Did you really think arbitrage of used goods could be a business? I think the best thing these types of experiments do is expose pain points and inefficiencies that you can make businesses out of.
When I was in my ramen phase of startup life (and newly married), I used to (among other things) buy clothes at local thrift stores and resell them on eBay for a decent margin. You quickly learn what brands/items sell and occasionally I'd hit gold and find a vintage Hawaiian shirt that fetches $200 (and cost $2).
In the end though, you realize it's just a way to make some extra money. It's not a "business" IMO–and definitely not a scalable business. But you learn what sucks (like dealing with shipping & getting photos from a camera to eBay pre-Smartphone) and realize other people also feel that pain. That's where your business is.
UPDATE: Downvotes, seriously? Read my reply down this thread. Some people on here are, frankly, ridiculous and have no clue how to engage in a meaningful discussion.
Exactly. It's a hobby, but while scaling it up is hard to do, it is not impossible. Two stories.
I wrote a program awhile back that would look for iPod Touches on my local Craigslist and would analyze the price for many different versions. If an individual iPod was available and was below mean price within a given time frame, I'd send the seller a note almost immediately. Then, if I purchased the item, I'd relist it at the mean price. Completely an arb play.
What I learned was that 1) iPods are easy to sell, 2) People who buy on craigslist are flaky and tend not to show up, 3) The time spent waiting around to meet people was obnoxious, and 4) Sometimes sellers see what you did with their item and send you angry emails.
I never made more than a few hundred bucks, but it was an interesting experiment nonetheless.
Second story: For years, my wife sold used books. She'd go to estate auctions and buy boxes and boxes of books. She'd go to library sales and buy hundreds of books. Then she'd sell them on the Amazon marketplace. She would walk into these places with a barcode scanner and would check their price and sales rankings on Amazon. If it was in a decent margin for her, she'd buy the item. This actually did scale, but she quit when it became less of a hobby side income and more like real work. She's a nurse by trade, and the book selling was never meant to be anything more than a hobby.
So, I guess what I'm trying to say is that arbitrage of used goods can be a business, but it depends heavily on the availability of the supply of used goods. Books worked for my wife because she could buy dozens of them at a time and ship dozens of them them all from the post office down the street as orders came in. For me, I was running around town picking up items and dropping them off.
Arbitrage is technically a set of simultaneous transactions where you buy and sell at the same time. Purchasing something and reselling it later for a higher price is not arbitrage.
It is usually used to describe a riskless transaction.
I'm not sure I agree with the description of arbitrage as "riskless". The arbitrageur is accepting the risk that the arbitrage opportunity will go away in between the buy and the sell. This is true whether you're arbitraging salt via caravans across the Sahara or arbitraging currencies in millisecond trades.
It's the idea of simultaneous transactions that makes it riskless. Whether millisecond forex trades can be modeled as "simultaneous" is another question.
If you want to get more precise, the benefit of simultaneous or near simultaneous transactions is reduced risk that prices will fluctuate. Arb is just an exploitation of different prices in different markets.
I've posted this before but I've made half decent money in small batches by purchasing crates of assorted goods at live auctions. Police auctions are sometimes good for this, as they may just load a heap of stuff onto a pallet and sell the pallet as a lot. Most people don't want to buy a pallet full of junk, but you can get lucky if you scope it out before the auction and look for valuable items. Same goes for office liquidations - you might get a bulk lot of 10 LCD monitors or laser printers or something like that. You can sell the first 1 or 2 on eBay, get your capital back and the rest is pure profit. It's also easy if you buy a bulk lot because you only need to write the listing once and just keep repeating it, plus you can get a feel for what days/times bring the most bids.
It's not terribly scalable because you need to have transport and time to attend auctions, plus somewhere to store the stuff. But if you have a decent sized car/pickup, proximity to auctions and a nose for a bargain, you can pick up some good pocket money with this strategy.
Incidentally, I think the market for the pricenomics data is precisely the same as the KBB market - detailed lookup via mobile app for people who are buying/selling regularly. A good pawnbroker/2nd hand dealer/auctioneer will know the price point on a wide range of goods, but allowing people to purchase this information for a reasonable price will help both people starting out, and also professionals stepping outside their bread and butter.
I would suggest a freemium model, where the free version gives you a price range, and the pro version gives you a very direct price.
> 2) People who buy on craigslist are flaky and tend not to show up, 3) The time spent waiting around to meet people was obnoxious, and 4) Sometimes sellers see what you did with their item and send you angry emails.
This is why you buy in the small and isolated market (craigslist) and then sell in the larger market (ebay) where you don't have to find people and waste time and money delivering the item to the person.
Interesting. But wouldn't it be better to buy on ebay and sell on craigslist? That way you don't have to drive around to pick up stuff and people come to your house to get things so you don't have to mail it out.
In places like ebay the sellers are a tad more experienced and they have more exposure to the "market price" so it's harder to get a better deal. You could still get a small deal and try to sell for an inflated price on craigslist, but I'm of the opinion that it's just easier to find buyers who will buy at the market price on ebay rather than buyers who will buy for an expensive price on craigslist. Even more so with specialty / collector style items.
A friend of mine runs a larger-scale version of the used book business your wife used to run. She started out buying books from estates and old people looking to downsize. She'd take anything, paying a flat rate of something like 10 cents a book, and would show up at your house and haul away all the books. Then she'd list all the books on Amazon. Even if the book was selling for one cent she would make money on the shipping, since shipping costs slightly less than Amazon's shipping allowance (unless the book weighed over a certain amount and thus she'd lose money on shipping, in which case she'd recycle it, as she did with books in unsaleable condition). After a while she built bookshelves in her garage which let her store I believe tens of thousands of books, and hired people to do the book listing and shipping for her. She also moved on to more large-scale ways of acquiring books, like arranging with churches and schools to pick up the books that people left in their donation boxes. Every so often there'd be a volume that sold for $100, but the great bulk of the predictable cash flow came from making less than $1 for a large number of books sold each day.
I got a few where people were mad that I simply re-listed their item at a higher price than they sold it for. I'm sure they felt duped for undervaluing their product in the first place. As binarysolo pointed out in this thread, some sellers feel they need to urgently sell their items, so they under-price. I'd could afford to wait for someone to pay my asking price.
Instead of being angry that they didn't maximize their profits, could it be that the sellers were _offended_ that someone would maximize profits with their possessions? I can imagine a couple reasons:
1) The Toy Story 3 plot: people want to find a home for their possessions with people of similar interests. They become angry that you are reducing the consumer surplus that would have gone to the ultimate buyer.
2) They realize that arbitrage on a first-come-first-served marketplace can reduce the value of the marketplace as a whole, since buyers are less likely to find bargains. They recognize your behavior as antisocial and become angry.
The reverse can be true for both of those points. Raising the price to the market-clearing level increases the probability that it gets sold to someone who places a greater value on it.
"The buyer" isn't necessarily constant. Suppose Alice values a widget at $100 and Bob values it at $200, and also that Alice spends much more time on Craigslist than Bob. If you sell a widget for $75 then Alice will probably buy it, which results in less consumer surplus than if you sold it for $150.
Buyers have different motives. As do sellers. Mismatches are common, and when people make a trip to someone's residence to look at product in question (as thru CL), the deal, typically goes through, leaving mismatched feelings about the deal.
err, yes, and I suppose used cars too. Maybe I should have been more specific.
But pawn shops don't get into YC and I doubt Cal Worthington ever raised a series C round on Sand Hill Road. Those types raise money via bank loans (if at all) and most people in the valley would call them "lifestyle businesses".
My point wasn't if such businesses exist but rather if Priceonomics really thought they could form a scalable business doing this. My guess is that they didn't (again, I don't know them and I'm often wrong). Rather, I think it was more of an experiment that would expose real business problems, validate ideas, create a case study, and/or make a little extra cash.
This seems like Silicon Valley echo-chamber thinking at it's finest. If your definition of a scalable business is based on the number of VC rounds raised, or which prestigious incubator it comes from, then no, I suppose it's not a scalable business.
No my idea of a scalable business is correct: grow revenue without costs growing proportionally. Software is the perfect example: you write it once and (potentially) sell it infinity times. (Please don't nit pick my definitions unless you fundamentally disagree)
Buying and selling used goods is absolutely not that. You're talking about searching, inspecting, paying (cash), storing inventory, selling, shipping, etc.
And, no, eBay and Craigslist are not examples. They don't buy things. They are a marketplace and that's not what the original post set out to do.
A scalable business is one where you find things get cheaper as you do more of the process. Software happens to be moreso than many other things (you still have to look at support costs, among others), but that doesn't mean it's the only industry.
Selling burrito franchises, car dealerships, and grocery stores all work very very well at scale, and are very scalable.
> searching, inspecting, paying (cash), storing inventory, selling, shipping, etc.
So Amazon was never a scalable business? Or netflix? You don't have to be sitting around a kitchen table selling nothing but bits for it to be scalable business.
I have no idea whether you have a point that you're getting at.
Amazon wasn't profitable for a long time and only scalable because of massive investments. They don't buy used goods and resell them. Same for netflix.
His main argument is that the acquisition of items for resale is not scalable, because you are dependent on people to supply used goods. You cannot make the market provide more used goods to meet demands. Amazon and netflix can perfectly well do that.
The list I quoted all applies to selling new goods, too. It's very strange to assert that it's not scalable to procure, sell, and ship goods at a profit when the bulk of business growth in the past 20-30 years has all involved those activities. (Apple included--their engineering and design are no doubt important, but their success is built on a strong operations backbone.) His main argument didn't look anything like the argument you paraphrased.
My point is that it's folly to try and argue this particular negative. I'm not so confident it's impossible to scale reselling of used goods when there's been so much growth in optimizing operations processes.
True, it does, but it's entirely different still. "searching, inspecting" are just different with used goods. For one, "searching" involves finding out whether there is anybody who can provide any goods, not whether there is a supplier who can give you as much product as you need. You cannot find a supplier in China to build you more used Aeron chairs. Apple and Amazon have wildly different options in that area.
Secondly, "inspecting" may boil down to a similar process of QA, but I think it should be obvious that assuring quality in a production process of new goods is a very straightforward thing while for used goods, you probably need a new process with every supplier you find.
And I agree that there is an astonishing growth in optimizing any kind of operations process. However, that still doesn't increase supply. This cuts back to his main argument: "grow revenue without costs growing proportionally". If you have a finite supply of used Aeron chairs, acquisition of the remaining chairs becomes increasingly hard - up until the point where there aren't any, anymore.
So yes, I added the argument of finite (if only temporary) supply, but it was only to extend his argument of proportional growth of cost. And yes, there is room for optimization and that may be sufficient to keep a business afloat - certainly if they are flexible with their inventory - but there are still natural limits to such a business, and that makes all the difference in the world.
The entire retail business is already constrained by demand. No one is demanding that "scalable" mean "scalable without bound".
For most durable goods there's a never ending supply of used goods already; the supply of new goods a couple years later. Once you solve the business problem of building a good funnel for used goods to come into your operation, you can probably boost or create resale value for used goods, indirectly pressuring the original suppliers.
Not quite: maybe I just want to put all my stuff in a truck, give it to a guy, and get a check. I don't want to worry about shipping and accepting payment from a hundred different people and keeping my listing up to date and figuring out pricing and not getting scammed.
But that is the pawn business. Anything else is a different business entirely, e.g. being a second hand goods dealer.
Pawn shops can deal in second hand goods and often have the licenses for outright purchase (which may be where some of the confusion that I've seen from people originates), but that is not strictly speaking what pawning is.
That's not arbitrage, neither is buying goods in one location and selling them in a far away location. Arbitrage is a simultaneous purchase/sale in different markets with a trivial amount of work and no risk. If there is risk, it's not arbitrage; if there is work, it's not arbitrage; if there is a lot of time involved (and thus, of course, risk), it's not arbitrage. Antique dealers buy from people who want to get rid of things and sell to people who want to buy things. They make a profit because historically it is difficult to find antiques when one wants to buy them. Even if you managed to be connected to every antique seller imaginable you'd have to be lucky enough to have an item go on sale within the time you want to buy it. Antique dealers serve as a buffer, offering quick cash to sellers and selection to buyers.
Yeah, but that suggests that the success condition is running a pawn shop. Probably not what you're after if you are a software startup that's just taken seed investment.
I'm going to assume that you're not talking about the secondary market for used goods, because that can most definitely be a business. See: ebay.com.
About arbitrage: I agree with you, to some extent. By definition, as more people notice the price differences and take advantage of them, the arbitrage will become less and less profitable. If you intend to build a business that will scale and prosper in the long term, you need to provide value to people and not tie yourself to short-lived arbitrage opportunities. I work in finance and that fact is plainly obvious to a lot of us.
However, there is value added when you give people information. Information isn't free. Someone has to go out there and find all the prices, organize them, and show them to people. The arbitrage differential will grow smaller and smaller as competition grows, but at no point will this information be free. Given the possibility to find cheaper prices, people will pay if it's worth their while. If it's not money, at least page views.
> Did you really think arbitrage of used goods could be a business?
Yes. Some examples (depending on how loose you want to get with the term arbitrage. I'm using it as its used in this article) would include antiques/collectibles and used cars.
It's obviously much better to operate in areas where 1) value is unclear and/or 2) goods may take time to sell.
With those things, you can get an advantage by knowing the value and by being able to hold onto something until it sells for a proper value.
Indeed. What do you people think business is? Plenty of people operate perfectly reasonable used-goods businesses of the same nature at flea markets and the like. The question for Hacker News types is whether the business is scalable (depends on the local supplies of used goods, among other things) and whether there are more interesting businesses for you to be in.
Business needs to be demystified. Look at Princess Kate. Her family's business (worth millions, or billions, I forget) basically started with assembling party supplies into convenient boxes. If that's a business, anything can be a business.
You're right, profit tops out well before you get to "big money," usually due to limits on either supply or time.
In the used clothes example you are either limited by time (I can only hit ten thrift stores in a week) or supply (there are only ten thrift stores in my area.) After that, how do you scale up?
Probably downvoted because 1) Priceonomics of course has never had any intention of actually buying and selling used items and 2) there are actually many examples of good businesses buying and selling used items (and, in fact, office furniture is one of them).
As a fellow data scientist and former Craigslist/eBay item flipper and deal site (SlickDeals, FatWallet) hobbyist, my tidbit of experience and Sidebusiness 101: profit comes when sellers don't care to maximize due to circumstance.
Those circumstances include lack of product knowledge, urgency to move item, and value for their own time/convenience.
For the first problem, people have tackled it with eBay/Craigslist listing misspeller searches or just manually emailing for more info. I once bought a new sealed copy of a collector's game, Panzer Dragoon Saga (eBay price ~$500+ back then) for $20 from a seller who was liquidating an old stash of games and listed the item as "Panzer Dragoon Saturn" and couldn't get any hits.
The problem of illiquidity has some fun implications assuming you're willing to take some product risk. Back when I was in grad school in the Bay Area, I was flipping Fujiiryoki massage chairs (MSRP 5k, buying around 1-1.5k, flipping around 2.5-3k) and there are plenty more items out there. This requires either good product knowledge (tons of old Chinese people who I knew wanted these) or a data-driven way of identifying high-price-point items without much/any historical pricing data. This is a rather solvable problem that hasn't been tackled (that I know of) and can be a value point for your site I'd think.
As for buying liquid items low, subscribing to CL RSS feeds with the right search terms can do the trick, though I neither confirm nor deny that I may have once written a CL page refresher to buy Burning Man tickets at cost (instead of from scalpers who were charging hundreds more). Back when I didn't really value my time, offering to pick up at a time of their location/convenience and pay cash.
Misc selling tips as an enthusiast: and legit work/school email or Googlestalk-able email establishes you as a "real" person. A phone number is almost a must-provide these days too. Pay low(er) and always in cash (or cert. check at bank) but assure the buyer that you'll be there and make the transaction convenient and easy.
Seems like I missed the edit deadline. More free advice: Most flippers derive market price by using pre-existing marketplaces data like eBay/Terapeak and Amazon new/used to figure out where the market roughly sits. These venues have strong incentives to regulate listings into consistent item buckets to make sure people can't (CL)SEO listings like CL spammers ("2011 Macbook Pro" vs "2006 Macbook Pro with Office 2011", or the giant paragraph of hot items in small text and white font to catch your search attention). Once you get that magical price point/band, you can pretty much go to town with some basic clustering analysis. [Disclaimer: worked on a few private, weekend projects in this specific niche.]
It’s unlikely Priceonomics could build a massively successful business arbitraging used goods if we have to take possession of them.
Did you consider letting the buyers and sellers do the leg work?
Setup a distribution center. Sellers who want to offload stuff scan the items and their details to you and you give them instant, fair quotes. If they like your offer, they bring the items to your center, and you check to make sure everything is as it was stated.
You put the items, their details and their new prices (with your margin markup) online for buyers to peruse. If interested, they'll come by and pick up whatever they want.
Like an online pawn store w/ local centers, except there's no pawning, just selling & buying.
This sounds more or less like a consignment store and pretty much what the amazon marketplace does, but with the work done by a middle man instead. The question is, would people be willing to put up with the higher price or reduced profit required by adding a middleman, or would someone always undercut you because they were willing to go straight to the consumer? It reminds me of all those "ebay shops" that popped up 5 years ago and just as quickly disappeared, though this could be as much about ebay changing their focus as any business pressures, I don't know enough about it to say.
With a consignment store the model works because you are willing to take the reduced profit to not have to put in the actual leg work it would require. People are also willing to pay the slightly higher prices because consignment tends to be in things like clothes that are difficult to buy online.
Pawn shops make all their money on the interest on the loans. The buying and selling of goods is really the side line lower-profit leader to get people in the door. Most of the items for sale as just items that the owner failed to collect.
There is a world of difference between a straight 2nd hand goods dealer and a pawn shop. Most of that difference is in the profit margin.
I still dont get what priceonomics provides that craigslist or ebay doesnt.
Craigslist:
* Listings have "ASKING" prices and can easily negotiated down 5-20%. So even if you provide a historical information of "Asking Prices", its still not a 1-1 relationship to how much you expect to sell your item for or its "BUYING" price
* I do question the value of historical information on CL: Its never been available, therefore neither buyer nor seller expect it and their view of the marketplace is limited to the time they hit search. And it is this view that they will use to determine a good price for an item.
When I need to buy something that I need NOW, I try to choose the nearest, cheapest item, satisfying my requirements that is CURRENTLY available. Historical information doesnt come into play.
Ebay:
* Since I already have access to historical information(completed items) and I can use it to figure out how much to sell my stuff for, I dont see what Priceonomics bring to the table here.
Again Im trying to figure out where you guys are going with this. From technology standpoint, all this content scraping, indexing and searching is interesting, but what problem are you solving and how do you plan to make money with it(short of arbitrage of aerons)
You sort of answered your own question -- in both examples you specifically pointed out work that you have to do in order to calculate a price -- you need to sift through Craigslist items, keep track of what you find, apply a calculation, and come up with an estimate. Same for eBay.
The work you're doing there takes time and has value, and Pricenomics is trying to capture that. I'm not intimately familiar with the company nor do I know if they'll figure out a viable business model, but I do see the intrinsic value in what they're proposing.
effort wise, it looks like search craigslist == search pricenomics, with craigslist being smart enough to limit my last search to the geographical area where I last searched, whereas pricenomics showed me the results around the country(with option to filter it down to location later).
All things being equal, the effort is the same in my opinion
I'm not sure if Priceonomics' vision is a viable business but it is relatively easy to see how it can offer information that is better and more valuable/useful than the very raw data currently found on Ebay and Craigslist.
There has always been a market for price info on collectibles antiques etc. they are just trying to make use of technology to expand this down to lower priced goods. Whether this is viable is less clear.
Right now eBay is already sitting on this data. In addition to the sale/non-sale price data, recently they've began to encourage (and sometimes force) you to very specifically categorize the item you are selling.
Combine with geolocation data for the buyer and the seller and they probably have a greater trove of data then you could get even with a biz dev deal with Craigslist -- main issue is that you have no idea whether an item in a given post was actually sold, and if so for how much.
I fear Priceconomics.com, as interesting as it is, will just work hard to prove a business model for this data that if successful will just be exploited by some engineers working at eBay who spin up a product to compete.
One additional point not mentioned in the post (written by me). If you buy a used Aeron chair, it's very likely you can sell it for the same price a couple of years later. Essentially you can lease the chair for free.
The $1 chair is very unlikely to still be a chair in a couple of years if it is sat upon for ~4160 hours. Perhaps you could still sell it for $1 as firewood, though.
If you're happy with a "doordesk" and a metal or wooden folding chair, more power to you. I bought my own personal Aeron years ago, I've used it at multiple different companies and at home when I was freelancing. In the approximately 10 years I've been sitting very comfortably on that ~$800 chair I've gone through dozens of thousands of dollars of now obsolete computer equipment (desktops and laptops). From that perspective combined with the fact that the chair is still in very much like-new condition, even paying $800 for it was well worth it, IMO.
I'm also quite fond of the Ikea Galant height adjustable desk I also bought ~6 years ago, and that one doesn't have the premium price of the Aeron. I do like a good value... IME, the Aeron actually is a good value despite the high price.
Granted. There is completely a place for good tools that make you more efficient and work better/longer/etc.
My point was more that you could replace Aeron Chair with X (where X is anything that doesn't have a steep depreciation curve -- ie - something that's not a car or PC)
If you buy a used "X", it's very likely you can sell it for the same price a couple of years later. Essentially you can lease "X" for free.
cl updates every 15 minutes, its pretty much useless to scrape continually. If you really need to be first to the info, just scrape for a window on either side of when it updates I guess...
You do realize that by having your buyer PayPal you the money you basically lost $50 on PayPal deposit transactions. I would have had him send me a corrected cheque instead.
The variance you are exploiting in this arbitrage setup is a result of the inherent variance in information about the chairs, i.e. uncertainty. Since they are used, there is lemon's principle at work. You can argue that Aeron's don't really depreciate in quality that much though over time so that variance in unjustified and in fact there should be some exact market price (perhaps as a function of time used, or more simply just dependent whether its used or new). But the thing is, more likely than not, that variance IS justified. Some of the chairs may be less broken than others. Some of the sellers may be less dependable than others. You can of course condition on this stuff - pick the low price chairs and mark them up by being the most dependable supplier, vouch for the chairs, become an expert in the chairs and be better at out the lemon's, but those things all add cost, so NOT doing all that work is already priced into the market. But cool experiment nonetheless! I have also found that I can buy a used Aeron, use it for a few years, and sell it back for like the same price. Not really a quickly depreciating asset .... maybe better than the stock market the last few years ...
I see two problems with estimating price off craigslist.
1. List price is not the same as selling price
2. The averaging is being moved by "accessory items" i.e. http://priceonomics.com/computers/apple/macbook-air/ shows a lot of things that aren't MacBook Airs in the low price bracket. Maybe tossing out anything that is a few SD away from the average would fix that.
Someone I know runs a very profitable business that is essentially a rare book finding/agency business.
They provide a 1800 phone number + internet site. People who are looking for an out-of-print book give them the details. They search for the book. When they find it, they add 20% the price, charge the buyer, purchase the book at the list price and have it shipped to the buyer, and keep the 20% without ever touching the book.
Essentially it's an agency business - I've often wondered why people don't find the books themselves, but it's a time/doing business internationally/inexperience type of thing. They would rather pay the extra 20% and have someone else deal with it.
The true value of the business in in the dealers database which allows them to find a book very quickly by drilling down into who is most likely to have a copy, plus they have an exclusive deal with point-of-sale booksellers, whereby anyone who wanders into a bookstore looking for an out-of-print book can be given somewhere to go.
My roommate in grad school did this. He'd buy toys on clearance from local toystores, and then sell them on EBay for twice the price. He wasn't selective at all w/ respect to the actual toy. Just looked for large markdowns.
He made decent money, but said that putting stuff in boxes and going to the post office was a hassle. He eventually stopped -- he was finishing med school at the time.
Even if you take out $75 for the GF subsidy (being generous and assuming she gets an equal share), each guy made $25/hour, cash (i.e. ~$30-$35/hour pre-tax), which is >3x what they'd get at a fast-food joint.
Now of course, one does need to take into account the fact that they're restricted in spending their loot on beer, which they are obligated to share. From a short-term economic standpoint this is probably a significant hit on their profits (i.e. unlikely that the three gentlemen will consume the majority of the beer). However, from a longer-term/more holistic view, purchasing beer for the group will surely lead to fun, team building, general goodwill, and so on, which is arguably more valuable than the $300 cash at this point in the startup's lifecycle.
tl;dr startups should use aeron-chair arbitrage to fund investment in beer, it's science.
Wouldn't the $25/hour still be taxable? (I understand that nobody pays taxes on small cash amounts, but if we're considering its viability as a business it seems unfair to compare one option with tax evasion and one without.)
its a proof of concept. through iterations the business can grow. I think this first painful experience is how many large retailers or wholesalers got established.
Why is your conclusion that it can't scale? You are making 20% profit on these chairs. There are many people you can pay 30% of your margin and they'd be happy. You can automate the buying and selling, sourcing people who can do the "heavy lifting." Actually, you can use your site to facilitate it.
I used to do lots of reselling and arbitrage on Craigslist during my poor student days. Here's my experience.
As a general rule of thumb, always ask for cash. Or ask for a cashier's check if the buyer is not comfortable with carrying large of cash around. Don't accept anything else (e.g. personal check or even paypal).
I refused to deal credit card based payments b'c of chargebacks risks. With chargebacks, the credit card company will always side with their customers, often leaving the seller with no recourse to retrieve the money or the item sold.
In addition, there are enough scammers lurking around on craigslist that I didn't want to expose myself to those kinds of risks.
I was also buying/reselling items with fairly low-margins. Credit card processing companies e.g. square, paypal, etc. will only eat away at whatever little profit I was making at the end of the day.
In my experience, many Craigslist buyers (especially of high-value / high-margin items) tend to be rather afraid of buying things on Craigslist, and would be unlikely to swipe their credit card with the seller's phone. Naturally this tendency will vary from market to market, and SF would probably be a good place to experiment with using Square in CL transactions.
While making a sweeping statement about such business models not working, I guess the op failed to take notice of Gazelle.com, which has been in operation for 3 years now, has raised $46.4M in total with the last round being a series D of $22M. And guess what their business model is, arbitrage on used electronic products. So safe to say, such models can and do work.
I also believe that these models will increasingly become more mainstream, because they save people 'time', time which is increasingly becoming the most precious resource that we have. You save 2 hours of time for someone, and pay him $40-50 dollars less than craiglist or ebay, and I am sure you can find a large percentage of people for whom the opportunity cost of 1 hours is more than $20-25, and voila, you have customers.
Maybe an interesting exercise, although the acquired "learning" of difficulty/challenges in shuttling large bulky items around without owning transportation...seems like maybe you should have seen that one coming?
Great post. I think this is one of the fundamental lessons that all startups going through an incubator should learn: have a product, find a customer.
The most basic, lowest-common-denominator example of this is arbitrage. Buy one product for X and sell it for X + 10%. If you can't do that with one product successfully that you know there is already a market demand for (e.g. chairs) then how on earth are you going to do it for your startup?
If you can't do that with one product successfully that you know there is already a market demand for (e.g. chairs) then how on earth are you going to do it for your startup?
umm, by building something new, not reselling existing stuff?
The most fun I've had doing this sort of thing is going to goodwill outlets (aka "the bins" ...of crap) and looking for stuff to flip. You pay by the pound, and the more you buy, the better the per pound rate. And your helping out goodwill with landfill costs. And your reusing something that would otherwise be trash. Everyone wins!
You would be astounded at what you can find there... things worth well over 100 dollars show up regularly.
I can't tell if this is a joke or not? Some frail guys can't hack lugging chairs around so it's not a viable business model for anyone? This is a very viable business that you guys feel too entitled for.
Open your eyes and guess what a pawn shop, antique store, used office furniture dealer, or IT equipment reseller do. It's not far off from this, but they aren't bitching about it and plugging a silly website.
When I was in my ramen phase of startup life (and newly married), I used to (among other things) buy clothes at local thrift stores and resell them on eBay for a decent margin. You quickly learn what brands/items sell and occasionally I'd hit gold and find a vintage Hawaiian shirt that fetches $200 (and cost $2).
In the end though, you realize it's just a way to make some extra money. It's not a "business" IMO–and definitely not a scalable business. But you learn what sucks (like dealing with shipping & getting photos from a camera to eBay pre-Smartphone) and realize other people also feel that pain. That's where your business is.
UPDATE: Downvotes, seriously? Read my reply down this thread. Some people on here are, frankly, ridiculous and have no clue how to engage in a meaningful discussion.