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I have not been a huge MSer historically speaking. Most of my miles and points have come from credit card signup bonuses, and really, with a current full-time job, I probably have more miles and points than I have realistic time to use them. But I’m a tinkerer by nature, so I have dabbled in gift card reselling (SEE: Reselling $18,030 in gift cards – was it worth it?) and recently I have been doing a bit more “traditional” manufactured spending (SEE: A postal worker just straight up lied to my face). In December, I did a more controlled experiment with product reselling to see how it would work out
But then again, product reselling is (should be) less about just getting miles and points and more about generating actual real profit.
FBA Case Study: December AZ flips
I have a hard time sometimes pulling the trigger and just DOING something (AKA analysis paralysis), when really I’m in a situation where even a loss would not be catastrophic.
I decided to focus on what are called AZ flips, where you buy something on Amazon when it’s on sale, then sell it back to Amazon through FBA (Fulfilled by Amazon)
I paid for access for 1 month access to an AZ Flip group ($149). While you can absolutely find AZ Flips on your own, I chose to pay for access to this group. These groups are always tricky because if everyone in the group is buying the same things, then the other group members are often your competition. Most of them are limited to the number of people in the group which helps some with that.
I chose November / December since with Q4 being a heavy buying time, I thought that would be a good time to start
AZ Flip case study results: the good news
Over the course of about a month, I bought 43 different items (140 units total). I did not buy everything that was posted in the group, though I did buy many of them. Most of the flips were either toys or shoes.
My total cost was $3,709.06, and I paid $31.97 in tax before I signed up with a prep center located in a tax free state.
15 of my products ($1410.92 cost) sold completely, and I got $2608.84 for them. Amazon took $482.42 in fees, but that still represents about a 50% product on those ones.
AZ Flip case study results: the bad
Now it’s time for the bad news. If you’ve done much reselling, you know that Amazon “gates” some categories and even some brands within ungated categories. What that means is that some sellers (myself included) are not able to sell certain brands / categories on Amazon. While I tried to be vigilant about checking if I was authorized to sell something before buying it, I didn’t end up doing a very good job with that! 7 of my 43 products ($327.68 cost) I couldn’t sell! I returned 5 of them to Amazon (getting $217.45 back) and had my prep center ship 2 of them to me ($89.94 product cost) because I thought I could sell them on eBay.
I also realized that 3 of my products were MISSING ($86.24) – so yay for good record keeping! I will have to figure out how to open up a support ticket with Amazon for that
As you’ll recall, I spent $3,741.03. So what did I get for that?
First, here are my sales earned or goods still in my possession
- Received $2,608.84 in sales
- $217.45 refunded back to me
- $1884.22 in products still in-stock.
A total of $4,710.51
- $482.42 from Amazon (shipping / order processing fees)
- $218.81 from my prep center (this could probably be lower since I got charged doubly for things I needed returned or sent back to me)
- $149 for the flip group
- $39 for the professional sellers on Amazon
Total in fees – $889.23
So at this point, I am $4,710.51 – $3,741.03 – $889.23 = $80.25 ahead 🙂
I did get the points for these purchases (3x Thank you Points with the AT&T Access More card or 3x points on the Amex Platinum while that was going on in December), but I’m not going to count those in my profit / loss report.
So, was it worth it? I think so. While I am only slightly ahead right now, that is assuming no additional profit on my $1800 of inventory still in-stock. While I wouldn’t bank on the same 50% gross profit margin (that would be another $900 profit on my $3700 investment), I am still hopeful that it will be more than $0. I shouldn’t incur any more fees from prep
Plus, if I was to continue this, I would be hopeful that I could stop buying things I can’t sell (incurring extra fees) plus have a better handle on what types of products sell better. I would also choose a different prep center that interfaces directly with my Amazon account (even if they cost more)
Any thoughts from (better) resellers? Leave your mocking comments and criticism in the comments 🙂
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OMG, the time you spent on all this! Even if you value your time at minimum wage, buying and selling for just $80 profit makes it an overall losing strategy.
Yeah – it didn’t work out that well. BUT, I made a TON of mistakes, and I think that if I tried again I would do much better. Still, you’re right that time was a big factor
Hi Dan… long time reader, fort time poster. Really appreciate you posting these last few stories about your personal experience in this game. It’s nice to hear a real life human encounter of the game we all enjoy playing. It not always easy, and none of us were perfect from the get go. And you’re showing that in these articles which I for one have enjoyed reading. Too often the new guy in town gets bullied away from the game. Best!
Thanks Tim – I am probably going to keep at it and see how things work out with a little bit more experience under my belt
Since this is an initial experiment to a degree, how much did you set yourself up business-wise (sole proprietor vs registering a biz, etc.) Does FBA handle sales tax if applicable or did you have to deal with that? I am in the analysis paralysis phase myself right now and trying to figure out the baseline minimum I should do before starting to buy product. I have been shadowing deals for a while getting a feel for things. Ready to try a first (small) outlay with real dollars.
I already have an LLC so I didn’t have to create a new one. I am not sure about the sales tax question. As for analysis paralysis, I don’t know what situation you’re in financially, but my recommendation would be to set yourself a budget and just take teh plunge. Personally, I finally realized that even if I had a total disaster, I was still going to probably not lose a ton of money
So refreshing to read your “real world” diamonds and coal story! In my home, we call the missteps “tuition.” As you learn more about a project or procedure, tuition expenses generally decrease substantially. Thanks for sharing!
Thanks! I feel like if I were to try this again I would do much better 🙂
Curious which prep center you used?
Varehouse. If I had to do it again, I’d use one that is integrated with seller central
Thanks. I’m researching for one now and was leaning towards Varehouse until your reply. I assume you mean integrated so that they can print their own labels etc. Any specific recommendations for ones in tax free states??
Prime Zero Prep in NH is one I’ve heard good things about but they have a setup fee. There was another one in Montana I think that looked good but also has a setup fee. If I were going to go again, I think that I will pay the fee for PZP
Amazon limit the quantity you can buy to 1-2 unit and they enforce it very strictly . How did you buy 140 items with the 40 purchases?
Most of them were limit 3 but some were not