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Did you really think arbitrage of used goods could be a business? I think the best thing these types of experiments do is expose pain points and inefficiencies

Did you really think arbitrage of used goods could be a business? I think the best thing these types of experiments do is expose pain points and inefficiencies that you can make businesses out of. When I was in my ramen phase of startup life (and newly married), I used to (among other things) buy clothes at local thrift stores and resell them on eBay for a decent margin. You quickly learn what brands/items sell and occasionally I'd hit gold and find a vintage Hawaiian shirt that fetches $200 (and cost $2). In the end though, you realize it's just a way to make some extra money. It's not a "business" IMO–and definitely not a scalable business. But you learn what sucks (like dealing with shipping & getting photos from a camera to eBay pre-Smartphone) and realize other people also feel that pain. That's where your business is. UPDATE: Downvotes, seriously? Read my reply down this thread. Some people on here are, frankly, ridiculous and have no clue how to engage in a meaningful discussion.

ssharp 15y ago
> Did you really think arbitrage of used goods could be a business? Yes. Some examples (depending on how loose you want to get with the term arbitrage. I'm using it as its used in this article) would include antiques/collectibles and used cars. It's obviously much better to operate in areas where 1) value is unclear and/or 2) goods may take time to sell. With those things, you can get an advantage by knowing the value and by being able to hold onto something until it sells for a proper value.
- fennecfoxen 15y ago
  Indeed. What do you people think business is? Plenty of people operate perfectly reasonable used-goods businesses of the same nature at flea markets and the like. The question for Hacker News types is whether the business is scalable (depends on the local supplies of used goods, among other things) and whether there are more interesting businesses for you to be in. Business needs to be demystified. Look at Princess Kate. Her family's business (worth millions, or billions, I forget) basically started with assembling party supplies into convenient boxes. If that's a business, anything can be a business.
zecho 15y ago
Exactly. It's a hobby, but while scaling it up is hard to do, it is not impossible. Two stories. I wrote a program awhile back that would look for iPod Touches on my local Craigslist and would analyze the price for many different versions. If an individual iPod was available and was below mean price within a given time frame, I'd send the seller a note almost immediately. Then, if I purchased the item, I'd relist it at the mean price. Completely an arb play. What I learned was that 1) iPods are easy to sell, 2) People who buy on craigslist are flaky and tend not to show up, 3) The time spent waiting around to meet people was obnoxious, and 4) Sometimes sellers see what you did with their item and send you angry emails. I never made more than a few hundred bucks, but it was an interesting experiment nonetheless. Second story: For years, my wife sold used books. She'd go to estate auctions and buy boxes and boxes of books. She'd go to library sales and buy hundreds of books. Then she'd sell them on the Amazon marketplace. She would walk into these places with a barcode scanner and would check their price and sales rankings on Amazon. If it was in a decent margin for her, she'd buy the item. This actually did scale, but she quit when it became less of a hobby side income and more like real work. She's a nurse by trade, and the book selling was never meant to be anything more than a hobby. So, I guess what I'm trying to say is that arbitrage of used goods can be a business, but it depends heavily on the availability of the supply of used goods. Books worked for my wife because she could buy dozens of them at a time and ship dozens of them them all from the post office down the street as orders came in. For me, I was running around town picking up items and dropping them off.
- fanboy123 15y ago
  Arbitrage is technically a set of simultaneous transactions where you buy and sell at the same time. Purchasing something and reselling it later for a higher price is not arbitrage. It is usually used to describe a riskless transaction.
  - zecho 15y ago
    If you want to get more precise, the benefit of simultaneous or near simultaneous transactions is reduced risk that prices will fluctuate. Arb is just an exploitation of different prices in different markets.
quanticle 15y ago
>Did you really think arbitrage of used goods could be a business? Isn't that basically the business model for antique dealers and pawn shops?
- phil 15y ago
  Yeah, but that suggests that the success condition is running a pawn shop. Probably not what you're after if you are a software startup that's just taken seed investment.
  - catch23 15y ago
    isn't ebay technically a very large pawn shop? wasn't it bessemer that passed on ebay because a company with a marketplace for used goods wouldn't amount to anything?
- callmeed 15y ago
  err, yes, and I suppose used cars too. Maybe I should have been more specific. But pawn shops don't get into YC and I doubt Cal Worthington ever raised a series C round on Sand Hill Road. Those types raise money via bank loans (if at all) and most people in the valley would call them "lifestyle businesses". My point wasn't if such businesses exist but rather if Priceonomics really thought they could form a scalable business doing this. My guess is that they didn't (again, I don't know them and I'm often wrong). Rather, I think it was more of an experiment that would expose real business problems, validate ideas, create a case study, and/or make a little extra cash.
  - Berone 15y ago
    http://techcrunch.com/2010/05/12/internet-pawn/ http://techcrunch.com/2010/05/12/internet-pawn/ Actually they do. And a business doesn't need to get into YC or get VC funded in order for it to be a real business.
  - philwelch 15y ago
    A bookstore isn't a scalable business either, but Amazon turned it into one. Do you really think there will never be an Amazon of pawn shops?
stryker 15y ago
I'm going to assume that you're not talking about the secondary market for used goods, because that can most definitely be a business. See: ebay.com. About arbitrage: I agree with you, to some extent. By definition, as more people notice the price differences and take advantage of them, the arbitrage will become less and less profitable. If you intend to build a business that will scale and prosper in the long term, you need to provide value to people and not tie yourself to short-lived arbitrage opportunities. I work in finance and that fact is plainly obvious to a lot of us. However, there is value added when you give people information. Information isn't free. Someone has to go out there and find all the prices, organize them, and show them to people. The arbitrage differential will grow smaller and smaller as competition grows, but at no point will this information be free. Given the possibility to find cheaper prices, people will pay if it's worth their while. If it's not money, at least page views.
funkah 15y ago
Stop freaking out about downvotes. They are literally just meaningless numbers on a website.
- mattm 15y ago
  Also, the upvote and downvote images are too close together. Sometimes I accidentally hit the wrong one - especially when browsing on my phone.
xsmasher 15y ago
You're right, profit tops out well before you get to "big money," usually due to limits on either supply or time. In the used clothes example you are either limited by time (I can only hit ten thrift stores in a week) or supply (there are only ten thrift stores in my area.) After that, how do you scale up?
pbreit 15y ago
Probably downvoted because 1) Priceonomics of course has never had any intention of actually buying and selling used items and 2) there are actually many examples of good businesses buying and selling used items (and, in fact, office furniture is one of them).

ssharp 15y ago

> Did you really think arbitrage of used goods could be a business? Yes. Some examples (depending on how loose you want to get with the term arbitrage. I'm using it as its used in this article) would include antiques/collectibles and used cars. It's obviously much better to operate in areas where 1) value is unclear and/or 2) goods may take time to sell. With those things, you can get an advantage by knowing the value and by being able to hold onto something until it sells for a proper value.

fennecfoxen 15y ago
Indeed. What do you people think business is? Plenty of people operate perfectly reasonable used-goods businesses of the same nature at flea markets and the like. The question for Hacker News types is whether the business is scalable (depends on the local supplies of used goods, among other things) and whether there are more interesting businesses for you to be in. Business needs to be demystified. Look at Princess Kate. Her family's business (worth millions, or billions, I forget) basically started with assembling party supplies into convenient boxes. If that's a business, anything can be a business.

zecho 15y ago

Exactly. It's a hobby, but while scaling it up is hard to do, it is not impossible. Two stories. I wrote a program awhile back that would look for iPod Touches on my local Craigslist and would analyze the price for many different versions. If an individual iPod was available and was below mean price within a given time frame, I'd send the seller a note almost immediately. Then, if I purchased the item, I'd relist it at the mean price. Completely an arb play. What I learned was that 1) iPods are easy to sell, 2) People who buy on craigslist are flaky and tend not to show up, 3) The time spent waiting around to meet people was obnoxious, and 4) Sometimes sellers see what you did with their item and send you angry emails. I never made more than a few hundred bucks, but it was an interesting experiment nonetheless. Second story: For years, my wife sold used books. She'd go to estate auctions and buy boxes and boxes of books. She'd go to library sales and buy hundreds of books. Then she'd sell them on the Amazon marketplace. She would walk into these places with a barcode scanner and would check their price and sales rankings on Amazon. If it was in a decent margin for her, she'd buy the item. This actually did scale, but she quit when it became less of a hobby side income and more like real work. She's a nurse by trade, and the book selling was never meant to be anything more than a hobby. So, I guess what I'm trying to say is that arbitrage of used goods can be a business, but it depends heavily on the availability of the supply of used goods. Books worked for my wife because she could buy dozens of them at a time and ship dozens of them them all from the post office down the street as orders came in. For me, I was running around town picking up items and dropping them off.

fanboy123 15y ago
Arbitrage is technically a set of simultaneous transactions where you buy and sell at the same time. Purchasing something and reselling it later for a higher price is not arbitrage. It is usually used to describe a riskless transaction.
- zecho 15y ago
  If you want to get more precise, the benefit of simultaneous or near simultaneous transactions is reduced risk that prices will fluctuate. Arb is just an exploitation of different prices in different markets.

quanticle 15y ago

>Did you really think arbitrage of used goods could be a business? Isn't that basically the business model for antique dealers and pawn shops?

phil 15y ago
Yeah, but that suggests that the success condition is running a pawn shop. Probably not what you're after if you are a software startup that's just taken seed investment.
- catch23 15y ago
  isn't ebay technically a very large pawn shop? wasn't it bessemer that passed on ebay because a company with a marketplace for used goods wouldn't amount to anything?
callmeed 15y ago
err, yes, and I suppose used cars too. Maybe I should have been more specific. But pawn shops don't get into YC and I doubt Cal Worthington ever raised a series C round on Sand Hill Road. Those types raise money via bank loans (if at all) and most people in the valley would call them "lifestyle businesses". My point wasn't if such businesses exist but rather if Priceonomics really thought they could form a scalable business doing this. My guess is that they didn't (again, I don't know them and I'm often wrong). Rather, I think it was more of an experiment that would expose real business problems, validate ideas, create a case study, and/or make a little extra cash.
- Berone 15y ago
  http://techcrunch.com/2010/05/12/internet-pawn/ http://techcrunch.com/2010/05/12/internet-pawn/ Actually they do. And a business doesn't need to get into YC or get VC funded in order for it to be a real business.
- philwelch 15y ago
  A bookstore isn't a scalable business either, but Amazon turned it into one. Do you really think there will never be an Amazon of pawn shops?

stryker 15y ago

I'm going to assume that you're not talking about the secondary market for used goods, because that can most definitely be a business. See: ebay.com. About arbitrage: I agree with you, to some extent. By definition, as more people notice the price differences and take advantage of them, the arbitrage will become less and less profitable. If you intend to build a business that will scale and prosper in the long term, you need to provide value to people and not tie yourself to short-lived arbitrage opportunities. I work in finance and that fact is plainly obvious to a lot of us. However, there is value added when you give people information. Information isn't free. Someone has to go out there and find all the prices, organize them, and show them to people. The arbitrage differential will grow smaller and smaller as competition grows, but at no point will this information be free. Given the possibility to find cheaper prices, people will pay if it's worth their while. If it's not money, at least page views.

funkah 15y ago

Stop freaking out about downvotes. They are literally just meaningless numbers on a website.

mattm 15y ago
Also, the upvote and downvote images are too close together. Sometimes I accidentally hit the wrong one - especially when browsing on my phone.

xsmasher 15y ago

You're right, profit tops out well before you get to "big money," usually due to limits on either supply or time. In the used clothes example you are either limited by time (I can only hit ten thrift stores in a week) or supply (there are only ten thrift stores in my area.) After that, how do you scale up?

pbreit 15y ago

Probably downvoted because 1) Priceonomics of course has never had any intention of actually buying and selling used items and 2) there are actually many examples of good businesses buying and selling used items (and, in fact, office furniture is one of them).