product that is at 4X to 6x return, but yields an API of $10-$12. We have another source that is a 2X return but yields a $25-$50 API. Listing time is about the same, STR is a little longer on the second. If Time is my constraint, I go hard on item 2, but if capital is my constraint, I go hard on item 1 (assuming a similar STR).
I had mentioned this before, but when we source, we have two guides: 1) At least $12-$15 profit but the cost has to be less than $5. So if it is $1 and we can get $15 and the STR seems high, we can do it. If it is $20 and sells for $35 we won’t. 2) We look for at least a 4x return, but we will go lower if the API is high (like item 2 noted above). But that doesn’t mean we will spend $100 for a profit of $125, or even $150. Cost of entry is too high, and too much capital at risk on one sale.
Good luck in your tweaking. Always remember…you buy your profit.
Agree Almasty.
For constant sales:
Fast moving inventory store means you have to feed the beast.
Slow moving inventory means you have to create a beast.
“sales beget sales” — +1
I can’t tell you how many times I have seen “Surf Sales”, meaning one item sells, then a similar, then another, then another…like a wave is building and we get to surf it.
Haven’t sold an Orvis item in weeks…Yesterday had a sweater, then a shirt, then another… Happens with Dress Shirts, Pants, Jeans, etc…
Beth: I don’t know if you are in the minority. I will say that the questions you raise are ones to consider. You touch on the problem of growth that every small business deals with (and has to solve at some point).
Your 10x return but 10% STR is a perfect example. Let’s assume that a new seller starts with a 10x returns model (buy $1, sell $10). They list 50 items the first month, and get a 10% monthly STR. They spent $50 in Month 1 (50*$1), and Revenue was $50 (5*$10). They break even on cost, but overall they lost money, as they still have fees, supplies, etc. in the model.
Month 2, they list another 50, and get another 10% STR. Money out = $50 (50*$1). Revenue= $90 (9*$10). Now they are making money, but they had to survive the first month of no money. This is where inventory growth is key to making meaningful money quick (“shut up and list”). It is also a good model (10X) in that profits from that work are returned quickly (and the 10% STR is pretty solid for that ROI as well).
We average a 4x-5x, so let’s use 4x for conservative numbers. If we buy at $5 (our average), sell at $20, and list 400 per month (our goal), and use a 15% STR (conservative). Month 1, we spend $2,000 (400*5), Revenue is $1,200 ((400*15%=60)*$20). We had NEGATIVE cash flow before fees. Month 2, we spend $2,000 again, and with 15% STR, Revenue is $2,220 ((340+400)*15%*$20). We probably break even overall, but still negative cash flow YTD. Month 3 we get over the hump, and start generating money.
This happens any time a company goes through a growth stage. They have to front load the cost of the growth with more inventory spending (and other possible costs like more labor, supplies, warehouse space, etc.) before the revenue generated by that growth comes in. And remember, even the 4X we are talking is GREAT for retail. Most retail are at a 2X on COGS, and a Net Profit of 5% or LOWER. Wal-Mart has a net profit margin of 3%. Imagine how tough it is to fund growth netting 3 cents on every dollar of revenue. Most eBay sellers are netting closer to 50%.
This is all to help illustrate your point (and others points). Growing your inventory is ONE of the factors to making money on eBay. But doing it in a capital efficient manner, and within constraints that each seller has (time, money, space, etc.) and getting solid returns (high ROI, high STR) are all factors. Growing inventory of items with low ROI takes longer for the “pipeline” (as Jay calls it) to generate profit. Low STR makes the payoff farther in the future as well. If you have a monthly STR of 5%, you are constantly plugging money into growing your inventory, and the returns are farther off. Not that it is a bad model, but you have to know and understand that. Jay & Ryanne have the low STR / high ROI model that constantly throws off a solid monthly return. And it took them years to get to that point. Growth takes time
It is like investing. Put your money down on solid inventory with solid returns.
Mark: Completely agree. There are nuances to the basic question that have to be answered. Sometimes the right answer for someone to make more money is to “shut up and list”…cause they just don’t have enough inventory. And even at that basic level, I would caveat “shut up and list GOOD STUFF THAT PEOPLE WANT.”
Beyond that, the only good answer is “it depends”. Lots of factors with constraints and goals will lead to the “right” answer…but everyone has a different “right” answer”.
Mark S: I can agree with you on the basics of your thinking, but the 2 difficult parts are in the extrapolation of the math and in your biggest assumption: Good Inventory.
Many times you can grow inventory because items you thought were good are still there a year later. Maybe it is a unique item and you can wait for that right buyer and it make take a year (or 2, or 3) to sell. But if it is more of a commodity item and it hasn’t sold yet, either it wasn’t as good as you thought, or the pics are bad, or the pricing is wrong…etc. And if it is something you “just know is worth a lot”, it may take even longer to realize there is an issue with the listing. Just having the item listed isn’t going to guarantee a sale. Sometimes, it is just taking up space and you are losing money (in the purchase price, the relisting fees, and the warehouse space). I think this is a reason that ASP drops when inventories get large…most people aren’t culling out the bad buys when they get larger.
That leads to the extrapolation issue. Keeping the ASP on 10 times as much inventory gets much harder, because now every task is 10 times larger and requires more efficient processes to maintain. At 2,000 items in inventory, shipping 1% Daily ASP (20 items) is manageable each day (I know some people with this size store with that ASP). At 20,000, that 1% Daily ASP (200) is much more difficult. You can cover by hiring, but then that brings on new tasks (HR, Payroll, time scheduling, covering downtime when they are gone/sick, etc.). Plus, now it is harder to maintain that store size as well. If you are selling 200 per day, you have to replenish 200 per day. So the extrapolation gets tough. Even extrapolating a low ASP store is tough, because that large store now requires warehouse costs, efficient shipping procedures, possibly more varied shipping supplies, etc.
Jay, the only good answer is…it depends. For you guys, you are willing to invest your capital and sit on that inventory for years if needed to get a sale. And by focusing on keeping your purchasing cost low, and you don’t have extra costs for inventory storage (though you did invest in a new building, but that can be viewed as a capital asset later that can be sold, so I’m ignoring that side), your model is to “set it and forget it”, not worry about the cash and time invested in your old listings, and wait for years for a sale.
I can’t speak for Beth (though I know where she comes from since I was in charge of purchasing in my past life), but I am more on her style of thinking: Constant management of resources. For example, in our plants, a critical component was a bodymaker ram. If you lose one, you lose production volume…not good. But they are also expensive. Default thinking is to have one in each plant to avoid downtime and lost production. But resource management would say that for plants that are within 4 hours drive, have one that covers both plants (as the chances of both plants needing one was very low). That is a better use of resources.
Side note: The other side of that equation was our customers. We made a product that our customers used JIT (Just In Time). They needed our product 24/7/365, and if we didn’t have what they needed when they needed it, they would shut down (again…not good). They managed a resource that they could NOT live without…and they never had it for longer than a few hours before it was used. Resource management.
For us, we don’t have unlimited space for inventory. We have recently had to rent an outside storage unit, so we have a cost to cover each month. Our inventory level can afford it, and we have little unlisted inventory. But before we grow into a second unit, I would be looking at the old items that I still have (as they are taking up space and requiring a second unit to grow) and asking if it is worth keeping the listing. Maybe it is better to call it a bad buy, and either blow out on a clearance sale or pull and donate. Wal-Mart does the same thing. They have lots of inventory, but they also blow out old inventory and donate to local charities (I have seen their stuff at our local thrift store).
So it all is different to everyone. I think what Beth is saying is that Inventory Growth just for growth sake is not a measure of success. That growth has to be done in a smart fashion, at the right time of the selling season, and with the right inventory.
Agree on that point. I was only discussing listing fees. Final value fee difference would be almost impossible to calculate.
As we ramped up our business, we always used 15% of the anticipated selling price as our estimate of fees.
Our even simpler method is to ensure at least a 4x return on our money, and at a minimum a $15 Profit. That will cover all fees and make sure it is worth our time.
486 miles. The harder part will be (not only that this is my first thru hike) is that most of the trail is above 10,000 feet. A large part of the trail is also part of the CDT, one of the Triple Crown trails (Appalachian Trail, Pacific Crest Trail, and Continental Divide Trail).
Great timing to get into this at age 46…
Habnab: You are dead on with your math (assuming the Yearly subscription price and only using Fixed Price listings)
To move from non-store to store: Breakeven is 157 listings/month – 157-100*.35=$19.95
To move from Basic to Premium: BE is 450 Listings – $19.95+(450-250)*.20=$59.95
To move from Premium to Anchor: BE is 3400 Listings – $59.95+(3400-1000)*.10=$299.95+1 on that thought.
Though just having items isn’t enough. We always have to do analysis of dead stock. Sometimes stores grow because people don’t want what is in them. At that point, Invested Capital is an issue. You have invested money and time into the listing. If it isn’t paying a return, time to remove the dead stock and put in new items that customers want.
