Retiring Soon - open speculation

[redcell]

30 minutes ago, dennugsmello said:

What can us non Amazon sellers do to survive? From what I understand new sellers cannot sell LEGO on Amazon, correct?

I've been an Ebay seller for a while, mainly out of print boardgames, which has similarities to LEGO reselling. High demand out of print games for example. Over the last year I have diversified into LEGO, and now have a hearty supply of sets. I was considering staking claim onto a Wal-Mart third party store? Might that be a good idea for those of us who missed the Amazon store train?

Amazon is a key to survival only if you have a business model that is reliant on Amazon.  The key to survival as a general matter is to align your business model and business practices to the platform that you're selling on.  

[Frank Brickowski]

5 hours ago, redcell said:

This is one of the best things about reselling Lego.  Last year I sold 290 different sets, lost money on 7 of them, and had a profit margin greater than 100% on 98 of them.  

But that profit margin of 100% wasn't accomplished in 1 year, right? I'd say it's only legit to talk about the gained percentage in relation to the years that passed between buying and selling, at least if you'd like to be able to compare the whole thing with other investment opportunities.

[Guest TabbyBoy]

Allow me to define the UK meaning of margin...

A 100% margin means, for example, you got the item free and sold it for £50. A 20% margin means you paid £40, a 50% margin £25 and so on. Markup is the correct term if I'm permitted to be a little pedantic ?

[dx0520]

13 minutes ago, TabbyBoy said:

Allow me to define the UK meaning of margin...

A 100% margin means, for example, you got the item free and sold it for £50. A 20% margin means you paid £40, a 50% margin £25 and so on. Markup is the correct term if I'm permitted to be a little pedantic ?

Isn’t markup the price you list above its cost, and margin the net profit you make?

It’s the same %, but the terms refer to before and after aspects of the sale.

[redcell]

56 minutes ago, Frank Brickowski said:

But that profit margin of 100% wasn't accomplished in 1 year, right? I'd say it's only legit to talk about the gained percentage in relation to the years that passed between buying and selling, at least if you'd like to be able to compare the whole thing with other investment opportunities.

Actually, it was.  I may have held a few of those sets for more than 18-24 months, but, with few exceptions, what I sold in 2017 had been purchased in 2016-2017 with the vast majority being purchased between August 2016 and February 2017.  

[redcell]

8 minutes ago, dx0520 said:

Isn’t markup the price you list above its cost, and margin the net profit you make?

It’s the same %, but the terms refer to before and after aspects of the sale.

At the end of the day, it doesn't really matter...the essential point I was trying to make was that I lost money on a handful of sets and made a crap-ton of money on a much larger group of sets.  Although some may disagree, my view is that, once you get the market somewhat dialed in, it is not particularly difficult to have more winners than losers year over year.

[Guest TabbyBoy]

28 minutes ago, redcell said:

At the end of the day, it doesn't really matter...the essential point I was trying to make was that I lost money on a handful of sets and made a crap-ton of money on a much larger group of sets.  Although some may disagree, my view is that, once you get the market somewhat dialed in, it is not particularly difficult to have more winners than losers year over year.

Of course... £s in > £s out = £s to buy more. Even though I've moaned about Star Wars, Elves & IDEAS have certainly made up for it.

I even accept selling say, a £30 buy-in set for £40 if somebody buys 20 of them within a week of me buying and there's no packing to do.

[therisingend]

Isn’t markup the price you list above its cost, and margin the net profit you make?
It’s the same %, but the terms refer to before and after aspects of the sale.

Not quite right...markup is the amount a product is selling at over cost. Margin is sales minus COGS. Markup shows profits as it relates to cost while margin shows profits in relation to revenue. The two numbers will be diff.

I.e. I just sold a Horizon Express for $215 (which is also what I sold one for two years ago right after retirement ). I bought in at $130.

Markup = ($215 - $130) / $130 = 65.38%
Margin = ($215 - $130) / $215 = 39.53%

Markup makes sure you're generating revenue on sales and Margin shows the actual profit you made on the sale.

Accountant here I'll answer anything else you have. And to get it out of the way: no I'm not a masochist and yes I generally do like accounting




Sent from my iPhone using Tapatalk

[dx0520]

14 minutes ago, TabbyBoy said:

Of course... £s in > £s out = £s to buy more. Even though I've moaned about Star Wars, Elves & IDEAS have certainly made up for it.

I even accept selling say, a £30 buy-in set for £40 if somebody buys 20 of them within a week of me buying and there's no packing to do.

That’s actually a great sell.

Most people don’t understand that paying 600 and selling for 800 within a week is loads better than paying 600 and waiting for a year to make, let’s say 1200.

Time value of money people, basic economics.

Granted, it assumes you reinvested your profits, and continued with 15-30% margin turnaround per week, and kept that rolling...which is amazing.

 

[Sozial]

2 minutes ago, dx0520 said:

Granted, it assumes you reinvested your profits, and continued with 15-30% margin turnaround per week, and kept that rolling...which is amazing.

 

in the world of lego that is highly unlikely. with stocks you can, but lego is illiquid.

[dx0520]

4 minutes ago, therisingend said:

 

Not quite right...markup is the amount a product is selling at over cost. Margin is sales minus COGS. Markup shows profits as it relates to cost while margin shows profits in relation to revenue. The two numbers will be diff.

I.e. I just sold a Horizon Express for $215 (which is also what I sold one for two years ago right after retirement ). I bought in at $130.

Markup = ($215 - $130) / $130 = 65.38%
Margin = ($215 - $130) / $215 = 39.53%

Markup makes sure you're generating revenue on sales and Margin shows the actual profit you made on the sale.

Accountant here I'll answer anything else you have. And to get it out of the way: no I'm not a masochist and yes I generally do like accounting




Sent from my iPhone using Tapatalk

 

That margin calculation makes absolutely no sense to me as it relates to how margin is typically understood to be.

Maybe you accountant types are just weird, no wonder you guys have terms like “cooking the books”...lol

[Val-E]

But is it better to spend VIP points during 2X VIP???

[dx0520]

1 minute ago, Sozial said:

in the world of lego that is highly unlikely. with stocks you can, but lego is illiquid.

Maybe not weekly, but there’s a sizable deal at least once per month on average. If you can capture those deals and then turn it around quickly for 15-30%, which is feasible, this is still way better than investing and waiting a year to offload, to make what? 40-60% at best?

If I continue with just 15% per month turnaround and kept reinvesting, I’d earn more on a year than someone buying in and waiting a year to offload at even 80%. The compound earnings is simply greater.

[therisingend]

 

34 minutes ago, dx0520 said:

That margin calculation makes absolutely no sense to me as it relates to how margin is typically understood to be.

 Maybe you accountant types are just weird, no wonder you guys have terms like “cooking the books”...lol

Apologies I don't mean to come across harsh but that's how it goes and you should definitely be looking at both numbers separately if you're in this big time or have your own business.  Markup helps you calculate sales price taking into account the costs to purchase or produce the item. This is useful so that you sell at a higher price than what you bought the goods at.  

However, margin helps determine profitability.  Let me see if I can layout my other example better using round numbers:

I bought Horizon Express for $100.  We mark it up by 50%, so the sales price is $150.  I sell it for $150.   

If you're looking at the financials of your business, your income statement will show income of $150, and cost of goods sold (COGS) of $100.  Gross Profit is $50 ($150 income - $100 COGS), which is a gross profit margin of 33%. 

I need to know gross profit margin so that I can take into account other variable expenses - such as overhead and the like, and make sure those expenses are covered by a profit margin of 33%.  If I had variable expenses in the 40% range, I would be losing money.  If I had used the markup method for profitability and had the same % of expenses (40%), I'd think that I was still okay.  

Hope that makes more sense to you.  Margin is much more useful when talking about the profitability of your business.  Using markup as a profitability tool can lead you on the path of being in the shitter.  Always look at gross profit margin when making sure you're running in the black.

Let me know if that helps out!

[Ed Mack]

58 minutes ago, Sozial said:

in the world of lego that is highly unlikely. with stocks you can, but lego is illiquid.

Speaking of stocks, after today...LEGO is a better investment than stocks.  Just sayin'...

[Legojona]

56 minutes ago, dx0520 said:

Maybe not weekly, but there’s a sizable deal at least once per month on average. If you can capture those deals and then turn it around quickly for 15-30%, which is feasible, this is still way better than investing and waiting a year to offload, to make what? 40-60% at best?

If I continue with just 15% per month turnaround and kept reinvesting, I’d earn more on a year than someone buying in and waiting a year to offload at even 80%. The compound earnings is simply greater.

In the Netherlands they would see it as income with so much work behind it and charge you 30-50% on the profits.

[Legojona]

4 minutes ago, Ed Mack said:

Speaking of stocks, after today...LEGO is a better investment than stocks.  Just sayin'...

Except when you bought a MF at RRP...

[dx0520]

9 minutes ago, therisingend said:

 

Apologies I don't mean to come across harsh but that's how it goes and you should definitely be looking at both numbers separately if you're in this big time or have your own business.  Markup helps you calculate sales price taking into account the costs to purchase or produce the item. This is useful so that you sell at a higher price than what you bought the goods at.  

However, margin helps determine profitability.  Let me see if I can layout my other example better using round numbers:

I bought Horizon Express for $100.  We mark it up by 50%, so the sales price is $150.  I sell it for $150.   

If you're looking at the financials of your business, your income statement will show income of $150, and cost of goods sold (COGS) of $100.  Gross Profit is $50 ($150 income - $100 COGS), which is a gross profit margin of 33%. 

I need to know gross profit margin so that I can take into account other variable expenses - such as overhead and the like, and make sure those expenses are covered by a profit margin of 33%.  If I had variable expenses in the 40% range, I would be losing money.  If I had used the markup method for profitability and had the same % of expenses (40%), I'd think that I was still okay.  

Hope that makes more sense to you.  Margin is much more useful when talking about the profitability of your business.  Using markup as a profitability tool can lead you on the path of being in the shitter.  Always look at gross profit margin when making sure you're running in the black.

Let me know if that helps out!

You’re making it more complicated than it needs to be. 

We’re talking about LEGOs, and to many resellers it’s a casual endeavor. When people say “cost”, or at least when I said it, it’s not just what you purchased it at, it implied all costs, including handling costs, shipping costs, and eBay/amazon costs.

So essentially, it’s exactly as you described it.

It would have been better to just ask me what I meant by cost. 

People on here are more well-versed in costs and profit compared to the average person, so it’s often sufficient to state things in simplicity for much of the implications are understood.

[Grynn]

3 minutes ago, Legojona said:

Except when you bought a MF at RRP...

Be patient, QFLL 5005747 ftw

[therisingend]

4 minutes ago, dx0520 said:

You’re making it more complicated than it needs to be. 

We’re talking about LEGOs, and to many resellers it’s a casual endeavor. When people say “cost”, or at least when I said it, it’s not just what you purchased it at, it implied all costs, including handling costs, shipping costs, and eBay/amazon costs.

So essentially, it’s exactly as you described it.

It would have been better to just ask me what I meant by cost. 

 People on here are more well-versed in costs and profit compared to the average person, so it’s often sufficient to state things in simplicity for much of the implications are understood.

Not at all - some of us are bigger sellers that sell more than just Lego and actually have to file tax returns.

[dx0520]

2 minutes ago, therisingend said:

Not at all - some of us are bigger sellers that sell more than just Lego and actually have to file tax returns.

True, inventory costs, taxes, etc.

But my point still stands, I lump those under costs, especially in casual conversation, it’s implied here.

[ravenb99]

Where the f is the mop when you need him

[carini26]

7 minutes ago, ravenb99 said:

Where the f is the mop when you need him

I can think of a super easy way for you to get this topic back on the rails.

[therisingend]

I think you're right in that most people don't understand the terminology and just equate it both as gross profit.  If you're talking to someone in business though, they will not refer to it as the same thing that you are doing here.  I'm just trying to help you understand the terminology that comes with running a business, if you should choose to go that route.  

1) I buy Lego for $50, sell for $200.  Markup is $150, or 400%.  

2) I buy Lego for $150, sell for $300.  Markup is $150, or 200%.  

SO, 

1) Gross Profit = $150, Margin is 75%, Markup is 400%

2) Gross Profit = $150, Margin is 50%, Markup is 200%

Markups can be higher than 100%.  Margins cannot.  Hope that helps in understanding the terminology. 

Most companies and sellers will tend to set an acceptable margin rate in order to turn an overall profit and make sure they can stay solvent.  You'll try to price your goods around that margin.  If I set mine at 50%, then I know that any product I need to sell should be priced around 50%.  If I'm looking at Lego investments I need to know that 50% margin will cover my expenses so I should spend money on sets that will net me that margin.  

If I buy an item for $200, I know that I need to sell for $400 in order to hit that margin.  If I buy an item for $50, I know that I need to sell for $100 to hit the margin.  If I buy an item for $25, sell at $50.  It's making sure you are using your money wisely.

Sorry to take up the retiring thread with accounting stuff @ravenb99 but I think it's useful to know for people getting into the business side of things.  Thanks for the questions @dx0520

So that WV Station is retiring right?? Haha...

Edited December 4, 2018 by therisingend

[33Lego]

math