Good grade refurbished goods e-commerce business

[questioner1289]

Hi All,

I have recently come across what I believe to be a excellent business opportunity, but would like input from anyone willing to spare me some of their time.

I met a supplier through my work, who handles returned goods from major manufacturers, which includes washing machines, telephones, printers, computers, graphic cards, essentially everything you can think of related to technology except server hardware and the more enterprise level expensive stuff, and I would like to start a business to sell these goods both in a brick and mortar on a busy high street shop as well as well as online through a web application e-commerce site.

He said he can do parcels of items of my choosing which I can select from him, but there is a minimum order which has to be met ( which is quite a high price, and it is quite a lot of product by the sounds of it, I will also need a company otherwise he will charge VAT also ). I have enough capital to buy a large parcel of goods, and have spoken to people on the high street near me as to how to get me a shop, where I will store and display these goods, and I will design the website myself.

What are the challenges I would be facing for this business idea? Is it too broad to sell everything technology related?

I understand marketing will be a big one and have set a budget (about the same amount as the parcel could be which is in the mid-five figure range), I believe what would separate me from my competition is that I could potentially sell high quality goods for far less than they would find in the high street and online. I have also considered providing a warranty, but I am confused as to how I would fix said item for cheap enough and to a good enough degree to make providing said warrantee viable.

SEO/PPC/user monetization will also be a major expense, as the website will need to gain traction, and marketing can be the biggest expense in the beginning.

What else should I consider before progressing with this idea?

What other things should be given more thought?

Is there perhaps something I should slow down on and give more thought to?

Thank you in advance.

 

[Paul Kelly ICHYB]

You have hundreds, if not thousands of competitors.

The big issues are warranty, returns and insurance.

 

[DontAsk]

Do you really have the skills to test such a wide range of goods, before selling them on?

I will also need a company otherwise he will charge VAT also ).

That's nonsense. If HE is VAT registered he will charge you VAT, regardless of your status.

If YOU are VAT registered you can offset the input VAT (that you pay him) against your output VAT (what you collect on your sales). The difference is a payment to or claim from HMRC.

You do not have to form a company, you can be VAT registered as a sole trader.

There are good reasons for/against Ltd v. sole trader and VAT registered/not VAT registered.

I think you need to do a lot more research.

 

[questioner1289]

You have hundreds, if not thousands of competitors.

The big issues are warranty, returns and insurance.

Is that not the case with most sectors?

Some couriers provide insurance for goods sent via them in transit. Where would you suggest I should look for the best warranty cover for products as a business.

 

[Paul Kelly ICHYB]

Not transit insurance, product liability!

 

[questioner1289]

Not transit insurance, product liability!

How would I go about mitigating this? Any pointers will help.

 

[questioner1289]

Do you really have the skills to test such a wide range of goods, before selling them on?



That's nonsense. If HE is VAT registered he will charge you VAT, regardless of your status.

If YOU are VAT registered you can offset the input VAT (that you pay him) against your output VAT (what you collect on your sales). The difference is a payment to or claim from HMRC.

You do not have to form a company, you can be VAT registered as a sole trader.

There are good reasons for/against Ltd v. sole trader and VAT registered/not VAT registered.

I think you need to do a lot more research.

Thank you, you are correct on this issue of VAT, with that said, what would be more cost efficient for a business in it's beginning stages, to set up as a sole trader, or as a ltd company? I would like to reinvest most of the earnings in the first couple years to allow for growth.

What else should I do more research on?

Thank you

 

[questioner1289]

Do you really have the skills to test such a wide range of goods, before selling them on?

Ah! I did not consider that part, is it possible to hire a product tester for a part time basis to ensure the products are up to a good standard, and learn the basics from there onwards?

 

[fisicx]

How are you going to compete with this:

https://www.amazon.co.uk/Amazon-Warehouse-Deals/b?ie=UTF8&node=3581866031

Or this:

Marthill International - UKs biggest ex-catalogue stock, discount pallet traders

Marthill are one of the worlds largest suppliers of ex-catalogue,surplus,clearance, customer returned stock direct from catalogues,high street stores

www.marthill.co.uk

Or any of the others all doing the same.

Or even places like CEX

So while it might seem like a great idea it's not a cheap business to set up and market.

 

[Frank the Insurance guy]

Hi @questioner1289 ,

You really need to put a business plan together to make sure its financially viable. It will also help you put together a "to do" list of things you need to consider.

From an insurance point of view, insurance companies do not like 2nd hand electronics. Therefore it will not be cheap and will be subject to every single item being tested and certified etc as being safe. It looks like you do not have the skills yourself, therefore you will need to employ or outsource this.

I remember years ago, i had a client who had set up a new business taking 2nd hand white goods from the manufacturer. Within 18 months they had shut the business down as not profitable!

 

[MJD12]

Ah! I did not consider that part, is it possible to hire a product tester for a part time basis to ensure the products are up to a good standard, and learn the basics from there onwards?

Are you buying already refurbished products or customer returns?

If already refurbished can you not get a warranty from the supplier?

If they're customer returns and you need to test and repair them, what does that additional cost do to your profit margins?

The big retailers have started to sell refurbished goods, how do your selling prices compare to them?

The products you've mentioned will need a lot of floor space, on a busy high street.

The financial risk vs reward in this case doesn't seem worth it.

 

[MJD12]

Ah! I did not consider that part, is it possible to hire a product tester for a part time basis to ensure the products are up to a good standard, and learn the basics from there onwards?

Are you buying already refurbished products or customer returns?

If already refurbished can you not get a warranty from the supplier?

If they're customer returns and you need to test and repair them, what does that additional cost do to your profit margins?

The big retailers have started to sell refurbished goods, how do your selling prices compare to them?

The products you've mentioned will need a lot of floor space, on a busy high street.

 

[BubbaWY]

I met a supplier through my work

WHat happens if your relationship with this supplier breaksdown? I.e. are you/your business going to be solely reliant on it?

 

[Scalloway]

what would be more cost efficient for a business in it's beginning stages, to set up as a sole trader, or as a ltd company? I would like to reinvest most of the earnings in the first couple years to allow for growth.

Starting as a sole trader might be best. If things don't work out then you just stop. A limited company involves a lot more paperwork and you will need an accountant.

 

[Paul Kelly ICHYB]

However, in this field, where one issue can cost millions, you would get some protection with a limited company that would be worth the admin stress.

 

[IanSuth]

Are you buying already refurbished products or customer returns?

If already refurbished can you not get a warranty from the supplier?

If they're customer returns and you need to test and repair them, what does that additional cost do to your profit margins?

The big retailers have started to sell refurbished goods, how do your selling prices compare to them?

The products you've mentioned will need a lot of floor space, on a busy high street.

The issue will be if you are buying as a business you will get no form of warranty you can pass on to a consumer

There are specific laws covering the safety of electronic devices sold to the public - that is why many charity type places will not touch low end electrical. The cost of testing a toaster could be more than they get for it

It is that difference of B2B or B2C which both creates the niche the OP thinks they have seen and the dangers/costs of competing in it

 

[questioner1289]

I would like to thank everyone for their input and also for correcting me. I guess I got a bit excited and a little too carried away when spotting this opportunity. I clearly did not do enough research. With that said, is there a person I could consult with to discuss the viability of this business, who has experience with refurbished products businesses? It seems I really need to make a to-do list to even begin thinking about this. As of now, the input from everyone has made it very clear I am way over my head, with little to no experience in this market, it would make it incredibly difficult.

 

[Mark T Jones]

Specific to B&M; you need to understand (at a basic level) the ins and outs of leasing commercial property. If you proceed, you definitely need to reinforce that basic knowledge with solid and legal advice.


Selling online, you need to be familiar with distance selling regs. (Or whatever the current term is)


Plus of course the whole warranty thing.

Given that this is really just an exploratory thread - and a good one - I'd suggest that you get hold of a cashflow forecast template and start to populate it with numbers. That's an extremely effective way to understand the many aspects of running a business (particularly a B & M business)

 

[fisicx]

@Mark T Jones makes a very point about property leasing.

You will need a decent sized warehouse with decent access and probably a loading bay. Then a testing station able to cope with wide range of products. Then maybe customer access, will be easier to market a local business than it would online.

Then you need staffing costs, insurance, delivery vehicles, utilities and marketing costs.

It’s all doable, there are two local businesses doing just this. They supplement the returns part with house clearance so also sell loads of furniture.

 

[fisicx]

And don’t forget fraud. People buy new and return broken items. And there is a growing market for fake goods. A popular one is HDD which look original but just have a flash drive inside with a couple of bolts to give it weight.

 

[DontAsk]

And don’t forget fraud. People buy new and return broken items. And there is a growing market for fake goods. A popular one is HDD which look original but just have a flash drive inside with a couple of bolts to give it weight.

And the ones that claim infeasibly high capacities for the price.