When Steve Morrow of Phoenix, Arizona, first started hearing about global supply chain issues last summer, and the impact this could have on consumer goods over the holidays, he bought $10,000 worth of toys to sell in the secondary market.
Among them: several Lego sets, Magic Mixies Magical Misting Cauldrons, Nerf HALO Blasters, video game controllers, Cabbage Patch Kids Baby Dolls, Mandalorian action figures, Frozen Sing-Along boom boxes, five different sets of Pokémon cards, and Ken and Barbie Dia De Muertos dolls.
Morrow, who's in the process of listing these items on platforms like Amazon and eBay, is not alone in his quest to make a quick buck, said Jeff Galak, Associate Professor of Marketing at Carnegie Mellon University.
“Supply chain issues accelerated the retail arbitrage phenomenon and created new opportunities,” Galek said.
Lesley Hensell has never seen so many new resellers jump on the bandwagon in her 11 years of selling on Amazon.
“It’s not just 18-24-year-old kids. It’s stay-at-home moms, parents, retirees. They’re coming out of the woodwork,” said the co-founder of the Tinton Falls, New Jersey-based , which helps other third-party sellers grow their businesses.
With no barrier to entry, resellers get into this perfectly legal, yet increasingly competitive business, one of two ways.
Some work with teams, going store to store, city to city, and even state to state looking for items they can flip quickly. Apps help them make purchasing decisions and even calculate their potential profit.
“If they find an item they can flip for three or four times what they paid for it, they’ll buy out every unit they can find – in that store and all the other stores nearby,” said Hensell. “Little shops in small towns can be full of gems that people in large metro areas can’t find.”
“If they’re shipping the items to the customer themselves, they’ll literally list these items on Amazon or eBay when they’re standing in the checkout line," Hensell added. "And they’re not afraid to max out the credit cards because they know these items will sell instantly, giving them more capital to buy more inventory.”
Others, like 49-year old Morrow, prefer online arbitrage. “It takes a lot less time than physically driving from store to store,” said Morrow, who pays a monthly fee to access leads from so-called ‘burner groups.’ “They follow this stuff religiously.”
When Morrow’s not working at his regular full-time job as a financial analyst or tending to his and blogs, he studies sales trends using tools like Keepa, which tracks everything from pricing information to number of sellers and more.
“It also shows when Amazon is out of stock, which is the ‘gold mine’ for resellers," he said. "If Amazon is having trouble keeping something in stock, it’s probably a good item to buy (at the right price).”
The one thing all resellers have in common? “They enjoy the ‘thrill of the chase,’” said Hensell.
Plus, she added, “there is that opportunity to hit the jackpot,” particularly this holiday season, where hot toys like the cat-themed , which is all the rage for preschoolers, is now going for about four times its initial $56 price tag. And the $250 is now selling for as much as $899 in the secondary market.
“In this environment, I should make at least a 50% return on investment,” said Morrow. “My wife thinks I’m gambling, but I’m basically buying and selling data so I think of it as more of a ‘science.’”
Personal Finance Journalist Vera Gibbons is a former staff writer for SmartMoney magazine and a former correspondent for Kiplinger's Personal Finance. Vera, who spent over a decade as an on air Financial Analyst for MSNBC, currently serves as co-host of the weekly nonpolitical news podcast she founded, NoPo. She lives in Palm Beach, Florida.