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Comment by adossi | Hacker News Reader

My brother has an Amazon store. He pulled in about $400,000 in sales last year and saw a profit of close to $200,000 doing exactly what you stated (buying wholesale, boxing it up and sending it to Amazon). Huge margins, I know. However he doesn't work a few hours a day, its more like 9 hours a day driving around to different auctions to buy wholesale. Its a lot of work.

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That's not wholesale. Margins like that mean he's buying liquidation.

> Margins like that mean he's buying liquidation.

Not really. https://www.amazon.com/Polyhedral-Dungeons-Dragons-Pathfinde... is selling for $10.98 the same thing you can buy wholesale for $1.50. Of course, you can get it from https://www.krakendice.com/faux-stone-green-jade-dice-set-fo... for the bargain price of $8.95.

https://www.krakendice.com/dice-by-collection/pearl-dice/ is selling sets for $5.95 when the wholesale price is $0.49.

Even after accounting for the cost of shipping, I'm pretty sure these are margins of over 100%.

Where are you getting those wholesale prices from? Do you mean the price you can buy an unbranded generic version? Because that's not wholesale, you can't buy it and sell against a listing that's branded.

In general the products that sell well will have a very competitive wholesale market and you'll be lucky to squeeze out 20% margin. It's certainly possible to get large margins in closeouts if you buy items that aren't popular, but it's difficult to scale that. And that's arguably liquidation anyway.

I'm getting those wholesale prices from hengdadice.com, the same wholesaler those two merchants both use. Factory prices, we can only assume, are much lower.

I don't know what you mean by "unbranded generic version". For reselling purposes, you can order a little card with a design of your choice on it (1 design total, 1 card per set of dice) from hengdadice.com, and both merchants I mentioned do that. That increases the wholesale price by a few cents.

The dice themselves are unbranded in all cases.

HDDais is trademarked. https://trademarks.justia.com/877/27/hddais-87727674.html

You can't sell on that listing legally, unless the goods were authorized by the brand owner.

Wholesale would be buying directly from the brand owner, in this case which would be "Shenzhen Lichen Trade Co.,Ltd.".

I don't know if they'd even sell you but if they did they'd definitely charge more than that.

In the United States, you can resell any product you legally acquired from any source, you do not need the permission of the original producer/brand owner.

https://en.wikipedia.org/wiki/First-sale_doctrine

No, but it needs to have been previously owned by the brand owner.

You can't buy directly from the factory without the brand's permission. That's counterfeiting.

From your link: "this same doctrine enables reselling of trademarked products after the trademark holder put the products on the market."

In other words, it must have been owned by the trademark holder at one point, and sold by them into the market.

If you identify it with that trademark, ok, maybe that's new to me but seems plausible. You can sell it without mentioning the trademark though.

We're talking about selling on an Amazon listing which has the trademark on it, which isn't allowed. That's what I originally pointed out - that the wholesale price wasn't relevant because it's not for the trademarked product.

... and this is why it's impossible to trust the provenance of anything you buy on Amazon!

The factory is the owner of the brand.

Not as far as I can tell in this case. I listed the brand owner above, which seems to have no connection with the wholesaler mentioned.

The brand owner is a trading company, and buys from factories, but is not a factory itself.

The HDDais brand owner doesn't buy from factories. He buys from Hengda. Hengda buys from factories.

HDDais is living the exact dream mentioned upthread, in which his business consists solely of buying things wholesale and shipping them to Amazon.

No, they're doing private label. It's a very different business.

Nothing's stopping you from registering your own trademark and selling whatever you happen to have on hand under that mark. Ownership of a trademark is free.

What is the difference you're seeing?

I didn't say anything is stopping you from launching a private label business.

The primary difference is that you need to spend to promote the listing because nobody has heard of you.

Oh yeah you're right, doh. For some reason I assumed the Shenzen company also owns hengda.

Amazon prices in shipping.

Retail at prices around $10 is all about psychology.

$1.50 is even a pretty high estimate. I've bought very similar dice sets from china for less than $0.50, and they have to ship them to me with that!

Buying generic from China is not wholesale. Wholesale in this context means buying branded goods, either directly from the brand or from a distributor further along the chain.

You also can't scale up the cheap UPU subsidized China Post + USPS shipping. It's for small quantities only. Order ~10+ and they ship via much more expensive means. Try and order a bunch one at a time and customs will catch on and seize them.

Why would customs care? Nothing in the package is an illegal substance

The UPU shipped items haven't paid customs fees / duties (or typically have WAY understated the value)..it's an exception for samples/gifts/etc. If they know you're shipping quantities, they want their money.

This is why some items on AliExpress either won't let you order more than quantity 1, or switch to FedEx only shipping if you increase the quantity.

Maybe his profit quote was vague or excluding Amazon fees. That's not that far off without having to do liquidation. Which is also a viable way to make money selling on Amazon.

Amazon fees using FBA typically run around 30% depending on average price. More if you do private label and have to pay advertising.

Talking about gross profit without including fees is effectively meaningless.

My rule of thumb for a successful wholesale business is 50% cogs, 30% Amazon fees, 20% margin. There are companies that do a lot worse, and I'm sure some that do better but it's extremely difficult to beat 30% margins at any kind of scale without doing liquidation, getting some lucrative exclusives, or otherwise find a very uncompetitive niche.

Source: have done several million in sales across hundreds of thousands of units on Amazon in the last few years.

You were higher volume than I, and my Amazon fees across the board ran about 35%, so I completely agree with your assessment. However I was buying liquidation and my cogs tended to be lower, although my processing time/expense likely higher to compensate.

Not only is that a lot of work, as you mentioned, but it is very volatile and a constant hustle to find the right products at the right price. And as soon as you find a good product to sell at good margins, you have to be moving to the next product because a wave of sellers, both legit and counterfeit will soon move in and start to encroach on your margins.

Even the sources of auctions are a constant whack a mole. Any consistent auction source soon gets overrun with a constant supply of newbie buyers that overpay for anything and everything just to try and make their trip worth it.

I used to frequent postal auctions for products to resell. Then the droves of bloggers and wantrepreneurs started moving in.

I stopped going when people started bidding up the price of MacBooks of unknown provenance to higher than retail.

You keep thinking, well these guys are going to lose their shirts and never come back. They don't come back. But 4 more will take their place the next month.

> Huge margins, I know.

> Your margin is my opportunity.

I don't your brother's business to last forever. While I'm happy for his accomplishments, I hope he's thinking about the competition from above.

It sounds like his brother is one of those who identifies those opportunities. I think he'll be fine.

Nothing last forever, one strategy is you milk it as much as you can till it dries then move on to the next endeavors.

what is he selling?

9 hours a day of driving pays every other job about 1/5th what your brother makes. Not advocating a race to the bottom, but expecting to clear 200k a year by driving around to auctions all day is still insane relative to what other people make doing similar work.

Are you serious? He's not being paid to drive around. He's being paid to go to auctions, analyze the price of things being sold in large quantities, and decide if there is a business opportunity to sell products in a different market. He then ends up with a large inventory that he must sell, otherwise he is stuck with unsold inventory (risk). He also has no guarantee that the aunction will be selling the same products the week after, so it seems like there is a scarcity risk as well (not having a homerun product to sell constantly)

This is what the retail business is.

He's not just "driving around".

Yeah, this whole thread is based on a false assumption, that the work he does is "easy and equivalent to driving around." It's not easy or trivial to start a business, plus he assumed risk up front.

That's like saying "Property owners just sit around and collect rents, so they shouldn't make any money." It totally misses the point of using capital to invest in and maintain real estate, which is not "sitting around" at all - it only becomes easy after you've done a significant amount of work to make it so.

Real estate is a very poor example considering countless cases of landlords neglecting repairs and maintenance. In some states in the US, there's little or no accountability for this.

Sounds like confirmation bias.

I've watched some YouTube videos about various arbitrage schemes, including refurbishing. It rarely makes sense at a small scale, but if you can get enough product, you can eliminate the waste by scaling up.

I can watch videos/read blogs about how to duplicate a specific win, but by that point so has everyone else and margins drop.

A few people who find the deal early can make a ton, and they get paid well for knowing what to look for in a good deal. Even then, I'm sure pretty much everyone who does well with this has plenty of stories where they lost big, and they only win on average. It's the same as stock picking; investors don't get paid well to watch their investments tick up, they get paid well for finding the bargains, and sometimes an investment opportunity is too good to be true.

I find it interesting to see this similar kind of behavior in video game economies like with Path of Exile. There are people who spend all day looking for good deals or opportunities, and essentially buying and reselling, maybe with some minor tweaks. These people tend to be the wealthiest in the game, with far more in-game currency than people actually playing the game.

I think a big part of that is because most people don’t care at all about economics in a video game. When you’re mostly competing with children and people who just want to game and don’t care about being rich, putting any sort of organized effort toward getting rich becomes substantially easier. EVE is like this too. These people are also often derided as “not actually playing” the game.

Exactly, he gets the risk premium. One of the most straightforward ways of making money in markets is being compensated for bearing risk. This is a systemic factor and will exist no matter how many people are doing it. That’s not to say it will always be so lucrative, but in general he will always get compensated more than someone who is merely dropshipping.

Yeah, but his brother has also taken up a lot of risk. There's a much greater chance he could be out of business with absolutely nothing, or worse, he may buy batch of items that gets destroyed, and worst, doesnt sell. The additional income is to compensate for the risk.

This is why Amazon handles the logistics for so many third-party sellers rather than simply buying their merchandise and reselling it. They get the little guy to assume all of the risk. Unsold products? Your problem. Some kind of defect? Your problem. All Amazon is on the hook for is shipping (and warehousing, although the cost there is a bit more abstract).

And when they are handling the logistics, they also get the benefit of just giving a full refund for whatever reason they like. It's nothing out of their pocket, and it makes them look good to the consumer. So, why not?

They also get to look at all that sweet data and if any one product or group of products starts to look too good for those small 3rd party sellers, they aren't afraid to just drop right in on top of everyone and push their own product to the buy box everytime.

After which they will drive away most of the 3rd party sellers before starting to creep the price upward.

Sounds like his brother doesn’t expect anything, but rather, understands hustle.

To say he makes 200k driving around all day is like saying senior developers make 200k playing with computers all day.

All you do is type a few words on a keyboard!

What a load of success-envy!

It’s not the driving that he is making money on. It’s the risc of being able to buy the stuff and the know-how of what to buy.

Nine hours a day of staring at a computer screen and typing something from time to time pays every other job about 1/10th what programmers make.

Not advocating a race to the bottom, but...

(Go ahead, you can fill in the rest.)

It shouldn't be surprising it's more profitable though because it's not just transport that their brother is doing it's transport in service of the real business which is essentially retail supply.

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