Pricing new, used and collectible products for resale is more difficult than most people new to the buy-and-sell game think, yet pricing is a very important element of the marketing mix. If your prices are too high, you will meet with great resistance to buying. If your prices are too low, you may also meet with resistance because of perceived quality issues, and you probably won't make any money on the sales you have.
There are a number of factors influencing how you price products for resale--product costs, overhead, competition, method of distribution, wages and your desired return on investment. If your pricing is correct, consumers won't think twice because they will feel the price is fair and commensurate with the perceived value and benefits. However, as soon as your price goes below or above the threshold of what consumers feel is in the fair range, you will meet sales resistance. Whether you are selling new, used or collectible products and items, you still have to cover the basics, your fixed costs, direct costs, and income and profit. It is a combination of the aforementioned and common sense that will help you determine what prices you have to, and can, charge for your products.
The first factor is overhead--that is, the fixed costs of doing business. Even though fixed costs cannot directly generate a profit, they nonetheless must be present in order to operate the business. The telephone bill must get paid regardless of how many sales you make or how much revenue is generated. Some overhead costs do increase as sales volume increases, necessitating good record-keeping and bookkeeping habits to keep on top of changes. Additional examples of fixed costs include business permits, transportation, bank charges, professional fees and marketing expenditures.
The next factor affecting product pricing is direct costs associated with the sale and delivery of a product. An example of a direct cost is the wholesale cost of a pair of sunglasses. If the sunglasses cost you $5 each, the cost to have each pair shipped to your home is $1, and you spend a further $1 repackaging and labeling the sunglasses for resale, then your total direct cost for each pair is $7.
The third basic factor influencing product pricing is your wages and profit. People often confuse the two, but they are separate issues. Income is what you trade your time for--$25 per hour, for example. Profit is the return on your investment and the reward for the risks entrepreneurs take by starting and operating a business.
Pricing New Products for Resale
There are a number of ways to price new products for resale. The simplest is generally a cost-plus approach, which means that you multiply your product cost by a markup factor such as 100 percent. If you paid $25 wholesale for a cordless drill and applied a 100 percent markup, the retail selling price would be $50. But at the end of the day, competition will be seen as the greatest influence. If the majority of resellers charge $35 for a cordless drill on eBay, you would be hard pressed to sell for more unless your cordless drill had substantially more user benefits and features. Of course, if you were the only vendor selling cordless drills online or elsewhere, you might be able to sell one for $75 in the absence of competition.
Sales value also has to be factored in to pricing. If you pay $1 for a lighter and resell it for $3, you might be getting a whopping 300 percent markup, but at the same time you have to sell a whole bunch of lighters to cover fixed costs and income, while also generating a profit. On the other side of the coin, you might only earn 5 percent on the resale of a piece of real estate, but on a $300,000 sale this adds up to $15,000. Once again, a commonsense approach must be taken when choosing products to resell and their prices.
For the small buy-and-sell operator, the best product pricing approach is to conduct research in the marketplace to find out what the same or similar products are selling for, how they are being sold, and who is buying. Research techniques include:
- Going online to eBay and other marketplaces to study prices
- Searching through newspaper, flier and magazine advertisements for prices
- Mystery-shopping at retail stores and doing price comparisons
- Subscribing to product catalogs for pricing information
- Calling retailers and asking how much they charge for the type of product(s) you are going to sell
- Asking suppliers. They are one of the best sources of up-to-date product pricing. They can tell you about suggested retail selling prices, sales tips, and if you are lucky, the prices other resellers are charging.
Obviously, it is in your best interest to search for innovative ways to distinguish what you sell from the competition's products and methods of distribution so you can sell your products for more and in greater volume.
Pricing Used Products for Resale
Pricing previously owned merchandise for resale shares similarities with pricing new products, especially in terms of pricing research. Use many of the same price research techniques-online searches, classified advertising and mystery-shopping comparison for small items at thrift shops to help determine market value of the used goods you are selling. There are also price guides available for more expensive products like cars, boats and recreational vehicles.
Price guides typically describe the product, including model and features, and assign a value based on these criteria as well as the condition of the item. Used car dealers have used price guides for decades to help establish a buying and selling price for trade-ins.
You can also have professional appraisals performed on higher-priced items to help substantiate and support the asking price. This is especially true for items like real estate, cars, fine jewelry, and boats. Keep in mind that professional appraisals and surveys can be quite expensive, and you will need to factor in this cost when buying and pass the cost along when selling.
Many resellers create a sliding-condition scale for pricing items. In perfect condition, items are priced at 70 percent of new cost, while items that are still saleable, but past their glory days, are priced at 30 percent of new cost. Some products also retain value better than others. For instance, computer towers are notorious for having poor resale value due to rapidly changing technology, while computer monitors hold their value better because technological advances in monitors aren't as quick or common. Ultimately, pricing used products for resale is very much what the market will bear, but you can greatly increase the odds of securing top dollar by selling products that are in good condition, work, and are in demand, and by selling through the right venues and to the right audience.
Pricing Antiques and Collectibles for Resale
Pricing antiques and collectibles for resale is another game entirely, mainly because antiques, collectibles and memorabilia items are seldom needed like a dependable used car to get the kids to school, a stove to cook on, or clothes for people's backs. Antiques and collectibles are things people want, not need, and the target audience can be very narrow, especially for uncommon collectibles and highly valued antiques. Let's face it, few consumers have an extra $25,000 lying around to buy an original Tiffany lamp. Therefore, pricing is largely reflective of what the marketplace will bear.
There are price, value and condition guides available for every imaginable type of antique and collectible. Value guides are unquestionably a good starting point for pricing and in most instances invaluable, but only to a point. Antiques and collectibles values go up and down daily, influenced by many factors. For instance, the value of nautical collectibles, especially cruise line memorabilia, skyrocketed after the release of the movie Titanic, as does the value of first-edition Hemingway novels for a few weeks a year around the anniversary of his birthday.
Pricing antiques and collectibles is as much about choosing the right sales venues and target audience as it is about the actual item, probably more so. Therefore, success comes to antiques and collectibles traders who pay close attention to what's going on in the marketplace at all times. Professional appraisals and authentications also help to substantiate and support asking prices. Indeed, in many situations having antique, collectible, and memorabilia items appraised and authenticated will greatly increase their value. Authentication is especially valuable.
Excerpted from 202 Things You Can Buy and Sell for Big Profitsfrom Entrepreneur Press