Buying Theory
How Much should I pay for a
Product?:
I use several factors in determining what I should pay
for an item:
What does it cost brand new?
What did it sell for
recently on EBay?
When purchasing single items, I tend to
concentrate on items that retail new for $500 plus. If you buy something
worth $25 the most you can make is $24.99. If I buy something worth $500
the most you can make is $499.99. The more money an item retails for the
higher the profit margin can be. Remember, just because an item retails
for $500, does not mean I need to pay $500, $400, or even $100 for it.
If I saw that an item sold for $800 in the past on Ebay, I would not
buy this item for over $400. It takes time to buy it, sell it, and ship it
and then I have to pay Ebay and Paypal fees. Therefore, paying any more
than $400 is not worth my time. Moreover, I consider the fact that I might
want to reduce my price if the item is not selling in the time I
predicted. If I buy this item and it is not selling within a few months, I
may want to reduce the price by $200 to get rid of the product. However if
I bought this item for $650, I would not have the option of lowering the
price by $200 to liquidate the item.
I create a buffer when I buy
something to help reduce the chances of losing money on an item. The point
of the system is to buy low and sell high.
One way to see recent
sales, within the past seven days, of an item or similar items is to use
the “ADVANCED SEARCH” feature on Ebay.
If I am to purchasing a
“lot” (large QTY of the same item) of items, then the I don't mind buying
lower priced good. I actually prefer it. For example, if I were to
purchase 500 keyboards at $3/each, thats a $1500 purchase. I'll assume
that I can resell it at $10/each. If I am successful, then I can make a
$3500 profit.
Therefore, one single item purchases, try to purchase
the larger ticketed items. When buying inventory is large lots, try to
keep the price per item lower. As you develop you niche(s), you'll figure
out what your price points are.
Does the demand for a product
matter?
Demand for a product is an important factor. There are
three levels of demand. High, Medium, and Low.
I determine demand
on the following basis. If more than 100 items sell on Ebay weekly demand
is high. If 15-30 items sell on Ebay weekly demand is medium. If less than
5 of the item sell on Ebay monthly, demand is low.
This
SmartAuctionSystem does not generally work for products such as ipods that
are in extremely high demand. How many people will sell a $200 ipod for
$55? Not too many. Why is that? Because the demand for the item is high.
Medium demand items are my favorite types of items to purchase for
resell. With Medium demand items it is possible to purchase the items for
a very low price. However, when I resell it, I may be able to unload it
quickly and for a much higher price that I purchased it for. The shrink
wrap machine that I discussed earlier is a prime example of medium demand
item.
Low demand is an area you have to be careful with. I would
not suggest paying more than 20% of the items projected Ebay sales price.
If you have to hold onto the item for a long time before it sells, but can
make 80% profit when it does, then it may not be a bad proposition.
Remember, the lower the demand for an item, the lower you should pay for
the item.
Product Longevity
The longevity of the item is
also an important factor in deciding how much to pay for the item. For
example, the shrink wrap tunnel is an item that will be good in 10 years
from now. However, a computer related item =can lose value very quickly.
Computer and related technology is basically always losing value. If you
purchase these item takes these factors into account. In other words,
offer less money for items that have a short shelf life.
Selling
for Parts:
If an item cannot be sold as a whole you can consider
breaking it down and selling the parts of the item. What are the parts
worth?
I buy and sell car parts on Ebay. In fact, in many
situations, the parts of an item can be worth more the item as a whole.
This is a new way of looking at products. Always ask yourself, what are
individual parts on this machine worth? This is a key method of making
money on Ebay. For many people car parts is just garbage. However, to
those of you who read this ebook, you know that paperweight can be
converted into thousands of dollars!
Always ask yourself, “what are
the individual parts on an item worth?”
Buy Low, Sell High:
Remember that with the SmartAuctionSystem, your money is made when buying
the items. So, make sure to always buy low. Do not get excited and stuck
in a bidding war. Your in the business of making a profit. Set a price and
if you do not get the item at that price, MOVE ON!
With the
SmartAuctionSystem, your money is made when buying the item(s).
Also, there is also a risk of having to hold on to the item for several
months or possibly never selling it. Consequently, make sure that the
price you buy your item is at a low enough price that if you are stuck
with it, you are not affected financially.
