Thrifter King Thinking Analytics

Profit Margin Analysis December 2018

Posted by

For the most part, I don’t have issues with massive margins on products. The majority of my so-called bread and butter items aim to make a minimum of $10 profit each sale. These will sell consistently over the longer term and don’t really require much adjustment.

However, I recently have been finding items where I have spent $20 to $30 when purchasing and have them listed on the store for over $100, with the highest item currently listed for $800. This leaves me wondering I am being too greedy with the amount I’m trying to get out of these items? That listed $800 item cost me $35.

My thought process recently was wouldn’t it be better to get some of these items sold for a lesser amount and get this money back into the investment property, thereby reducing the mortgage and saving additional interest payable by myself? After all, the value of an item is kind of arbitrary until someone actually buys the item. Perhaps my own bias and egos desire to be correct with what I think something should sell for is actually stopping me getting more items sold? Perhaps it’s me also pricing some of these items like this because I know I will not find another in all my days as some are truly unique…

Of course, I also want to extract the maximum value from these higher priced items as they really are where the big profits lie but I realise that it is financially in my best interests to get these items moving.

The sum of these higher priced items totals into the $3000-$4000 range.

What’s The Plan?

Well, the obvious start would be to reduce the price, but at what time point should this happen? A couple of my higher priced items have been up for 5 months now with a lot of views, a couple of watchers here and there (possibly other resellers) but no offers or messages enquiring. The offers I understand as I have Auto decline turned on to deter low ball offers (and stop my time getting wasted) but I thought I may well get some questions on a couple of items which has not eventuated.

6 months seems like a good number to start with. I will gradually start reducing the price on some of these items to get some decent money from sales going.

I have previously used the markdown manager with limited success. A 10% storewide markdown yielded no discernable difference in sales.

eBay actually has a new feature that is perfect for this type of scenario. After 10 days of the listing, eBay will automatically reduce the listing price by %5 and then do the same every 5 days all the way down to a set value.

For example, I have an item listed for $120 + shipping at the moment. It has 9 watchers sitting on it.

I am confident if I apply the above strategy I will get a sale. I paid initially $20 even if I dropped this to $80 for the sale I am still making $50 (after fees).

The Longtail Benefit Of This Approach

In the future is where the value of this approach lives.

Suppose I applied this approach for all of these higher value items and they all sold today for $2000 combined (an across the board 33.33% haircut on original listing prices). If I took the sale amount of $2000 and made a one-time lump sum payment on the investment property and then did absolutely nothing else I would save approximately: $9453 and 1 year 8 months off the loan term!

That is huge, more than 4x the original amount in interest savings.

Obviously, the results vary greatly depending on current rates, loan amounts and time frames. Just google an extra lump sum repayment calculator to see what a difference even a small extra repayment will make over time.

One comment

Leave a Reply