Question
When reselling what gross profit margin do you try for?
Do want to double, triple or quadruple your money?
Is there an average or a rule of thumb?
I might be asking the wrong way but to me it means:
Double:
bought for $10 - - sold for $20
Triple:
bought for $10 - - sold for $30
Quadruple:
bought for $10 - - sold for $40
Answer
It is turnover, not solely profit margin. Velocity matters.
Answer
It's also a matter of what the market can bear.
For instance, if I buy a piece of china for 50 cents, and the current selling price on ebay is $50, I'm not gonna be happy selling it for $2.
Answer
Yes turnover and volume is very important. The higher the better.
As far as the prophet margin I was referring more to commodities as opposed to collectibles. As in selling brand new widgets.
Isn't there a rule of thumb?
Answer
The sale price of an item should be determined by the market for that item, and the purchase price should NEVER be considered.
Failure to do basic research on items can have devastating effects on markets. Just look at pottery and glassware on eBay.
I primarily sell books. Overall I try to never pay more than about a third of their market worth. There are exceptions, where I will take some to full retail (at least median price) if I find they are particularly desirable, a good investment, or a necessary action to thump competitors.
However many other factors must be taken into account, such as saleability, turnover, and time. The last is important, since if the item takes a lot of time to sell, either in preparation, or customer service, it is clearly cutting into the ability to make money. And some items will simply never sell at a reasonable price, cutting into the profit margin. And some items may sell, but take an abysmally long time to do so. Do I spend $50 on a $250 set of books that may take three years to sell, or rather use that money on more popular items, albeit with lower profit margins that sell every week or two??
'Buy Low, Sell High' is elementary common sense, but real life business is often more complicated than that, especially when there is fierce competition for basic inventory.
Answer
Originally Posted by grumpygramp
Yes turnover and volume is very important. The higher the better.
As far as the prophet margin I was referring more to commodities as opposed to collectibles. As in selling brand new widgets.
Isn't there a rule of thumb?
No. The market is too fluid. You cannot control the margin. Too many variables.
Answer
I don't look at each piece's success...sometimes I lose money on individual items. I look at the overall picture, which is 2 - 3x profit.
Answer
I think we are mixing the words markup and profit.
Buy for $25. and sell for $50. $25. markup - 100% markup on product cost - 50% markup as a percentage of selling price.
Profit is $25. minus all expenses other than the direct cost of the item.
Specific expenses include such things as eBay fees for the transaction and then there is general overhead.
With new items some of my inventory costs me 75% of the selling price but the dollar amount justifies, to me, the sale.
Other new items cost 15% of the selling price.
There once was a concept that, as an example, general new product retail bought for $5.00 and sold for $10.00 but market forces have changed all aspects for pricing and markup/profit.
Preowned items are a world unto themselves and pricing has much greater variations.
Answer
I sell some commodities such as decorative items, DVDs and CDs and the profit margin is so low it is scary. So I look for a minimum per transaction profit of $5.00 or about 30% after all out-of-pocket expenses are subtracted. Turnover is key.
This only works for me because I have devised auctions and methods that are very low in terms of labor invested per sale, and very high in capturing repeat customers.
Still, my prices are usually the highest in the areas in which I sell. This is offset by very fast service, great packaging and presentation, and nice personal touches that customers like.
Slow and steady has served me well for seven years on eBay.
Larry
Answer
$5.00 profit has always been my magic number with video and DVD as well.