The Money Mustache Community

Learning, Sharing, and Teaching => Investor Alley => Topic started by: yolfer on December 19, 2012, 03:16:41 PM

Title: Price Arbitrage? (i.e. Importing from China)
Post by: yolfer on December 19, 2012, 03:16:41 PM
Has anyone tried something like this:

http://www.startupbros.com/step-by-step-guide-on-how-to-find-a-profitable-product-to-sell/

Seems similar to being a landlord in a few ways (hard work at a good income, if you do it right). Also sounds too good to be true.

I like how you can start with very little money invested and grow the business at the rate that fits your lifestyle.

Anyone have experience or thoughts?

(PS: There's a good reddit discussion about that link in the FI subreddit: http://www.reddit.com/r/financialindependence/comments/1504wq/step_by_step_guide_on_how_to_find_profitable/)
Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: kudy on December 19, 2012, 05:45:37 PM
I talked for a bit with a local guy who does this... he follows fashion trends: hair feathers & other weird products, imports them, and sells online.  The hard part for him is staying in front of the trend, and not getting stuck with a bunch of inventory after it's gone.  I think he's made quite a lot of money, and with some clever web marketing and positioning it could be easy.
Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: Another Reader on December 19, 2012, 06:35:32 PM
There are a lot of successful businesses based on this premise.

Here is a blog I have read for years.  This guy started out as an engineer turned real estate investor.  He found importing and selling stuff to be much more profitable.

http://www.livelearninvest.com/

This blog was recently referenced in another blog.  I just glanced at it briefly so I can't really comment on it.

http://mywifequitherjob.com/our-story/

Both folks are Chinese.  I think family connections there may have made it easier to connect with reputable manufacturers.
Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: arebelspy on December 19, 2012, 09:06:10 PM
http://www.livelearninvest.com/

+1.  After reading the OP, this immediately sprang to mind.  I've also read it for a few years, and have seen him develop it into a more serious business (move it out of his house into renting space, hiring people, etc.)

Definitely go back and read the history of that blog to learn a lot.

The thing is, it's a business.  It's a job.  It's not passive income.  It's another way to work.

When I was in college, my roommate and I make quite a bit of money (think: six figures ish in several months) doing an eBay business with essentially this premise.  So I know how it is.

And that is why I'd disagree with this:
Seems similar to being a landlord in a few ways (hard work at a good income, if you do it right). Also sounds too good to be true.

Having done both, I can say that rental income isn't that much work.  Landlording for an SFR takes maybe 1 hour per month on average (usually maybe 10 minutes per month median, then the mean is dragged up to an hour per month in the vacancy months where you spend 10 hours due to turnover, getting the unit rent ready and advertising and showing it).  And it's a lot easier to outsoource (via property management company).

An import/export business (for lack of a better phrase) is a business, a job, that can be full or part time depending on how much you put into it, but vastly more work than rentals.

IMO, YMMV.
Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: yolfer on December 20, 2012, 02:09:06 PM
Thanks, everyone!
Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: chucklesmcgee on December 27, 2012, 03:13:45 PM
Importing from China not arbitrage. To nitpick, buying a product for less and then selling it for more is not necessarily arbitrage, as you're assuming the risk of having to sell the product, that prices could change, demand may not exist, etc. Arbitrage requires an essentially risk free transaction.

Getting started with my chemical company I was lucky enough to be in an arbitrage setup. I was able to arrange for a purchase of chemicals with a buyer already lined up to purchase at 5 times my purchase price. Payment was to be on net-30 terms, that is I wasn't expected to pay my manufacturer until 30 days after receipt of my product. If I sold to the buyer, I made money, if my buyer backed out and I couldn't pay, well, what are the Chinese going to do?

That said, very few manufacturers will do that sort of pricing for obvious reasons. Still, buying and reselling products can be a great way to make a lot of money if you know your market. Start small and establish yourself and build up from there.

Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: yolfer on December 27, 2012, 05:42:53 PM
Importing from China not arbitrage. To nitpick, buying a product for less and then selling it for more is not necessarily arbitrage, as you're assuming the risk of having to sell the product, that prices could change, demand may not exist, etc. Arbitrage requires an essentially risk free transaction.

Getting started with my chemical company I was lucky enough to be in an arbitrage setup. I was able to arrange for a purchase of chemicals with a buyer already lined up to purchase at 5 times my purchase price. Payment was to be on net-30 terms, that is I wasn't expected to pay my manufacturer until 30 days after receipt of my product. If I sold to the buyer, I made money, if my buyer backed out and I couldn't pay, well, what are the Chinese going to do?

That said, very few manufacturers will do that sort of pricing for obvious reasons. Still, buying and reselling products can be a great way to make a lot of money if you know your market. Start small and establish yourself and build up from there.

Wow that sounds too good to be true! Can you do a little write-up about how you got started in this business? Sounds pretty mustachian.
Title: Re: Price Arbitrage? (i.e. Importing from China)
Post by: chucklesmcgee on December 28, 2012, 12:16:24 PM
Importing from China not arbitrage. To nitpick, buying a product for less and then selling it for more is not necessarily arbitrage, as you're assuming the risk of having to sell the product, that prices could change, demand may not exist, etc. Arbitrage requires an essentially risk free transaction.

Getting started with my chemical company I was lucky enough to be in an arbitrage setup. I was able to arrange for a purchase of chemicals with a buyer already lined up to purchase at 5 times my purchase price. Payment was to be on net-30 terms, that is I wasn't expected to pay my manufacturer until 30 days after receipt of my product. If I sold to the buyer, I made money, if my buyer backed out and I couldn't pay, well, what are the Chinese going to do?

That said, very few manufacturers will do that sort of pricing for obvious reasons. Still, buying and reselling products can be a great way to make a lot of money if you know your market. Start small and establish yourself and build up from there.

Wow that sounds too good to be true! Can you do a little write-up about how you got started in this business? Sounds pretty mustachian.

Maybe some day.