Why eBay, Amazon, and marketplace to marketplace is going to be a game-changer in 2020. There are a few reasons. First off, the simple fact is...
Why Marketplace to marketplace flips is going to be the biggest arbitrage in 2020 - ebay to amazon
The simple fact is that if you look at the arbitrage nowadays it's going to be marketplace to marketplace. This is because you can see the dying marketplaces and you can see the rising marketplaces, also the cost of entry and the quick turnaround in terms of product. If you look at like Tackle arbitrage, right now you're looking at a, they're going at a stagnant pace, Or like kind of more like it's RA, Or OA, not marketplace to marketplace. Everybody's getting the same products that are all out there, limited quantity, and there's not much turnaround and diversity in that catalog base.
Since there's not a lot of catalog base, it's hard to diversify and make a good amount of money. Also, the margins are not going to be there. They're not going to be there because, think about it, a company doesn't want to lose their ass and what they bought it for is usually going to be higher than their liquidation price. So they're just trying to recoup some money back or break even.
You could do this with a headline or slogan (such as VW’s “Drivers Wanted” campaign), color or layout (Target’s new colorful, simple ads are a testimony to this) or illustration (such as the Red Bull characters or Zoloft’s depressed ball and his ladybug friend). All good advertising copy is comprised of the same basic elements.
First Market Vs. Secondary Market
Relatively the secondary market. That's the first market. So you look at the chain of markets. This is good to understand because then you can kind of understand the whole process. The first market, the retail market (e.g., Walmarts, Targets, ACE, etc.). There's a bunch of retailers out there, whatever it is, they get products from either wholesalers, distributors or the manufacturers. They're going to list it at first price. This is called the first market. The secondary market is what we trade on normally. So if you are a garage seller, a flipper, a liquidator, that's the secondary market, and the prices on the secondary market have dropped dramatically.
The Four D's in Business
This is for a few reasons. It's called the four Ds. Death, Divorce, Disaster and Downsize. Those four Ds can be attributed across the board. Those are just to the consumer-based four Ds. That's why you have estate sales, downsize sales.
People get a lot from divorces and disaster. Well, let's put those in the context of businesses... So a death, So a complete bankruptcy. That's why a lot of things go out bankrupt, the prices get slashed and it goes out the door. Sears is a big one, a lot of people made a lot of money on Sears. And then you're going to see the apocalypse of the storefronts coming up. Also, a lot of e-commerce apocalypse as well. You can see it now, especially when the economy collapses, there's a lot of e-commerce that is just going to be gone because the attention's not there. So death, And I'll talk about why the attention isn't there in a second. Death.
Divorce. It could be two companies splitting up and the assets get split. Also, in terms of, let's go eBay, for example, Divorce. So eBay controlled PayPal and now they're divorced, especially they're trying to move to separate. So you can kind of hemorrhage that middle ground, right? Especially in PayPal transactions. You could have... You can get their people's emails off the PayPal and [inaudible 00:03:32] relatively easy. We don't do that. We don't do that. No, no, no. We don't. We would not do that ever. But you can do that relatively easy. And there some other ways that you can take that advantage and kind of manipulate that market.
Disaster could be like if something major happens and it completely wiped everything out. If you're looking at a recession, that's going to be a big one for the disaster type trends. That's when a lot of prices decrease.
Downsize, So companies going from big to small and kind of collapsing, that's an area of what they're trying like they're not trying to expand anymore, they're trying to downsize. They're trying to cut staff. I'll talk about this in a second. But that's another reason why prices are lower.
eBay In The Death Cycle
So we talked about eBay, right? I love... This is why we're going deep into the eBay and Amazon arbitrage. Also marketplace to marketplace, we're going deep in this now. We're building software, we're building a whole complete company office. You can see our massive ramp-up growth with stupid margins. Look at eBay. They're downsizing, they're cutting staff. They're in the death phase, downsize cycle, they're in the death cycle, the death spiral. Prices are dropping. Look, they just dropped their last CEO. Like things are not working out for that player.
Today eBay suffers from an inefficient organizational structure, wasteful spend and a misallocation of resources.
So if that assumption is correct, that downsize cycle, eBay's in a downsize cycle, they have almost all four Ds, except for disaster. And once the economy collapses you're going to have the disaster too. They're just going to spike down. You can see this in multiple ways. They're trying to... They're hemorrhaging cash because they're getting 10% eBay bucks back. That's their whole margin. That doesn't make any sense, It means they're running, that margin that they're running on is just getting slashed. So we can take advantage of that relatively easy. They're in this death cycle again, prices are cheaper than anywhere else, we're kind of leveraging that, but if you look at the markets, especially... Okay, you look at markets in general, Amazon's, their prices are higher because you're leveraging your arbitrage in that FBA. That one-day, two-day shipping, it's going to be that-day shipping, like it's going to increase and increase and increase and increase. This is very, very important. You're leveraging that. Well, eBay does not have that so they're down here. So the product costs, what's on eBay, they sell slower. They are selling slower, that means there's less demand and there's more supply because the... So their demand goes down because there's not much attention on that product or there's not enough attention on all these things in general. So demand goes down, supply goes up, because it's the ease of market, So as the ease of market is there it is easy to say the supply is high, while the demand is low, that's the prices' decrease across the board. This is where you come in with the market to market.
eBay's Leverage Points
If you look at eBay, what is eBay's leverage points? I think it's three things. Low price, their sellers and ease the market (i.e., how easy it is to find products, search them; you can see any product: you just go sold, like we all do, and you can see what to price it at).
OfferUp, LetGo, Mercari And Facebook Marketplace
Also OfferUp with shipping. That's another good thing. They put that shipping on there, so you have that leverage to have stuff shipped to you, so you don't have the time to go run out for OfferUp, and that's one of the biggest problems with OfferUp is that you have to go find the products. Also, Letgo and basic marketplaces are all... Those you can leverage as well relatively easy on the Amazon platform. One, Amazon is more exclusive. The exclusivity on Amazon is pretty high. It's a lot harder to get into it. There are barriers to entry. But you can't sell everything. Like there's a learning curve. All these things keep a lot of sellers out on eBay and OfferUp and Letgo and marketplace, that they don't want to deal with. That's what we'll deal with If you have a process in place that you can scan it fast. That's the only reason why we like marketplace to marketplace.
We're taking up all the supplies. We increase the costs on that and we can make our margin.
The third one is a big one. There's constant supply. There's a constantly rotating supply. There's a constantly rotating supply. Thus, there's not going to be a bunch of sellers jumping on one thing. We can control a market relatively easy. So we're buying all these products in this marketplace, let's call it, let's say there's a remote. There are rare remotes, like a TV remote or whatever it is, There's a rare remote. We can buy all that out so we can keep the price high. We're taking up all the supplies. We increase the costs on that and we can make our margin. Right now we're running at a 90% ROI, a 40% profit margin, which is astronomical, especially in the Amazon space, especially at scale too. If we're doing $200, $300, $400 $500,000. Right now we're at about $100,000 we should do in October, if not more. We're increasing at 44% a month and we're pushing in a lot of cash into that. We're pushing for the Q4 season. But if you're at that $400, $500,000 range at 40% profit margin with a 90% ROI, like you're just turning the money over so quickly that you... Nothing can beat it. So if that continues to stay true we'll be able to turn a transfer. That's not the game plan we're trying to get into our software because there's more of scalability on that software side. And also because we want to build products and we want to get off other people's platforms.
There's more of scalability on that software side. And also because we want to build products and we want to get off other people's platforms.
We'll still do eBay and Amazon arbitrage or marketplace to marketplace arbitrage. But we want to build products instead of being a distributor. Just because the selling aspect from the back end is more powerful when we want to sell the company in the future, if we do want to sell it, or there are ways to scale it out, which I have a couple of ideas. We'll get those to you in a few years.
But right now, this is the game plan, especially if everything drops relatively hard, we'll be there to pick up the pieces. And if you have a lot of cash and a lot of leverage it becomes even stronger, right? So going back to the point of the marketplace to marketplace, Amazon's the highest one. So we're taking all these secondary markets. The secondary marketplace is not Amazon, but the other ones. And there's leveraging that with higher ROI, as long as we can find that good ROI is the big potential.
So if you look in the marketplace it's going to go new is going to be the first one that's going to get dropped out, or leveled out, new, and then use is going to be a second one. After using it's going to be certified, refurbished. Those are the three phases that we're in that we're going to go into, right? Just by the competition, you're at the drop-down, drop down, drop a tiny point and keep the same high margins, and I'm sure you can take fewer margins if you want, but margins are really what you're looking for. That's the game plan,
Also, if you see it, the Amazon used price is about 70% of the new price. When you look on eBay, the used prices are up around 30% of the new price. This is a massive, massive market shift as well, especially with some weird stuff that we get into. You're going to see some big things. I believe in the future, if Amazon wants to continue, they're going to have to do more of a used market. I'm sure the massive growth rate that they want to take up even more percentage, they're going to have to go into the used market even more, which is not capitalizing on, that's just going to bring a lot more people. Because if you look at the buy-it-nows are normally the new ones. They always take up their length, but, what I'm seeing is if there's a buy-it-now for new and used, you get the better option and you can see it. Right now 90% of items that get sold are in the buy-it-now box, right? About less than 10% on average is used, right? But still, there's a big margin. We sell some used stuff, but right now there's so much out there we ran out of cash, in terms of operating cash, because we were buying so strong, so there's so much out there. We can ramp up production once we have our software. We'll be hitting that multi-hundred figure mark relatively soon. I think by early 2020... Except if the market crashes, then we're going to kind of re-pivot and go from there. I have kind of an idea of what we want to do with that. But, yeah, we're looking at some big stuff, especially right now, especially if you want to do really... If you want to make a good money market to the marketplace is going to be the best, the margins are there, they're stupid margins at $100,000, and net profit is $40,000 profit, that is, you can't get anywhere else. You can't do that OA. You can't do that RA. The margins are just not that good. So it's something that you can jump into and if you want, it's the flipping margin, it's the garage sale margins at scale, which are very helpful to grow a company fast and strong, which we have done. We went from zero to about $100,000. We did $90,000 plus this month, $90,000 plus in four months. So on four months, we went from zero to $90,000, and that's a big increase. And if we had some tools, that's why we're building them, we could go to the $200, $300, $400, $500,000 mark relatively fast. That's the kicker that's slowing us down. We still have the first problem, which was cash, to just keep turning money, right? Because if we're going at 45 to 50% each month it's taking up a lot of our cash because we have a 30 to 60-day turnaround, just by when we buy the products to when it turns around. So, think about it like this, if it takes us 60 days to sell a product from when we buy to when we sell it and we get the cash-out, we've been only in two cycles so far. In two cycles we have grown from zero to $90,000 in two of those cycles. That's massive. That is ridiculous and we can continue that faster and faster and faster, especially when you get better and better at this stuff.
We're undiscovered... We're discovering things that no one else has. We're building up this platform to be strong with things that we use, right? We're building a platform that works for us, this will help work for you guys, right? That's the overarching goal, is to completely for ourselves. We're very, very needy in this, but we're in it at least for you guys as well. Because again, this is not our end plan. This is not our game plan and in the end it is to be flipping marketplace to marketplace, even though it's fantastic, money, it is to build a software company, build tools for entrepreneurs, and really change the game, change the game. And this is how I can do it because my background is in that Silicon Valley era. This is what we can do with it. It's going to be crazy. It's going to be crazy these next few months, especially when we get those tools ready and tools popping off. Nothing, nothing is going to stop us relative. Just today we're doing about... We sent out about $30,000 in the last two days. We already shipped out on Tuesday. We're shipping out again, and we're going to send out $30,000. We're doubling our money. The money's there.