With the advancement of the internet, the resale business has been really easy and accessible for people to start making money. The question is “is it doing good or bad to the market?”, as you know resellers would buy a good at a certain price and try to sell the good away at a higher price from 30% to even 300% profit.
With the resellers earning this much of profit, a lot of customers who want to buy certain products might feel frustrated as they just could not get the goods before the resellers. This “forces” customers to buy them at a much higher price and it is not fair for them.
With the recent unfortunate death of Kobe Bryant, a lot of resellers went online and went on a shopping spree to get any goods associated with Kobe Bryant. Those products such as his shoes, jerseys, shirts, and many more. As a fan myself, I felt really frustrated as resellers were using his death as a way of making money. As his fan, I couldn’t even get a jersey as the price of Kobe Bryant’s jersey skyrocketed to $1000 on Carousell which is ridiculous.
High Reselling Price
Remember how platforms such as Carousell was being used as a way to sell away your second hand used items so that you get something back instead of throwing away clothes that you don’t fit anymore, books that you stopped reading, and your other used items.
However, right now platforms such as Carousell are being used as a market for people to buy and sell things of all varieties. There are many types of sellers that buy things and try to sell them at a higher price on Carousell.
Remember what happened during the start of Covid-19? People were clearing supermarkets, buying all the masks and hand sanitizer from the stores and where did you see all these products on sale? Yes, it was Carousell and people were putting them on ridiculous prices like $20 for a pack of instant noodles and $30 for a mask.
How does this affect people?
I am sure that it is obvious that the most direct factor would be the price paid for a certain product. A lot of people would surely feel frustrated since they can’t get the products they want at the affordable/lowest price. This would affect the market as the saying goes “monkey see, monkey do”, people will start to learn from what others have been doing and copy them by clearing away all the goods at a good price and then try to sell them away at a higher price. This would then turn the whole market into a disaster where all goods are being overpriced and people who could afford may now be unable to get the things they wanted.
This creates a toxic market as people can hardly get the things they want and those resellers are taking the consumer demand as their advantage of earning high profits.
For example, if a singer that is going to retire soon is hosting a final live performance, there would be a lot of loyal fans that would try and get a ticket to watch the show. But what resellers do? They would use technology such that they would enter the site and book the tickets before others do. Upon getting the tickets for $250, they would resell it at $1000 and those fans who really do not want to miss the performance would have to pay that unreasonable price. Hence, it is actually kind of annoying that resellers are taking too much advantage of what people want.
Is there anything done to prevent resellers from abusing the system?
Luckily, some websites have implemented bot detectors to detect the purchases to ensure that the user is not an intelligence made to source goods for reselling purposes. This ensures that the online market interest is being protected as resellers would not be able to do bulk purchases using their bots.
For retail stores, they also put in efforts to stop people from buying for resale. Some retail stores set purchase limits where they would only allow you to purchase a certain quantity of certain goods. For example, during quarantine, a supermarket in Singapore named “NTUC” limited the number of toilet papers and other essential items such as canned food so that people would not overbuy and stock things up.
How would reselling be acceptable?
Honestly, there is nothing wrong with reselling goods but people need to know that there should be a limit for everything. I feel that it is fair that some people are trying to earn some money off reselling goods but there should be a balance between your profit and your ambition.
You should not be overpricing the goods so badly that it becomes unreasonable. I would say that anywhere below 30% is counted as fair especially for branded goods. Anything more than that is just too much.
What is the Resale Business?
A reseller is a company or individual (merchant) that purchases goods or services with the intention of selling them away at a higher price so that they can earn a profit. However, this stream of business does not always guarantee profits as the value of the goods and services can fluctuate in the market.
Different Types of Resellers
There are different types of resellers but the way their business work is similar. They buy products from either wholesaler, manufacturer, or distributor and sell the products at a higher price to earn a profit.
- Distributors – Buys a product from the manufacturer and resells to either a wholesaler or retailer.
- Wholesaler – Buys products from distributors and sells products to a retail store.
- Retailer – Purchases products from wholesalers then sells them to customers.
- Arbitrage (flipping) – Some customers would find good deals and sell the products on an online platform
How do Resellers make money?
- Retail Arbitrage: Some customers would target clearance sales on goods like for example a sneaker clearance sale. They would buy some sneakers and resell them online on platforms such as eBay or Carousell at higher prices. This way they earn profit and this becomes a cycle as they target other sales.
- Private Labels: The reseller will be targeting goods from manufacturers that are good qualities and buy them to upgrade the products. It can be the packaging or adding a brand to the goods. They would then sell the goods at a higher price and earn profit from it.
- Dropshipping: Dropshipping is done completely online where the reseller would sell goods without any inventory. This means that the reseller is more like a middleman who tries to gather customers and directly send the orders to manufacturers and the manufacturers would just handle the rest. The reseller would then earn money from the sale by just promoting the product without a store, inventory, product, and even physical store. All handling is done by either middleman or technology.
- Wholesaling: Resellers would buy large quantities of goods from manufacturers and resell them straightaway on platforms such as Amazon.
Why do people start the Resale business?
The barrier of entry for the Resale Business is low as this business does not require you to have any store, product which means that the cost of entry is very low as you do not need to spend money creating and manufacturing your own products. The demand for certain products is already well established and all you have to do is to put the products on the right platform and wait for people to buy them.
As a beginner, you probably don’t have everything for you to start creating, packaging, and branding your products. Not to mention that you have to market them well as well. All these take a lot of commitment, time, and cost to establish. Why not start by doing a resale business where you are just selling other people’s products, you can create your own products when your business is ready for it.
Resale businesses would usually depend highly on online markets like Amazon or eBay where they can just list their products on these sites to sell their products. But if the resellers are looking to expand their business then creating their own sites would be smart as they no longer have to share their earnings with Amazon and eBay.
Disadvantages of doing Resale Business
As much as it sounds like resellers are having an easy life and making easy money, there are certain disadvantages that they have to face in this line of business.
Lack of Control – Resellers are only responsible for picking a product that they want to sell and then listing the products somewhere else. They have no control over the quality of the products and even post-sales services. If customers are not satisfied with the products, there is nothing you can do about trying to satisfy customers since you have no control over the goods.
Branding/ Pricing – Since you are selling products of a certain brand, you can’t control the branding of the goods which can affect the popularity of the goods. This means that the performance of your goods is not within your control. If the product is not unique, you would be having a lot more resellers that are selling the exact same products as you. This makes it harder for you to earn higher profits as you have to ensure that your pricing is similar to the other selling the same products.
Smaller Margins – Since you are selling on platforms such as Amazon and eBay, you would be sharing your earnings with them as you are selling on their sites. As compared to selling your own products, you would be earning more as you no longer need to get goods from a wholesaler, distributor, or retailer to make sales.
They Become Your Competitor – After selling certain types of products for some time, you have enough money to expand your business to sell the same type of products. The products that you reselling becomes your competitor as now you are trying to make people buy the goods created by you.
Is it legal to Resell Products?
Yes, it is legal for people to resell products that they have bought from a store. There are many markets such as Carousell, Facebook Marketplace, eBay which encourages people to sell goods that they don’t need.
However, there are platforms such as Amazon that have a list of brands that they restrict to not be allowed for resale listing on their platform. Those restricted brands are usually those of huge brands such as Nike and Apple and also other brands that might clash with the platform’s terms and conditions. So be careful if you are trying to resell products and check the platforms so that you can sell products that are approved.
Things to consider if you are looking to start a resale business
- Do your research – As the saying goes “fail to plan, plan to fail” if you just throw in random products to sell, it is more likely that your business will fail as you don’t know if the product is good and if a lot of people are looking to buy the product. Do your search and find the right product to sell.
- Never claim that you created the product – By claiming that you created the product brings in problem as the customers would have more requests for your products assuming that you have access to the manufacturer. Also, use words such as “Unsealed” or “Used” for the products so that customers would know you have owned it before reselling.
- Do you have enough money – This is foremost one of the most important things to consider when you are trying to start a business. You have no experience so chances are that you are going to attend for courses to learn how to set things up. Other than learning how to set up, in the process of building up your business would incur costs as well. Maybe you want to buy a product and try it out before selling it? Maybe you want to build a website to expand your business? All these incur costs and you have to ensure that you are financially able to invest your money into the business.
Final Thoughts
In conclusion, I feel that reselling is a good business if someone is trying to start a business as it has a low barrier of entry, and the cost of starting that business would be lower since you don’t have to create products and market them. However, resellers should be reasonable with their pricing and not disrupt the market by quoting super high prices on products.
For the consumer side, I feel that something needs to be done to prevent people from abusing the advantages of reselling products. This is so that people can still get what they want at a price where they can afford instead of buying them from a reseller that sells goods at a higher price. Let me know what you think about this issue.
