One of the things that I struggled with a lot when I started was how to price secondhand items effectively. In my opinion, price is actually one of the key reasons for the growth and for the downfall of the online selling business.
If you’re new to online selling and if you’re struggling in pricing your merchandise then read on. I’ll share with you some tips on how to price secondhand items effectively.
Why Is It Important to Price Your Items Effectively
The main reason why we get into a business is of course to profit. That’s the honest truth about setting up a business.
We need to sustain ourselves and our business so that we can continue doing the business. If we don’t profit, then we will just stop doing it and go back to being employed.
If online sellers do not profit enough to sustain themselves, their families, and of course their business, then they will stop doing it and consumers will be limited again to big brand retailers.
The challenge though is, big brand retailers, have the financial capacity to order in bulk, thus lowering the overall cost of the item. They’re very much capable of lowering the selling price if needed (thus – Mall Sale).
It’s something that we, as online resellers have to live with.
The price of our merchandise is one of the key determinants of our success.
If we price the item too high, then we will be just eaten up by the competition. Consumers will not buy our items because they will be perceived as expensive.
If we price the item too low, then we might not be able to recuperate the cost of operating the business and might close the business sooner than later.
How to Price Your Secondhand Items Effectively
Understand Your Business Expense
When pricing your secondhand item, there are many variables at play. But before you start pricing an item, you have to understand the cost that you have to recover for an item/batch of items.
Personally, I do consider this heavily when pricing my items. Some of the costs that you have to think about include (but are not limited to):
Business Expenses A
- The acquisition cost of the item – This is the actual cost of the item bought from your supplier/other sellers.
- Additional cost incurred in acquiring the merchandise – Did you commute/drive to get to the store? How much did your transportation cost?
- Cost of Prepping the Item – This may include, laundry, dry-cleaning, steaming/ironing of clothes, leather cleaners and conditioners, and packing them for storage.
- Cost of Listing an Item Online – If there’s any.
- Cost of Receiving a Payment – Depends on your payment method
Business Expenses B
- Equipment and Tools for Online Selling – This may include a mannequin, camera, tripod, lighting, backdrop, packaging materials, shipping materials, other tools that you may need (lint remover, fluffs remover, etc).
- Storage Equipment – This may include clothes bin, clothes cabinets or drawers, bags and shoe shelves, garment bags, etc.
- Labor Cost/s – Do you have any staff that you have to pay?
- Tax (Will vary per country)
If you can notice, I have divided the expenses into two parts. Business Expenses A are the things that I need to consider to understand how much I will need to break even for the cost of the item (plus prepping the item for posting online). Bear in mind that I did not include what I would be paying myself yet.
This is just the very basic computation on how to break even from processing an item. Processing means the cost of getting an item from your supplier onto your online selling platform/s.
Business Expenses B are the thing that I need to consider in the mid/long term. These are basically investments or additional costs in my business that I need to recover in a mid/long term timeline.
These ‘investments’ were also not bought right away, but rather, they were bought gradually as the business grew. For example, you don’t need storage bins or cabinets if you just have an inventory of 50 shirts in your first three months. Your personal cabinet might be enough or probably, one storage bin will be enough for this size of inventory.
Please bear in mind that the variables might vary depending on your choices, but this will give you some idea. Also bear in mind that this is just base on my experience and might differ from yours.
Anyway, now that you have an idea of what your basic business expense looks like, you can now proceed in pricing your items.
Things to Consider When Pricing Your Items
Prevailing Market Prices
The prevailing market price is one of the main things that I personally consider when pricing my items. This is the prices of the items in the online selling marketplace or basically, this is how much your competitors are selling similar items for.
For example, if you have a simple, non-branded, high-quality non-branded black dress, just check your preferred online selling app, like Carousell and eBay, and check for how much they’re being sold for. Try to identify the lowest and the highest price that you can see online to see the range.
Let’s say the range for that kind of item hovers around P199 – P499, then you can price your item within or slightly lower or slightly above that range.
In my opinion, this is probably one of the best ways to price your item. This will also serve as your guide when buying your merchandise too.
Brands, Rarity, Novelty, Other Factors to Consider
Another thing to consider in pricing your item (while still keeping the prevailing market prices) is, of course, brands, rarity, novelty, etc of the items that you’re selling.
In my experience, this is one of the rare times you can price your merchandise a bit higher than usual.
By the way, please bear in mind that ‘rare’ might be a relative word to use because there are items that are rare in one location but not rare in others.
But there are also items that are ‘rare’ in any location such as vintage runway pieces from the most coveted fashion designers in pristine condition.
Personally, I still use the prevailing market price in making a decision with my prices for these kinds of items. But instead of just considering the local market prices for these items, I do factor in the international market price, especially for the ultra-rare pieces.
Contrary to popular belief, high-quality vintage (and even newer) designer pieces are really hard to come by nowadays. It’s really difficult to find one at thrift stores probably because a lot of people know these brands already.
Your Business Operation Expense and Target Profit
Of course, another thing to consider is your business expense and your target profit. However, this is part of the bigger picture though.
You can’t just use this independently without considering the prevailing market prices. This is actually one of my early mistakes in online selling which I will discuss below.
My Early Mistakes in Pricing My Items
Selling Too High by Using my Business Expense as the Core Consideration
Of course, the business expense and other overhead cost is an important factor to consider when pricing your items. However, one of my early mistakes is using it as my main consideration and have not considered the prevailing market price that much.
The effect was that I was eaten alive by the competition. My items were selling so slowly and I was buying expensive merchandise because I was using the wrong pricing benchmark.
What I did to correct this mistake is to continuously build up my inventory by buying cheaper merchandise with higher quality. By doing this, it sort of diluted the average cost of my merchandise on a per-item basis.
I also intensified my knowledge of brand items thus, I found more items that I could sell for a higher price. It then absorbed my losses from my early purchases.
Selling Rare Items Too Low
Now that I have a better understanding of fashion merchandising, I have realized that I have sold a lot of rare pieces in the past for a very low price. It’s now some sort of a ‘professional regret’ hahaha. I would have held on to those instead of selling them for a very low price.
There were certain items that I have never seen (even once) in the market again. So that meant, I probably was the only one who has that item in my location.
Pricing your merchandise can be a very tricky thing to do especially when you’re just starting out. There are just too many variables to consider.
However, to be able to price your secondhand items effectively and to sell them real fast, you have to consider what the market is willing to pay for such items.
At the end of the day, the market will dictate the price, and as online sellers, we will have to adjust accordingly by continuously looking for cheaper supplies and by constantly lowering our overhead costs without sacrificing the quality of the products and services that we give to our customers.
How about you? Do you also sell secondhand goods online? How do you price your items effectively?