I am living proof that $60.00 can be made in as little as 1800 seconds on Craigslist. 1800 seconds is 30 minutes, but 1800 seconds sounds more impressive to me.
Location Arbitrage
My wife and I were shopping for a rug at a well-known department store. The strange thing was that the rug was half price ($100.00) on one side of town and full price ($200.00) on the other. Not wanting to travel to the other side of town to pick up the rug, we asked if the sale price would be honored at the store closest to us. They politely told us that the clearance sale was a function of local inventory and could not be honored at all stores. So, we made the 20-minute drive across town to pick up the rug for half price.
The rug was paid for, sitting in the back of our car, and we were headed out of the parking lot when I told my wife to turn around. This particular store is considered to have high-quality products, so I thought, “Why not purchase a second rug and post it on Craigslist and see if we could make a few bucks?” The return policy was 90 days, so if it didn’t sell in the next 2 months, we would have more than enough time to take it back for a full refund.
I purchased the additional rug and put it in the car. On the ride home I started to write up the ad on my phone. By the time we got home I had put together what I considered to be a straightforward offer. The name of the store has been redacted.
“[NAME REDACTED] AREA RUG 5′ x 7′ (NEW) Floral Brown – $160”
Brand new, never used area rug. 5 feet by 7 feet in size. Great for a dining room or living room. Purchased from [NAME REDACTED]. Give me a call for this great deal.
The offer was accompanied with a high-quality photograph and went live.
I figured we could post the ad, see if there was a response, and lower the price incrementally if there were no hits. The first day there was nothing, no calls. Day two, still nothing, so I decided to renew the ad and post it again in another category. That night the ad was renewed and brought to the top of the listings in two categories. Day three, we received a text and a phone call from two separate people interested in the rug. Having two interested parties meant we were not going to have to come down in price. The gal who called said she wanted it and brought us the money that night.
- Total time invested: 1800 seconds.
- Total financial investment: $100.00
- Final sale price: $160.00
- Profit: 60.00
- hourly earnings: $120.00
How Was Value Added?
So, how is this possible? In order for us to make a profit, we must have had something of value and a competitive advantage over our competition. We were able to make money on this transaction because the demand for the product existed, and our competition (the local branch of the department store) was offering the same item for 25% more than what we were. Additionally, the product was new and unused, so buying from us (a non-credible source) was not an issue. This would not have been possible if the local branch was offering a lesser price, or if the demand didn’t exist. We added value to potential customers in our area by bringing the product to our neck of the woods and offering it for less than what they could get anywhere else.
How Was Risk Assumed?
We assumed risk in the respect that 100 dollars was invested without any guarantee that the item would sell. We did have a safety net because the store had a 90-day return policy, but returning the item in 90 days at no gain would almost equate to a loss. Committing funds for 90 days without a return could be considered a holding cost, and the opportunity loss from not having 100 dollars for 90 days could be as much as 100%.
When to Buy and When to Sell
The root cause of the opportunity above is the seasonality of consumer product lines. As we transition into the next season, major department stores lower their prices to move out the old inventory and bring in the new. These stores don’t want to hold onto the product for a whole year, because the demand will not be the same, and holding costs would be high. So, use this reality to your advantage and purchase goods out of season. In How to become an Entrepreneur I illustrate a similar opportunity to the one above that I failed to capitalize on but that existed for the same reason.
Capitalizing on the seasonal demand means having your product available before the season begins. It also means marketing to the appropriate demographic. Many entrepreneurs fail to move product because their potential customers have no idea the offer exists. In the example above, I had to broaden exposure by adding a second listing and renewing the current one. Had I not, we would not have sold the rug so quickly. I can’t say exactly which ad the buyer saw, but the original was posted in “household” and the second was posted in “furniture.”
Buying and selling goods like this can be a very lucrative way to make some cash on the side. If you are thinking about taking this up, I would suggest you establish a niche market to focus on. The more you can build your knowledge on one product line or target market, the more you will be able to identify a good buy when you see one. Additionally, you will become more familiar with where to find buyers. Like anything you do, the more you practice, the better you will get and the more fun it becomes.
Lastly, I will leave you with a quote I recently heard from a friend. He heard it somewhere, so if you know who the original source is please let me know.
“A good deal at the wrong time is not a good deal.”
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