Sunday, 15 September 2013

Reselling: In it for love or for the money?

Topics covered: Scalping, resale value and pricing trends, mark ups, accommodating loss and dead-stock, reselling as a full-time job

Reselling for profit has always been a somewhat controversial topic.  People want to get a good deal and can become upset if they find out that they're paying more for an item than the seller originally bought it for.  Regardless of the feelings involved, profit and loss are present in every market, and the lolita community is no exception.  If you are planning to resell for profit, expect dead stock (stock that cannot be sold, so you're stuck with it) and if you buy based on what you think might sell instead of items which you personally like, it can become a source of pure loss (you paid out to buy it, but can't sell off and it is worth nothing to you personally).  That said, if you're new at it, or don't plan to do much reselling, buy based on your own interests.  Ideally, these items would be ones you have a personal interest in and wouldn't mind keeping if you can't sell them.  This way, even in the worst case scenario, you would still get some personal enjoyment out of it.

First off, there is a big difference between buying for yourself and re-selling if you decide not to keep it for any reason versus buying purely for the sake of reselling without any intention of keeping it.  The latter case can be further divided into 2 scenarios, buying for the sake of reselling where you don't mind keeping the item if it doesn't sell versus you having absolutely no interest in it whatsoever and any dead-stock (something that won't sell) is considered pure loss.

Scalping is a sensitive area in the lolita community.  It encompasses any situation where items are bought for the express purpose of being marked up in price and resold.  However, not all cases of technical "scalping" are viewed the same in the lolita second hand market.

When you are in a situation where you are buying limited releases straight from the store and marking up the price to resell for a profit, backlash can result since from the buyers' perspective, if the items were not bought to be scalped, they would have been available to be purchased directly at retail prices.  As demand for popular releases increase, some brands like Angelic Pretty have also announced their dislike of scalpers and even warn that scalpers who are caught may be blacklisted from purchasing from them in the future.

A more grey area of scalping would be buying items on the second hand market or on sale and reselling at a mark up.  This is often more acceptable because not all shoppers are able or comfortable to purchase overseas or use shopping services.  Popularity of certain styles, prints and even brands also vary, so the most popular prints in North American may very well be old news in Japan which can result in inexpensive purchases from Japanese sources that have high resale value on the western market.  This way, the profit margin can be achieved without competing directly with the pool of buyers that the item may be sold to.  It also often means items can be bought at a reduced price so that a profit can be made even if the item is being sold at below retail price.

The price that any particular item can be sold for can vary wildly by season and trend.  Generally, summer time is when lolita sales peak since many people who may not be interested enough to have a wardrobe for regular wear are still interested in obtaining a few outfits for special occasions, such as anime conventions which mainly occur during the summer season.  Season specific items will vary based on whether they are weather appropriate or not.  Seasonal items which will vary in popularity based on popular trends are often best avoided since their popularity and value may drop between the time when they go on sale at the end of a season and the start of the next appropriate season when demand for seasonal items increase.  For example, a trendy jacket bought on clearance at the end of spring may decrease in popularity and market value by the time it becomes weather appropriate again the following fall.  If you cannot be certain about the market and style trends for a seasonal item, it is best to stay with more timeless styles that will stay in fashion season after season, or purchase only very inexpensive items with high mark up potential so that if it falls out of style, you can sell it at a lower price than originally planned without losing money (or ideally, still being able to make a profit, even if it is not as profitable as originally planned).

Generally, I go by the following guidelines regarding how much pricing mark up would be should I resell the item.  (For those who aren't very handy with percentages, think of it as if I was selling the item for $100.  The percentage mark up would be how much would be "profit" if the item sold at $100, so a 30% mark up would mean that $30 out of the $100 sale price is profit or a 50% mark up would mean that $50 of the $100 is profit.)

Mark up amount:
Wishlist items - 0%-20% (usually only resold if the item does not fit/suite me)
Personal purchase - 10%-30% (originally intended to keep for personal use)
"Trial" items - 20%-40% (to "try out" a new style or items)
For resale or personal use - 35%-50% (would like to sell for profit, but would rather keep than sell below cost)
For resale only - 50%+ (would not want to keep even if it must be sold at a loss)

Mind you, I have regular income and do not rely on reselling to turn a profit, so my mark up values mostly reflect how much I value my time, although I have a bad habit of underestimating shipping costs, so the mark up also help cover shipping overage and paypal fees.  I also tend to think about these mark ups in reverse.  I take what I know as the best estimated market value (usually easy to find with a quick search of EGL Comm Sales) and deduce the mark up I would expect to be able to add in order to reverse calculate how I should set my maximum spending limit for the item.

For the not so mathematically inclined, here is the reverse chart.  To read this, 100% is the market value (what the same or similar items have sold for recently) and the spend percentage is what you would need to restrict yourself to spending so you can make the expected mark up.  (ie. If the item sells for $100 on EGL Sales, if you want to be able to mark it up by 25%, you would have to limit yourself to paying no more than $80 to purchase it since $80+20% = $100.  This is a little harder to calculate on the spot.)

Your spending limit as a percentage of market value (if the odd numbers confuses you, round down when visualizing to play it safe):
Wishlist items - 100%-83% (usually only resold if the item does not fit/suite me)
Personal purchase - 91%-77% (originally intended to keep for personal use)
"Trial" items - 83%-71% (to "try out" a new style or items)
For resale or personal use - 74%-67% (would like to sell for profit, but would rather keep than sell below cost)
For resale only - 67% or less (would not want to keep even if it must be sold at a loss)

You should modify these charts and amounts based on why you are planning to resell and how much you need the income.  If you have no money problems and only want to sell so you can reduce clutter in your closet and buy a few new nice things, you don't need to worry about mark ups as much; however, if you are in a position where resale profits make up a large portion of your income, you would need to find the best deals so you can have large profit margins to make sure that you do not run a risk of winding up in debt with a bunch of clothing you cannot sell.  In this case, focus on spending less since common or low demand items will likely just not sell if the price is too high or the buyers are not biting.

Of course, if you manage to find an item you like at a price far below what you would be willing to pay, go for it!  It's a great opportunity to purchase a much wanted item for a super low price, and in the event that you decide to sell it (because it doesn't fit, or you found something you want more), the additional savings can be turned into additional profit if you sell it.

Profit margins also need to be able to accommodate the cost of dead-stock (including pure loss situations).  If an item is not a sure bet to sell, be sure that you are willing to eat the costs if it cannot be sold.  This is often a big issue for older and severely damaged items as well as items where shipping can exceed the cost of the item itself.  If your finances will not support a high number of dead-stock, buy only items that have room for a large mark up.  If you are buying your goods through auction sites, this may require keeping your bids low, even if it means winning fewer auctions.

Any pure loss situation is very bad, especially if you do not have sufficient sales or other income that will easily offset the loss.  In any case, while the occasional loss may be unavoidable, it is best to keep it to a slight loss situation (where you may need to reduce the price to below what you paid to sell it) rather than a significant or pure loss situation (where the items value is significantly lower than what you paid or the item loses nearly all it's value).

In some scenarios, even dead-stock can have it's uses.  If you resell online, perhaps you can use it as prizes for a promotional raffle for your e-store.  More often, it just needs to be written off as a dead loss if it can't even be sold at an extreme discount.

Whatever your reason for reselling, the lolita market (and most J-fashion markets) is very niche, so you have a limited audience to appeal to.  If you want to turn casual reselling into a business and make most or all of your income from it, think long and hard.  In the business world, 99% of small businesses close down within the first year of operations.  Niche markets can be even more difficult to appease.  If there is any possibility, it is much better to work a regular job and run your lolita business on the side.  Having multiple sources of income can bring a sense of stability since fluctuations in sales only means that you may earn more extra income one month than the next, but it can be a source of stress if you rely solely on these fluctuating sales to pay the bills.  Having your own business is not something to be taken lightly. 

Much like starting a wardrobe, if you're starting a resale business, start small and slowly build it up as your finances allow.  Don't spend money you don't have or credit card debt can quickly eat away at your profit margin.  If you don't have the resources to buy items specifically to resell, there's nothing wrong with just enjoy the fashion and not treat it as a business venture.

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