Monday, June 1, 2015

Selling Vintage Online is not the Money Making Stream You Hope it Is


Dear eBay/Etsy buyer: your seller isn't making any money.

It may appear like they are swindling you--paying only .50 cents for a pony and selling it for $20, but I assure you, they are not. They are either in the heady love of a newfound hobby, don't understand accounting and scaling models, or (like me) they enjoy it. But rest assured: they aren't making money.

I have wanted to write about this topic for a long time. I think it's an important point for all collectors to grasp, especially if they are not thrift/garage sale people and buy online exclusively. Some tend to feel ripped off when they learn a seller purchased an item for so cheap. Trying to get the best deal possible, they negotiate free shipping, bulk discounts, etc, because "Hey, that seller for it practically for free, right?" They, at times, complain about slow shipping, packaging materials and imperfections even if they've only spent $20 or less on their item. In other words: they expect the very best for very little.

I know this because I'm a buyer, and a very informed buyer. I spot hidden gems. I snipe. The idea: get it cheap, get it quality. I frequently succeed.

But I'm also a seller and have felt the flip side of this issue. I have had buyers try to negotiate a $10 item down to $5, effectively wasting my time. I have had people complain about slow shipping after they refused to pay for priority and opted for media mail. I have taken hundreds of additional pictures to assure are picky collector that the item is what they want. I have been scammed with international mail fraud chargebacks more time than I can count. Once, over $1000 worth of packages were stolen from my porch.

I don't generally mind the issues that come with day to day selling. Antique and vintage toys are very additive to my life. In other words, when I've had a hard day doing other things and being adult, I love visiting my cute storage unit where all my inventory is. I also love going to thrift stores and finding the items. It's just plain fun. It's plus-one for me and my emotional health.

But, I worked for years as an accountant and I know the grim truth: I am not making any money. During tax season this tends to be most evident. After adding up all the expenses such as storage unit costs, gasoline, inventory acquisition, postage costs, supply costs, fees, etc. I find I have traded 20+ hours a week for a measly $60 in profit.

Read: that's $3 per hour.

Unfortunately, many small shop owners, especially those who sell online, don't understand basic accounting principles don't get that they aren't making money. There are many reasons for this. First and foremost, they don't take into account their own value as a moneymaking entity. If they can make $30 an hour answering phones, but only three dollars an hour selling vintage, that's a net negative -$27. They are, in effect, losing potential dollars simply by working for less.

But some people don't want to work answering phones and would rather make three dollars an hour doing what they love. I get that. The next truth is that they don't understand tax law. I have found that many fail to even file a schedule C or incorporate their business. The sheer labor of tracking profit of a $1 item, let alone $1,000 one-dollar items, is far too arduous and labor intensive in QuickBooks or any other accounting software. They literally don't have the resources to file proper taxes or keep detailed, so they just don't. Without these numbers, they can never be sure they are making anything, and I have found that they would rather not know. Moreover, they don't keep track of important incidental costs like fuel, utilities and payment gateway fees. It's overwhelming, so best ignore it! Besides, didn't they just sell a $.50 item for $30? Shortly, there's a huge room for profit in there?

I felt this way too. I thought that if I just kept trying it would eventually pay off. When I began to deal in bulk, I started hiring people to help. I hired a photographer, a lister, even a shipper, a bookkeepe. The idea was the more time I had, the more inventory I could find, the more I could sell. My per hour rate went up because of the bulk I was able to sell but I was also pressured to buy more. More items turned into a heftier storage unit cost and heartier budget for inventory acquisition. Rising costs equaled lower profits even in bulk.

But why not find ways to lower costs? Why not keep the inventory at home to save on storage unit costs, for instance? 

I experimented with this too. In fact, I kept my inventory in all sorts of places over the years. Garage, living room, basement, office, outside storage shed, under my bed. In one answer: It is too chaotic. Plus, if you think about it, keeping items at your house isn't free either. Take the square foot total of your home and the square foot total of the space your online inventory takes up and divide your house payment by that. It isn't free. Also, having guests come over and look at your vintage toy room can really damage your adult reputation. I have yet to meet another adult that believes scouring garage sales is a healthy use of my time or that other people buy these old things. 

But they do. I make many sales per week. Some weeks, I make hundreds of sales on various channels. At times, I am overwhelmed with orders.

So with all that cash coming in, how can I say that I'm not making money? What am I doing wrong?

The answer is nothing. I am running as an efficient an online business as possible. The real problem is that vintage retail is an inherently flawed business model. After doing this for 15 years I have noticed two important truths that clue us into the reason these businesses are flawed.

First, no one has ever met a rich antique dealer. The few wealthy dealers I know where wealthy before they became dealers. They are able to continue to be dealers because they have family money. This is true for upscale store fronts. There are several here in Utah. Their items are very expensive and very unique, justifying the price. But, I have kept careful track of their inventory. Items sit on the shelf for years. All the while, the wealthy family money playboys get to shop for new inventory and chat with other people all day. When they do make a sale, the sale is huge. But, not enough to pay for the acquisition of new inventory and overhead. These playboys are not making any cash.

Contrast that with a few of the dot-commers I've met in my neighborhood. They started from nothing and are now multi-millionaires and they became so in less than a decade by starting businesses online. Why they succeeded while us online vintage sellers have failed?

The answer (and the second thing I've noticed in 15 years of dealing) is that antique businesses cannot scale and therefore cannot turn huge profits.

The dot-commers invent a service or a widget that they can manufacture in huge quantities. They market that one widget for that one service. They hire people to improve and maintain the service. They hire people to market the service. They acquire funding from venture capitalists. There one service makes their business highly scalable. Once they've built a fort they can keep the whole city safe. Once they build the big fort, we can keep the whole country safe.

They also eventually sell the business to a larger corporate entity for millions of dollars so they can free up their time to do it all over again. Scaling makes it possible.

I have experimented with scaling in every respect. I can justifiably say that I have exhausted all prospects. I have tried selling in bulk, hiring cheap labor, buying large collections. I have tried selling on personal websites to cut down on third-party fees, I have tried bulk discount at the post office to cut down on shipping. I have tried selling consignment. I have tried antique mall booths. I have tried selling super cheap. I have even tried selling digital vintage images that have passed the copyright date.

Each of these avenues significantly improved the metric it was trying to improve but because each item is unique and therefore needs to be treated uniquely, and because the need for acquisition funds scale up as my business scales up (you have to stock your shop with new items regularly in order to sell old items) the overhead again dominates profit.

Ultimately, selling antiques is selling in the retail market. Retail is notoriously turbulent. You have to guess what your buyers want and often times, more often than not, you guess wrong and the item that you bought hoping to make a huge profit on has to be sold at a loss. Times this by 10,000 items over the course of the year and you can start seeing why it becomes difficult to turn a profit.

But even regular retail stores have scalability. Ever been to Claire's? Every Claire's across the country is exactly the same. They are selling the same sparkly scarf that they bought in bulk discount from a retail manufacturer. That is a form of scaling that can reach huge amount of people and reap huge profits.

That's impossible with vintage. At times, I have purchased old store stock and have had five or six of the same item. But I've never had more than that. The opportunities to buy in bulk are rare.

For these reasons you see secondhand shops open all over the place and then close very soon after. In the real world, not online, I can usually predict with fairly good accuracy when a vintage store will close. It's usually at the two-year mark. A few of my favorites, where inventory was very cheap, have disappeared. Friends have left the country after these businesses fail, donating all those tough-to-sell bits back to the thrift stores from whence they came for another hopeful to buy them up and start the process all over again.

TAKEAWAY 

I have grown to look at vintage/antique dealing like the arts. A writer or a painter is almost never paid for their work. If they are paid, they are certainly not paid in proportion to the work they have done. Many of them struggle over lifetimes to sell a single manuscript or painting. Sure, there are the superstars that become instant millionaires that those are so rare as to almost be mythical. It's about as rare as finding Elvis' hairpiece in an old shoe box your grandmother gave you. Boom, instant thousandaire. It's happened before, but it's rare.

The antique dealer and the writer and the artist don't necessarily do it for money. Many times they do it because it renews them. They do it for love.

So next time you pay $21.99 for an item on eBay and the shipping is $10, think of all the time and money that it took to get you that special item. That seller went out into the world for you, fought off the other dealers at the thrift stores and garage sales for you. They took pictures and cleaned the item for you. They put it in a box with your name on it. 

You are willing to pay $31.99 for a good steak, why not pay for something that will last longer? Why not pay for somebody else's (and your own) passion?







12 comments:

  1. I lived reading your blog at least once, often couple of times, a month (and i mean the whole thing) even while you were'nt active anymore but now I'm dying to read more and it's hard to wait that long :D
    Your life, work and spirit are inspiring to me and I loved to hear the best time of your life might just have started

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    1. Thanks so much, Cat! I feel guilty for dipping in and out but one of my goals this year is to keep posting simply because its fun! I hope you come back and read some more :)

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  2. Great article. Good advice and we have defenitly come up against some of the same struggles you have. Enjoyed reading this as I was going to write something similar.

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    1. Sweet, thanks for the reply. If you want to post a link to your store I'd love to take a look and I think readers of this blog enjoy new finds :)

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  3. I just have to say, I stumbled upon your blog today and went through every single entry! I had a huge collection of LPS that got sold at a garage sale without my knowledge, and I'm still upset about it! I loved going through all of your pictures, and hope you continue to update!

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    1. Thanks, Laura! I too wish to replenish my LPS collection! They are getting pricey! But that just makes it more fun, IMHO. Sorry your collection got sold under your nose! I try not to do that to my kids!

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  4. Thanks for giveng us usefull information about Sell Online.

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  5. This comment has been removed by the author.

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  6. Kiddi.it the online shop mega store with a large catalog of 10,000 gift items, school backpacks and toys for children of all ages.

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  7. Could you message me by email
    And assist me I'm pricing my nib
    Fairywinkles. Thank you
    ACHANCY73@gmail.com

    ReplyDelete
  8. Could you message me by email
    And assist me I'm pricing my nib
    Fairywinkles. Thank you
    ACHANCY73@gmail.com

    ReplyDelete