What new businessmen and women think is that they can slap a price tag on any old item and move it through the door. This is how many businesses flop – if you don’t take into account factors like overhead, competition, shipping, employee wages and your desired return on each investment, then you can’t hope to stay afloat.
Believe it or not, consumers do research before buying an item. My grandfather actually makes lists of different stores that hold the item he is searching for, and then goes with the best deal. Consumers pay attention to what they see on sales racks, clearance shelves and on the Internet. In fact, world wide web shoppers are even more frugal than those who shop in brick and mortar stores.
Before you can even begin to determine prices, you must know the sum total of your overhead costs. Overhead is everything you need to do business – rent, utility bills, membership payments, bank charges and marketing costs. You should always know what your overhead is from week to week because these costs must be covered regardless of whether or not you move product.
Next, look at individual products. You must know what every product you sell costs to acquire. For example, if you purchase items in bulk from the manufacturer, you must add the costs of the items, the shipping and handling, and the cost for repackaging for resale. The sum of those costs is your direct cost for product.
Then you must examine your desired profit. It is a mistake to hold the mentality that whatever you make is good enough for you. Running your own business should not be a fly-by-night operation; you should have a fixed (realistic) number in your head of what you want your annual profit to total. If you want to make $60,000 per year, then the amount you make off of product sales should allow for that profit margin.
Depending on the product, you can make a substantial income from buying product directly from the manufacturer and reselling it through your business. The most important thing is to find a product that you know you can sell effectively, and that can create your desired profit margin.
When considering possibilities for resale, determine the market value based on the competition. For instance, if you decide that you want to sell flat screen televisions, you must first find out what other technology stores are selling them for. If a particular television costs $1,400 at Frye’s Electronics and you try to sell the same television for $2,000, you probably won’t find many customers.
On that same note, you might want to find a product that lacks competition. If you can discover a new product that hasn’t been picked up by major stores, you’ll have a niche product. It will be much easier to move merchandise when you aren’t competing with older, more established venues.
You are the only one who can decide what you want to make, but you won’t reach your goal if you don’t sell something of value. For example, let’s say you want to sell candy. You purchase each package of candy for $1.00 and can turn around and sell it for $5.00. In that transaction, you’ve made a 500% profit, but you’ve still made only $4.00 to the $1.00 it cost to purchase. However, if you were to sell vending machines, you might only make a 10% profit, but on $2,000 per machine, you make $200.
My best advice here is to mix and match your products. Just because you want to sell candy doesn’t mean you can’t sell to fundraising businesses, or that you can’t sell candy machines as well. Or perhaps you want to sell children’s toys as well. If you consider your position logically, you can overcome the value problem.
For more information on how to price your new resale products, check with your suppliers. They will be able to tell you the suggested retail price, and they might be able to give you a heads up about what your competitors are charging.
When it comes to selling pre-owned inventory, you must realize that there is a difference between what an item is worth and what it will sell for. Just because an antique armoire is worth $15,000 doesn’t mean that someone will buy it for that price, and if all of your inventory is geared toward high-priced antiques and collectibles, you won’t make much.
Follow the guidelines for selling new inventory, but add the following factors:
1. Age – How old is the product you intend to sell? And is it outdated? A computer manufactured in 1997 might be worth a few hundred dollars, but very few people would purchase it for that price. The same goes for all technology and clothes. Price it according to its age.
2. Wear & Tear – Take note of all scratches, dings, faded coloring, chips and broken pieces of all used inventory. A quarter-inch scratch could lower the price by as much as 50%, so be careful of what you buy for resale. Always have a working knowledge of inventory before you set out to buy.
3. Market – Resale shops have difficulty pricing items because the market changes so quickly and so often that it is difficult to keep abreast of what people actually want. Talk to companies that do surveys and polls to find out if your inventory has any resale value.
The most important thing to remember when pricing items is that you can always go up or down. If you find that a particular item isn’t moving, mark it 30% off as a clearance item and stick it in the front window of your storefront. It is always best to take a monetary hit on an item than not to sell it at all. For more information about pricing new and used inventory, visit this website.