So I see lot of problems in claims being made. Unfortunately this reporting smells more like advertising and mostly link bait as opposed to investigative journalism with evidence and good data source. It is likely that on can find blindspots from inefficiencies in some nitche and make small profits but doing this at scale seems highly unlikely. I'm more on cautious side because Internet is littered with videos of people like this making claims of how anyone can millions by doing this and that. Usually that video is prelude to something they want to sell like books or self-help course or just get free publicity to boost their prospects.
He uses Fulfillment by Amazon, meaning after he buys the products he just ships them all to Amazon and Amazon will ship them to the customers when the orders go through. That saves 90% of the time required to operate a business like this. All he has to do is find and buy products where he can make a margin significant enough, send them to Amazon and list them in his store.
$200K/mo is a little much for this kind of low-hanging-fruit but easy/easier money DOES exist. Your next startup doesn't have to be a blockchain AI distributed whatever whatever that's going to change the world.
If you can afford to use distribution centers (there are some that come ready made and will drop ship and do stuff for you), and can find a niche/gap in the markets and fill that niche/gap until it's no longer there.
That said, this is low hanging fruit (basically arbitrage), and difficult in practice, as logistics (storing, shipping, inventory, etc) is hard. If you can do it easily, odds that others can too, and more will enter the market, and reduce your profit margin.
I also don't need millions to feel like a success at such a startup -- If I were to make a setup like this (and I know people who have, though they focused on specific niches), and get away with 50K a year or 100K a year, I'd be very happy (assuming the logistics were little to no work after initial setup costs).
True, but this guy and WalMart are not solving the same optimization problem. Supermarkets are dropping prices on particular items to lure customers into their stores expecting them to buy other stuff as well. They try to maximize the profits they make on all of their existing and potential customers, now and in the future. Customer loyalty is a big deal for them. This is a very difficult optimization problem.
When WalMart sells a particular item for a particular price, it is not a judgement on the real market value of that individual item. And I think that's what creates the sort of arbitrage opportunities that this guys is exploiting. He doesn't have to beat WalMart at their own optimization game only with less data as you suggest.
Salary is a different matter, CEOs of new companies dont earn from annual revenue but more from stock sales and gains.
Paying 150k is also before taxing and profits and is an expense in wages.
Taking a quick guess and say that this person has 1 million in profits, but most likely 1 million to 2 million in gross profits instead of net from what I can think is more likely and 150k in his salary as well as wages for 11 people and warehouse rent which likely reaches 700k to 1 million, he likely has around 3 to 3.5 million in revenue and net profits of likely 50k as thats your average web retailer net margin
$8 million is sales since starting.
So what would it be that someone was hypothetically paying for if they were to buy him out?
The blog following and sales classes probably are the key IP worth paying for.
The reinvestment is for something better than a juiced up valuation. He’s likely parlaying his profit into more inventory or scaling the team that he will profit from. Reinvestment isn’t always about selling the company.
So exactly like most of the 100s-of-millions valued internet startups?
(But in this case, actually making a profit)
That said, presumably the value of the entity could be a multiple of the revenue. Either way the article fails to shed enough light on it.
But, the actual net margin is unclear. At least $150k, since he paid himself that. But it's not clear that it's millions.
Edit: He contradicts himself..."four years later, we're a team of 11 and we're doing well over $200,000 in sales per month"
$200k/month isn't even close to $8M/year. And you aren't netting 7 figures with $200k/month and 11 employees. Now I'm thinking this is just a puff piece for his get-rich-quick lecture series. Too bad, as it's probably still a decent story with the actual figures. Just not a rags to riches one.
I'm also having trouble visualizing 11 people buying $8M (retail) worth of stuff from WalMart in shopping carts. That's $2k per day, per employee, every day.
The article is just content marketing for him to sell his "get rich with an FBA business" course.
It doesn't say $8M/year, it says $8M total sales by the end of this year. So from the founding of his company, to the end of this year.
Ahh, yes, of course.
Your call on whether it's a genuine desire to share his success.
But, thank you.
In which case very cheap sometimes works. Like, "I'm not looking to make money but help me cover gas and venue rental"
I sometimes recommended them to online friends who had just lost a job or whatever, but they didn't get it. They didn't see what I saw.
So, I started a blog to try to explain how to make it work for you:
I also have a longstanding homeless site:
I created flyers:
A couple of people I know socially are interested and have given me some useful feedback. I updated the flyers and one website because of the feedback I got.
I think I need to make local contacts and establish trust. Maybe do some volunteer work. I am not sure.
I would like to start here, but also actively encourage people to get into things like Etsy. There is good internet service in this town. But, I think they just need to get the word that it can be done. Remote work and gig work seems to be kind of big city, cosmopolitan culture. This is an area that historically did a lot of logging and fishing.
There is interest in, for example, IT related meetups. But nothing seems to actually be happening.
Maybe if I were representing some religious organization, people might buy that I am just well meaning. But, I don't do religion.
He said $8M total (over 4 years), not $8M a year.
If one is going to discredit the article, at least they could read it carefully.
Here in Australia, IKEA does not ship (not sure if they do else where) so she buys a heap of items at the Ikea stores and flips them online. She's been doing it for years and does pretty well at it.
Here in Australia, IKEA stores are few and far between so her arbitrage is a huge value add for a lot of her customers since IKEA cannot (won't?) ship and traveling X KM's to pickup an item isn't an option for most. Personally, I'd rather buy X item from another retailer that has a product similar to the Ikea equivalent rather than use a middle man but. People really want to buy IKEA goods rather than the alternative.
I can't see how this gentleman's equivalent will stand up in the long run but till then since Walmart's goods are less unique and more importantly, much more accessible. But still he's exploiting an OK market for now.
The self help angle he's now peddling makes me suspicious that his income hasn't scaled as well as he would like now his business has grown.
He's now got 11 employee's and a much larger footprint. His business overheads would have significantly increased and dropping from $150k to $60k a year for his salary would indicate his business Net has either diminished or hasn't grown as expected.
Hence, peddling self help to generate additional income and exposure for his business.
However, I've come to understand why they have limited their delivery service. Their flat pack products are their profit centers and the packaging that makes them so efficient to store in their storefront warehouses is simply not suited for shipping via 3rd parties (UPS, FedEx, etc). As an extreme example, consider their cardboard honeycomb + laminate furniture (the Hemnes stuff). It takes almost nothing to punch through the flat surfaces of those products if the force is concentrated on a small area and the box offers zero protection (padding) to prevent this. Even the higher end products are packaged as tightly as possible with sensitive surfaces directly touching the box they're packed in. While it's insane to charge $129 for get a pack of their excellently priced "ancillary" products shipped (kitchen utensils, cheap LED lightbulbs), those products are priced desirably in order to get you in the store. If IKEA sold those online with a modern shipping model, they'd forgo the chance of getting you to buy something that is actually profitable. IKEA can't redesign the packaging for their flat pack products without impacting the efficiency of their in-store inventory and they can't ship their existing packages without ironclad damage-free guarantees from the big logistics companies.
Even if they get a guarantee that the logistics company eats the cost of any damaged good, it would still negatively impact customer satisfaction when, for example, the bed they ordered for their new house shows up damaged and needs to be returned/reordered. Every time I've bought IKEA furniture, it's been for an immediate need, and I'm not going to be happy when I have nowhere to sit for 2-5 days because UPS crushed my package.
Paying some one else for the luxury and buying it through an online medium like eBay is a pretty decent alternative to a 2.5 hour drive.
You can't do it online or over the phone, and even in-store they won't tell you availability of slots or reserve you a slot while you go pick up the stuff.
Their customer service in this aspect is dreadful.
It's only marginally better than when they partnered with a local delivery company (Kings, at the Rhodes store) who were even worse - not delivering on the day I'd paid (extra) for, and then having the nerve to try and charge me for storage when I said they'd have to deliver it the next weekend.
Britain for example, since it's in English: http://www.ikea.com/gb/en/customer-service/faq/dispatch-and-...
Edit: They deliver to the whole country, but if you're not in Sofia you're gonna pay more. Given that Bulgaria is like a small state in the US that'd probably be the scale I'd expect in the US, but I'd bet that you have more IKEA stores in your average US state than Bulgaria has country-wide.
They do ship, but only within a small radius of their stores.
Both well worth it when you're furnishing a new place and purchasing 4-digits worth of stuff.
Ikea does "show-rooming" right.
They definitely have a delivery service in the US.
Online shopping is already available in Tasmania, the Northern Territory, Queensland and the Australian Capital Territory.
I gave the impression that she exclusively deals with IKEA products but from what I understand it's more diversified than that but, I'd suggest it's still her bread and butter.
Not that I checked eBay and noticed a lot of people selling IKEA USB lamps or anything ;)
Looks like there's no IKEA in New Zealand though. Hopefully your friend can still make her fortune selling across the Tasman and providing a great service to Kiwis!
If you purchase in store hey do delivery, but the queues can be an hour on the weekends.
They have services like GoGoVan to get some bulky items home cheaper.
They found out pretty quickly that many customers preferentially buy Prime listed items over non-Prime items, and specifically purchase items they can quickly resell for a profit.
Long story short - for clearanced items, Amazon's new gating policy is making it more and more difficult to grey market (legit, new, but not manufacturer authorized) products. Amazon's set up a system for vendors to police their excess, and they keep internal metrics on how many items are being sold through third party vendors... and once that number/dollar is high enough, they outreach to the vendors themselves and do a sales pitch so vendors can be active on their platform.
For new items being arbitraged by a third party between like this Walmart->Amazon thing, Amazon basically sits on the sideline until the product accumulates enough sales, then outreaches to the vendor themselves. Basically the arbitrageur is doing market discovery for Amazon, and at the point where it's a particularly profitable item Amazon does their bizdev direct with the manufacturer to bring efficiency into their own marketplace. Really clever and virtuous system, to be honest.
Most arbitrageurs now go for the private label option (buy unbranded items and rebrand with their own trademark) to avoid this, but once their product is popular enough to warrant it, Amazon responds by having their buyers clone an AmazonBasics version of them item. (See prior discussion: https://news.ycombinator.com/item?id=11533973)
Additionally, he does use price tracking and discovery tools to try and find the deals with bigger amounts of arbitrage between Amazon and WalMart. Because pricing is so dynamic and changing all the time, occasionally an item just barely breaks even as Amazon will sometimes magically update prices for its own goods to match or beat what might have been available at WalMart in their store. But it all depends and varies a lot.
Also, some of these prices aren't set at maximum profit per item, but there are other factors involved. For example clearing warehouses or attracting customers.
In many cases, I suppose Walmart should be coming up with a way to sell direct to Amazon, but that may not be what they want, strategically speaking.
From their perspective Ryan is probably helping them out by emptying their clearance stock faster. If the local manager was smart he'd keep his number on speed dial.
Eventually Amazon banned me for selling currency instruments, but it least 10 months.
1. Amazon product delivery is so convenient that users don't mind paying little extra or
2. Walmart discounts products valuing their warehouse space more. Thus not realizing there was demand for the product elsewhere or at a different time.
Seems like it would be simple for Walmart to figure out this arbitrage and shelve products for longer time. Any thoughts ?
My theory is that plenty of people are not particularly price sensitive and just want the thing to appear. I'm stubborn enough (or cheap enough) that I'm very reluctant to reward the arbitrageurs. But I'm sure many aren't.
If I see the house was bought for 40%+ less just a few years ago, I refuse to give an offer. Even if the price seemed reasonable and it interests me. I refuse to reward people who bought low and want to flip it for much higher (if it increased reasonably, fine)
Yes that is probably irrational "caveman" thinking. Never said it was logical.
The house I bought doubled for the last owner during his 6 years here. It doubled for me in half of the time since. The past owner wasn't greedy the market moved on its own.
Comparable sales prices for recently sold similar homes would seem a better measure.
I suspect if you look around say the Tesla Gigafactory, local housing prices had a massive spike at some point.
If Walmart increases the price, they could easily lose more than 1% of their other customers by attempting to capture this guys profits.
A bottle of vitamins on Amazon might be $9, but you can order them right now and get them delivered to your door. In the store it's $5. A LOT of people are willing to buy from Amazon evening knowing it's more.
When that season ends, it’s more useful for the store to unload the inventory for cash quickly and switchover to the next thing.
You can always spot a struggling general retailer when you see “holes” in the aisles or low-density merchandising... it’s a sign that the vendors are tightening credit terms.
Amazon has a less competitive market position because people are buying stuff for convenience and there’s a high transaction cost due to shipping. Every major retailer is launching subscribe and save programs to nip at those Amazon convenience shoppers. Amazon needs the job-lot people because they are the only folks who can get a tube of toothpaste for 1/3 the retail cost. It’s a great strategy, until some psycho tampers with product by putting poison in toothpaste or acid in shampoo.
In germany buying stuff in bulk sometimes requires to travel like 50km, I've seen people plenty of times make bulk buys over amazon, because it is more convenient.
I doubt it amounts to enough merchandise for them to care about though, regardless of the margin. They make money on low costs and volume.
Wouldn't this fall foul to some kind of anti-collusion laws?
Being able to order online and have it magically show up later that day or the next is worth the markup.
Also, my Amazon seller app. But I'm a new seller. From what I understand, some of these restrictions may not apply to sellers who have been around awhile and sold certain brands or categories before they became restricted.
The deal about Walmart receipts not being valid I read in a forum post.
When it comes to "retail arbitrage", it seems dealing with Amazon FBA is kind of like dealing with the IRS. You can walk on as thin of ice as you want, but Amazon can ban your account at any time. Some argue that items purchased retail should not be listed as "new" because they will have shelf wear. Some sellers laugh at this notion.
The company has been around for nearly 20 years (I've been with them off and on for seven of those years), and was one of the earliest online closeouts retailers back in the 90s. This is nothing new.
If you honestly think this is sustainable, you are mistaken.
You are lucky to have done well all these years, but as more people get smarter, bye bye margins.( Same thing in every business.)
More and more people will get into this space.
Sure, you may be able to survive because you geta volume discount on shipping, but that's all dependent on you sourcing the product that these new people will be doing because all it takes is a smartphone and dream....
It's been sustainable for the nearly 20 years the owners have been doing it, and the rise of Amazon and eBay has caused an explosion of growth over the majority of that time.
As for myself, my role there is multifaceted (mainly IT and website management, and helping out everywhere else as needed). I'm paid better than I was in government work, and I'm enjoying it a lot more.
And capital for up-front costs, and a willingness to take the risk to buy stock you might not sell, and space to store the stock before it ships, and people to do fulfilment, and knowledge of how to sell through Amazon (or any other site)...
If it was that easy then everyone would be doing it already. You can build a sustainable, profitable business doing reselling (thousands of people do) but it's hard, and risky, and that puts most people off.
He netted $2 on a $12 product, and I found it amusing.
I've seen Ebay sellers with tens of thousands of items posted, all from Amazon.
Canada Post has been taking 5 or 6 weeks to deliver items from China that are shipped with free shipping.
So, I'll buy 10x what I need from China when I need a part, then sell the rest on Ebay. Paying attention to things that I can ship cheaply (i.e. < 2cm thick)
Lots of buyer will pay extra to get their spare part in 3-5 days instead of 3-5 weeks.
Christmas time will be especially good to me :)
Remember, FBA charges you money to use it beyond the cut Amazon seller already pay to sell in the platform.
(Neat thing: a friend of mine was one of the devs on the Amazon FBA seller app that lets you scan barcodes at other stores and see how much you'll make selling it on Amazon)
> As his business is increasingly run by his team, Grant has reduced his salary down to $60,000 a year and now dedicates much of his time to getting that message out. He consults and teaches e-commerce classes through the same blog he has been using to track his performance.
I think the opportunity is probably too small and time consuming for big business to come in and destroy the opportunity. Similar to how small eBay sellers are able to import stuff straight off alibaba and make a profit.
I want to build amazing software, and for that I need a larger company who can market my inventions and talk about it on conferences and road shows.
I will earn less, but I will be happy.
Considering an even 10% markup, you could easily do $5M+ and only clear 500k profit. Curious what the numbers that matter are like.
A gas station convenience store clerk gets a salary in part from selling sugar water that promotes tooth decay and cancer.
What's the difference?
Everyone has to make a living, and our economy is not structured to prefer "positive" output, it only cares about profit. If you call this guy into question, you should be looking at the larger picture.
He has filled a gap in the market.
"Waste time." I shouldn't reply to this kind of antisociality, but this is gross enough that I feel compelled to. I contribute to open source because it is the right thing to do, because I have gotten so much from it that it is only right to pay it forward. You should be doing the same, not sneering at people with a sense of community to them.
Basically saying, if you aren't only helping yourself and turning a profit you're doing it wrong is a little disturbing to hear.
Free Open source volunteers merely imitated (Linux vs. Unix) or extended institutional or corporate sponsored projects or ideas. Without robust government and corporate funding of basic research in the later 20th century we would not have the well developed information technology industry we have today. People founding vanity projects, ICOs, and forking is not moving the industry forward. What truly revolutionary innovations have originated from open source software vs. just imitation or variation?
Blockchain is revolutionary but the developers did monetize their work in that case (literally). In this society you need to earn money to live. It is mysterious that so many people in software want to practice their trade for free. I guess they love what they do but I think the quality of their work would increase if it was monetized. Monetization need not imply centralization or appropriation c.f. bitcoin.
It just means assigning value and ownership to the results of socially valuable work. What is so evil about that? I think, from an evolutionary psych view why people think contributing to OSS is prosocial is because of something like a genetic tendency to share new technology with the tribe. In the ancestral environment it would have been uncool for one shaman to have monopolized a new flint knapping technique. But with the rise of trade and property right people can develop and protect their competitive advantage / economic niche and monetize their work for benefit of the whole of society why collecting a reward from their innovations. Free Open Source fanatics like the GNU people are stuck in the stone age and do the profession of software development a disservice.
Nothing at all. That's how Canonical built a billion dollar corporation building on and releasing, for free, open source code. That's why Facebook, Microsoft, Apple, Google, etc all release huge amounts of their code openly and for free. There's no reason to believe you can't make amazing open code and generate huge profits too.
Free Open Source fanatics like the GNU people are stuck in the stone age and do the profession of software development a disservice.
GNU gave us the GPL and LGPL, which, combined with the rise of the internet for distribution, was fundamental in changing the way applications are built using other people's code. Those "fanatics" made every developer's lives immeasurably better. Even if you don't like the code they produce themselves you still have a lot to be grateful for.
By your own token I think the sharing of such information would be "newsworthy". Your comment is rather inconsistent.