Yesterday I mentioned that we will be looking at a new perspective going forward, and this will include business opportunities rather than just ideas. But I wanted to share this business that I had in my drafts as it meets the new parameters.
Firstly trading has been around since before Jan Van Riebeeck arrived.
It meets the quick and simple to execute “business plans” we will be using going forward:
- Focus on what you going to do going to
- Who you gonna buy from and who to sell to
- Where are you going to do it from
- And how are you going to tell people you do it
It meets the general plan of having “bread and butter” income to cover your daily living needs and provides the time and money to work on your “end goal”.
It is possible to make the minimum R100 hour/R1000 day opportunities we will be looking at going forward
It is a simple business that requires common sense and maths literacy
We’ll discuss more about the new plan going forward, but for now, we look at Starting a Secondhand Buying & Selling Business: Buying From Buyshops and Advertising & Selling Online
Synopsis / TL;DR
The buying and selling of second-hand goods is one of the most popular small businesses in South Africa both as a side business and as a full-time biz.
A second hand goods business buys a piece of personal property that has been used before and sells it at a price that is usually below retail value.
Second-hand goods business cater to people who are unable or unwilling to buy a product new, either because they can’t afford it, simply don’t want to pay the price for a new item, don’t need a new item, or the item is no longer sold or cannot be found new.
Solution / Business Model
A secondhand goods business buys an item, usually at a greatly discounted price to new and sells it still at a discount to the new price.
Product Mix Strategy / What to sell
When starting this business you have to decide whether you are going to focus on a product category such as tools or electronics or whether you are going to sell whatever you can find at a good price.
This businesses main target market is people looking to buy a product at a more affordable price to new.
This business requires two things to be sustainable and ultimately successful: a place to buy the goods cheap and a place to sell the marked-up goods. When buying you need to be able to spot when a product is good value and when it is not. When selling, you need to sell it at an attractive price, yet enough to make a profit.
Places to buy
Places to sell
If we look at Cash Converters, Cash Crusaders, Gumtree, and bidorbuy as four separate platforms, they all have their strengths and weaknesses, Cash Crusaders and Cash Converters have the physical infrastructure to source the goods, Gumtree and bidorbuy the regional and national reach. This opens the opportunity to buy at one place and sell at the other.
To be successful in this business you need to be able to purchase goods for cheap enough that when you sell it, it has to be cheap enough to be attractive and yet sell for enough that you make a profit to make this a sustainable business.
Start a Secondhand Buying & Selling Business: Buying From Buyshops and Advertising & Selling Online
To start a business or side business can be as simple as buying something for a certain price and selling it for a higher price, do this enough times and you can have a full time business and a very good one. All you need to know is what to buy, for how much and how much you can sell it for (buy low sell high) but finding the right product is often hard due to a lot of variables including competition relative to demand which will affect margins and not make it sustainable long term. Today I am looking at a business that can sidestep South Africa’s rigid market forces, a business that buys from secondhand “buy shops” such as Cash Convertors and Cash Crusaders and resells it using online sales and promotional channels namely Gumtree and bidorbuy.
A Secondhand Buying & Selling Business buys from brick and mortar buy shops such as Cash Convertors and Cash Crusaders (from hereafter referred to as “buy shops”) and then advertisers and sells it online (on Gumtree and bidorbuy) where there is a bigger audience and it can be easier found by prospective buyers.
As easy as it sounds it is actually not that easy as there are a few things you need to understand but it is a business that can be easily started. I say this now for people who are new here: I only cover businesses that require work, (no passive) there are a lot of risk factors in this business. And I know the quick buck mentality that is so prevalent out there where people do not apply their minds, they don’t want to read and apply their minds they just want to make quick money. If that sounds like you, you are at the wrong place.
The buy-sell retail opportunity explained
In order to run a successful buying and selling or retail business, you need to find a good product at a good price and you need to advertise and sell it where there is demand. But getting the right product is not easy because there is a lot of existing competition out there. So you can’t just buy cheap Chinese crap and resell it because there are a lot of people already doing it. Sometimes there is money to be made in imports by latching early onto fads such as the fidget spinner craze we had a few years ago, or onto trends or even pandemics like we saw with everybody and their cats were entering the hand sanitizer and digital thermometer business.
Buy shops on the other hand have different stuff every day, people are constantly coming in and selling and pawning their possessions. So there is constantly new “stock” arriving. Today we look at buying from buy shops and reselling it.
Looking for opportunity
Whenever people think of supply chains and sources of opportunity that thinking often stops when the consumer buys the product but there is a whole myriad of opportunities after there (refurbish, repurpose, recycle etc.) and one of those is the reselling of an item that was already used.
After a person has used a product and they have no need for it or they need money they will sell it. If they need money quickly they will go to a buy shop like Cash Crusaders or Cash Convertors and sell it there immediately. The buy shop will buy it, add a markup and resell it. They also sometimes get stock via a “loan against goods” that the owner did not return for (this is called pawning and is not the same as the buy shop). The goods are pledged as collateral/security for repayment of the loan, in the event of default the goods are sold by the buy shop to recoup the money owed.
So the buy shops are the middleman they have a place to easily walk in and sell the goods.
What this business does is buy stock from buyshops in which there is profit to be made by reselling it online. This is harder than it sounds because it is actually very hard to find goods deals at these stores and you need to know what will sell at a higher price online. One of the main sources of stock is when a product has been marked down at the buy shop.
Like any market, some opportunities arise where the forces of supply and demand do not meet opening up opportunities of “arbitrage” on another, different platform. In this case, the rationale is clear: buy shops are local businesses, online platforms are regional and national businesses. A product can sit on the shelves of a buy shop for months and can be reduced to below cost simply because the shop is in the wrong area where there is no demand for that product, when that product is put online it can be found with a simple Google search.
Like any shop the buy shops don’t like it when a product stands on the shelf for too long, not only does it take up space but buy shops have parallel loan businesses one is payday loans the other is pawn and these loan businesses charge high interest rates, so even if they resell a product at cost or at a loss, they still get liquidity from the product in the form of cash which is loaned out and they make money from the money. Under normal circumstances almost everything on the shelf of a buy shop is negotiable (with the exception of the new product “house brands” at Crusaders such as Dixon and products that have just arrived less than a week ago). The amount of discount they are willing to offer usually depends on the amount of time it has been on the shelf, if it just came in they are not likely to negotiate or even negotiate at all, also on the tail end if it has been discounted too much already they also unlikely to negotiate.
Sometimes their products take a while to sell, causing them to discount it, some branches are quicker with the floor markdowns than others (but might still listen to offers) some of them discount it like 5% a month. And sometimes it stands on the shelf for months, even more than a year. Here is where the opportunity is, during this period where it has been extensively discounted it does not mean that there is no demand for that product, it simply means the right person has not come to see it. There is money to be made by buying that product from the shop and reselling it online.
Three things converge to create bargains that are heavily discounted, sold at cost, even below cost at buy shops:
- The buyshop bought in a product that is not popular in the area that they are located
- The buyer at the buy-shop paid too much and the item was standing long, they did not incrementally discount it and then they just mark it down to get rid of it
- The salesmen at the buy shop is lazy/incompetent and they are not dedicated when testing the product, so people come, say hey I want to buy that thing. Now the salesman can’t find the power supply, they don’t know how the thing works, and this scares off buyers.
Now I want to interject here quickly, recently buy shops have started to put some of their secondhand goods online for sale. While it is considered a risk factor I do not believe it poses a threat in its current configuration. Firstly only a small percentage of goods are put online, they don’t have the manpower to put all the goods online, even if they do use an automated system that can post to their websites the moment it is added to their system. They don’t have the infrastructure to go full hybrid clicks and mortar, they are primarily a physical retail outlet and I do not believe their staff has to capacity and dedication to pull off a dual offline-online business model. It will require staff that are on top of things to manage both sites, once an order comes on one side it has to be removed and dispatched and vice versa. Buy shops attract some of the least dedicated and competent sales workers that I have ever seen, they are not properly trained, I don’t think it pays well and seems to attract people that see it as a passing-through gig. It will require a significant shift for it to be a threat and I do not believe it will be anytime soon. I think they are probably more focussed on their loans business right now and wondering if all the shop space is even worth it. At least that is what I think when I enter and see all the crap laying around on expensive mall floor space and see a steady stream of financially struggling people at the small loan booths. I would think that the financial services arm would be growing significantly in this economy as people stumble from one paycheck to the other as the cost of living skyrockets.
And if, even if it is properly implemented, if you do daily rounds you will still be able to get good deals, based on the early worm doctrine or snooze you lose (while the person is considering buying online you already have it).
How do you know a bargain is a bargain and will be able to sell at a profit?
Any business requires a certain degree of skill or experience to be successful.
You might be thinking simple enough. It is not simple. This business requires some skill.
You need to know the product, and what it is worth. Some people that do this and specialise in a category already know just by looking at the item whether it is a good deal or not. But even then they have a cellphone with data on hand to research the item, but that is not enough, you need to know what type of competition (similar products) and demand is on the platform that you are going to sell and how popular that product category is on the platform. Every platform has a life of its own, example if you deal in coins or stamps bidorbuy is probably better than Gumtree etc.
What makes a good buy-sell entrepreneur
Usually, I would say when starting a business you need work skills (relevant to the industry) and you need business skills, like management. But that is post Van Riebeeck thinking, we need to think like it’s 1651. Now, all we need is “Focus on what you going to do going to”, immerse yourself in the industry when researching the business, common sense and maths literacy and you done.
This business can be simply described as you need to know the actual products and what products sell well where.
I have been selling on classifieds for over 20 years, I started selling as a teenager, I once sold a Nintendo Gameboy and the man who bought it for his son, he asked me if my mother knew I was selling it. I started with Cape Ads paper and then moved to Gumtree as the internet eroded Cape Ads (the dead tree version) userbase. I still remember how I used to scout early Thursday mornings for the latest edition. How times have changed with the instant availability of the internet!
I am very experienced in selling secondhand stuff online. I sell everything I don’t use. I am frugal and a minimalist, I hate hoarding and when I see stuff lying around the place that is not being used I see price tags above them. And I am going to recoup part of the price I paid for that item, working stuff, half-working stuff, broken stuff I sell them all.
This combined with the fact I have a fascination with buy-shops whether or not I intend to buy something if I see a buy shop I go in just to see what they have. Like a child and lucky packet, I always find interesting things. The thing is this we have very poor variety in our major stores, and the Chinese shops just sell crap and at buy shops, you often find exotic stuff from overseas that has been imported just one of by the person who bought it.
This has created a certain mindset that has helped me greatly. When it comes to the business side I can run the necessary equations through my head.
While this may seem like a simple business and simple requirements, I believe that many simply just don’t “get it” to be able to make it a successful business.
How does this business look (as a business)
Now you thinking, ja sure, I mean I can do this as a side business, but can it be a full time job, it can but won’t be gangbusters, unless you really cast your net wide, realistically person can make R500-R1000 a day with normal effort. Let’s see how:
Draw up a map of all the buy-shops within an acceptable driving distance. Visit them every day looking for bargains. List and update your ads every day on platforms that are chronologically sorted. Not all buyers search for goods others are just browsing the sites. And the more often you update the more often your ad is at the top. Although some places limit the number of times to “repost” an ad per day.
On the classified sites, assuming you selling from home (and not a busy sales channel where people are walking by), and assuming your prices are good, unless you have a lot of products this is a lumpy business: You not going to make a sale every day, but on some days there will be multiple sales. So for three days you might sell nothing, then you sell R5000 worth of products in one day.
Know your platform
The two most popular platforms that I advertise and sell on is Gumtree and bidorbuy. Some use OLX or Facebook Marketplace, I don’t. Both of these platforms have their strengths and weaknesses.
Gumtree is popular, the number 1 classified site in SA and many people use it to run their business on. But they have a lot of shortcomings.
Timewasters: Gumtree attracts timewasters on an unprecedented scale. I don’t think that there is a platform in the world that rivals Gumtree SA when it comes to timewasters. I don’t know if some people are just lonely and want to talk but it is nuts. And you need to be careful if you have a lot of listings you will become cynical and annoy yourself even with legitimate buyers (what I call “Gumtree Syndrome”) Gumtree Syndrome is real and it is a disease it will make you as a seller cynical and bitter. On certain Gumtree ads, you will see some stuff like “if ad is up then its still available”, “only contact me when you want to collect” or “no timewasters” or “no emails calls only” those people have caught Gumtree Syndrome due to all the timewasters. As the internet has become cheaper and cheaper a lot of people have been able to use the internet and some of them are just (I don’t have a better word right now) kak dom. They will annoy the shit out of buyers and they probably don’t even have the money to buy.
How to weed out timewasters: Timewasters on Gumtree take many forms, none more notorious than the “is it still available” timewaster that when you answer they just disappear. The more the listings the more of these people. Many people have combated this timewaster by politely saying something along the lines of “if ad is up then it’s still available no need to ask”. But I can guarantee you will still get people asking. You need to have a thick skin and not let people rile you, but its hard cos sometimes you stressed and then you still get morons grinding your gears.
The email timewaster: 9/10 if not 99/100 people that respond to ads using the contact form will waste your time. I think it is the lack of commitment required to send a mail compared to a phone call or WhatsApp. There is one serious buyer now and then that makes the initial contact this way. But like the “is it still available” timewaster you can state “no emails”. Timewasters will still email you. I am of the opinion that classified sites should make contact forms optional. That is how strongly I feel.
The photo timewasters: Even if you post the maximum amount of allowed photos from all angles and take it with a powerful DSLR camera people will still ask for photos, at the beginning I used to send because I thought, maybe they on mobile and cannot see the pics properly. Now I just ignore such responses, the amount of times I have sent pics, even of new items with zero imperfections and had my time wasted is just too many. Serious buyers usually don’t do this if there are sufficient photos.
So just be prepared for that. So what causes this? This is an inevitable result of mass internet penetration in a country like South Africa, the vast majority of people are not very sophisticated, where there is not the best education, knowhow of etiquette. etc. (Township Twitter being a cast in point). Gumtree was not always like this, years gone by when the internet was still expensive in SA, the majority of buyers were more sophisticated, they were well off, they were using it from work, now that internet is cheap there are a lot of dreamers on the platform.
Now you probably thinking wow hostile much, this is no way to treat prospective customers, go sell on Gumtree, and then tell me again. Almost all veteran sellers have a love-hate relationship with the platform.
Gumtree the “community platform”
Gumtree likes to position itself as this wholesome community platform, and sometimes it takes steps that are detrimental to sellers. They have a long list of prohibited items, they were blocking sanitizers and related stuff at the beginning of the pandemic “to protect hospitals from price increases”. This was pure PR, and harmed a lot of legitimate sellers. There are ways around banned items by using creative titles (which is auto-deleted or auto-moderated). But as a seller, you don’t have time to play whack-a-mole. Ironically they have no problem taking money from quack “herbalists” all the time claiming to bring back lost lovers and help with court cases or winning the lottery.
Incompetent moderators are another problem that plagues Gumtree so now and then when they remove your items for no reason. When you contact them and call them out they like “my bad”. I am talking real common sense stuff that has been human moderated to use an example, to some Gumtree mods a gun made from chocolate is a gun, not a confectionary, I’m serious a novelty item I was selling was once human moderated because it was shaped like a weapon and they called it a weapon but it was a hanger for clothing or something like that. Although this can be explained by SA’s poor education system under the current dispensation.
Another thing that has tainted Gumtree over the years is the scams on the platform, list a small expensive item, and you are bound to get an email from someone overseas saying they want to buy your product for even more than you want to sell it for. This is due to Gumtree’s popularity but also our open border policy, the vast majority are undocumented and untraceable foreigners, often scamming as a full-time job in SA. Don’t release goods until you have the money.
Bidorbuy has more liberal policies than Gumtree, more things are allowed, like weapons and smoking stuff like vape mods and juices. The main benefit that bidorbuy has over Gumtree is the rating and buyer protection system (verified seller status where you send in a copy or your ID to be verified). This helps to facilitate province-to-province trade by weeding out unscrupulous sellers and spammers (some slip through but nowhere near as much as the open policy Gumtree). In recent years Gumtree has taken steps to increase buyer credibility by showing how old the account is, how many ads they have placed (which increases credibility logic being that a scammers account will be closed) but I have found this not to be sufficient in many cases.
Do not underestimate the power of this credibility that attracts buyers from other provinces and rural areas. If you are a seller from Cape Town, you are living in a country, I mean city where a lot of things are easily available, but if you living in a small town those things are not available. This means if you only selling on Gumtree you are competing with sellers and selling to people who have access to these things. But someone from a small town does not have the same access.
Another thing, for some reason I get a lot of buyers from Johannesburg, which may seem strange because it is the business capital of SA and all we do in the Cape is surf the whole day and work a little bit when we away from the beach. But this could not necessarily mean that these things are not available in Joburg it means there is more demand there and might be more expensive there. Or at least I think so, I’ve never been there I don’t know the place.
The negatives of bidorbuy
Bidorbuy has always had a personnel problem, I don’t know if some of their staff are incompetent or just arrogant but dealing with these guys often rubs me the wrong way. And you will see the complaints on their forum (if not deleted) and other forums such as MyBroadband.
The payment is not instant. This will be the biggest issue if you are tight for money. They have made it so that all payments go through them (so they get to take their cut first), you have to request payouts before a certain time, and it comes from certain banks and takes a while to clear if you don’t bank with those banks. This can be a problem if you running tight on money. It’s not like Gumtree where the money is in your hand.
The neutrals of bidorbuy
Bidorbuy has drastically increased their fee structure in recent years, pushing their commissions on some sales as high as over 10%!!! This you have to take into consideration because it will eat into your profits. On the plus side bidorbuy has been advertising more and they have started to advertise the individual items. So if someone is searching for a Samsung Galaxy you might see ads for a Galaxy from Takealot, Cellucity and a private seller on bidorbuy paid for by bidorbuy in the hope that they will get the commission from the sale. But remember bidorbuy has to pay for every click whether or not the person will buy anything. It is not like Gumtree that can arbitrage their PPC campaigns sending cheap traffic to listings that will generate higher earnings.
This is an unpredictable business, I like to think there is a buyer out there for every product but sometimes they take a while to come. I’ve developed a “feel” with a high degree of accuracy due to doing it for so long this is no different than tacit knowledge in any industry.
Next time maybe we look at what sells better where and what to avoid.