Hi All,

I want some advise on reselling used cell phones. Where do all the phones the public trades into Apple, Big box stores, or at the carrier store go? There's a company that triages and put the phones back in the US market. The company auctions off lots of the used phones based on their "grade".

The buyers would then resell the phones. I want to be one of those buyers. I have the connections to be able to buy the phones. I understand the pricing, but need help with re-selling the phones to the end-user.

I could wholesale (wouldn't know where to start) and just be a middleman, but I feel it's more profitable to sell the phone to the end user. Give me your ideas as to the best channel to market/sell the phones. eBay, Amazon etc..?

What about wholesaling to an emerging market. How do I identify and develop the relationships to export the phones to countries with a larger secondary handset market? Lastly, how do I figure out which phones are the most in demand. I don't want to end up with a lot of slow-moving inventory.

LET'S MAKE SOME MONEY!

So for clarification purposes, you know nothing about the industry but you want in?

In NYC, when I list iPhones on Craigslist, I get 2 or 3 buyers within a day offering nearly identical prices that "Buying" ads offer. I strongly suspect they are buying for resale. That's on a local small business/solo scale. The profit margins from what I saw weren't high but they don't seem to have a problem moving iPhones. I see a lot of faded Samsung boxes walking around NYC though.

On a larger scale you're competing directly with Apple's iPhone trade-up program, Gamestop, and Verizon's upgrade program.

This is just from the perspective of a consumer regularly upgrading and having to dump old iPhones.

Your main issue with reselling to the end user is testing and warranty. You gonna soak test every phone for battery life? Your gross might be better, but it will take a lot more time and give you more hassle than selling to the trade.

You bring up good points. I have those bases covered: I'm purchasing the phones wholesale from the company that triages them (water tests them) and gives them a "grade". This company is where Apple and Verizon send their phones-- they've already contracted "residual" values, as they are the supply chain fulfillment company that does both the forward and reverse supply chains.

Their grading process won't be perfect, but I'll offer a 30 day warranty as that's what the competition is offering.

I'll only be purchasing A or B grade phones. A grade is "like-new" while B grade would be a floor model with regular wear/tear.

My tactics would be staying away from iPhones, because the competition is very high, thus low margins on resale market-- Apple products hold their value well.

The less prestigious phones have reasonable margins. For example, a Moto X Pure can be purchased for $155 and sold for ~$200 if it's A grade. The GS6's and 7's margins are smaller, but not razor thin like Apple products.

I might go ahead, and list them on Amazon for a couple dollars less than the competition, and see if it'll move the phones. Going to put in my first purchase order for 50 phones. I'll put them on Amazon/Ebay and price them a couple dollars less than the market.

50 phones isn't a lot, but it's only a $10k investment which should be turned around in month. This business should scale well, but I prefer to keep the purchase orders under 6 figures.

I'm more interested in coming up with creative sales solutions that would improve on what the competition is doing (e-commerce). Some ideas I've been kicking around are exporting to BRIC countries to wholesale, loading the phones with ads and undercutting competition, or acting as an affiliate for a carrier (no idea if that's feasible). What creative sales solutions can BFI come up with?

If your best deal is buying at $155 and selling at $200 you're pretty thin for selling on eBay.

Fees will be ~$12
PayPal ~ 8.00

So your $45 gross just got cut to $25

Is the competition offering free shipping? If so then another few bucks just went south.

How much are you factoring in for guarantee claims, fraud and refunds?

If you only have genuine returns and a 1.5% return rate then your $25 per phone is now $22 without return shipping.

But people will 'borrow' phones, they will break them and claim a return under guarantee, they will decide they don't like the product or it didn't do what they thought it would, they will try to steal from you. This costs in return shipping, sunk costs in outbound shipping, time and aggravation.

Let's allow another 1.5% for errors, fraud and general ignorance. Your $22 is now $19.

And that's on your best margin phone.

Any sales taxes to pay?

How much per phone in packing materials? Again, are you offering free shipping?

How long does it take to unpack your shipment, test, list on eBay, answer questions, pack and send out the phones? Not to mention dealing with after sales issues.

My point is, you might be risking $10,000 on a business that will AT BEST earn you maybe $15/hour. Before taxes.

Your $10,000 returns $1,000 before taxes.

You'd be way better trying to earn a lower percentage and ship the whole lot to the trade if such outlets exist imo.

G & T nailed most of the problems you'll have. Consider who your customers will be. You'll mostly be selling to teens, poors, & scammers. Is that really a demographic you want to cater to?

I've heard many times that selling things like phones, games, and other electronics is as much about getting paid, reducing chargebacks and not selling to scammers as it is about your product. It doesn't sound like your margins account for that.

Are you already selling on Amazon and Ebay? Being a few dollars cheaper probably won't give you an edge over sellers w/ years of successful transactions & extensive feedback history. I've never sold in electronics on Amazon but I believe that's a category that requires approval and might even be restricted. There are plenty of items Amazon won't let you sell and phones seems like it might be one of them?

One of the oldest rules in retail is selling at a minimum of 2x markup. Buying at $155 to sell at $200 is a sure way to work for free.

Agh, you guys make good points. I just thought I had an edge, but $25 margins w/o chargebacks isn't gonna get me the profits I expect.

I'll keep grinding my day job and stocking away money in R/E.

Thanks for your help guys.

Like others pointed out, you don't have good enough margins to sell online. Your best bet would be to sell locally using craiglist/facebook/etc. You won't make a lot of money, but if you meet with people on your lunch breaks or downtime it would be a relatively easy small side income. You might also get lucky and run into someone trying to resell them, then you could just sell directly to them.

I do loss prevention for a mobile company. I'm somewhat new to the role (2 months), so I don't know the entire process of what happens to returned phones. One of our functions is ensuring retail locations are sending phones that have been returned to retail locations to corporate so we can get credited back. I have no idea what happens to the phones though. I always assumed they would be sold in bulk to a middle man in Asia or Africa. That's just a guess though. I've never been to either of those places so I don't know if people are walking around with iPhones.

Seems like the eBay/Craigslist route is just too much work for no money. If you could someone be a middle man that sells in bulk, there might be something there.