Interesting - thank you! And Happy New Year to you all!
Adventures in Aeron Chair Arbitrage
101–110 of 111 posts
Re: Adventures in Aeron Chair Arbitrage
#102Earlier quoted context omitted.
Yes, but (value) - (price) still decreases. Higher prices are not good for the buyer, as should be obvious.
"The buyer" isn't necessarily constant. Suppose Alice values a widget at $100 and Bob values it at $200, and also that Alice spends much more time on Craigslist than Bob. If you sell a widget for $75 then Alice will probably buy it, which results in less consumer surplus than if you sold it for $150.
Buyers have different motives. As do sellers. Mismatches are common, and when people make a trip to someone's residence to look at product in question (as thru CL), the deal, typically goes through, leaving mismatched feelings about the deal.
Re: Adventures in Aeron Chair Arbitrage
#103Earlier quoted context omitted.
I got a few where people were mad that I simply re-listed their item at a higher price than they sold it for. I'm sure they felt duped for undervaluing their product in the first place. As binarysolo pointed out in this thread, some sellers feel they need to urgently sell their items, so they under-price. I'd could afford to wait for someone to pay my asking price.
Instead of being angry that they didn't maximize their profits, could it be that the sellers were _offended_ that someone would maximize profits with their possessions? I can imagine a couple reasons: 1) The Toy Story 3 plot: people want to find a home for their possessions with people of similar interests. They become angry that you are reducing the consumer surplus that would have gone to the ultimate buyer. 2) The…
> could it be that the sellers were _offended_ that someone would maximize profits with their possessions?
Friend of mine does the whole estate sale book thing, too. People have definitely gotten upset when they realize what the scanner is for.
Re: Adventures in Aeron Chair Arbitrage
#104Earlier quoted context omitted.
> searching, inspecting, paying (cash), storing inventory, selling, shipping, etc. So Amazon was never a scalable business? Or netflix? You don't have to be sitting around a kitchen table selling nothing but bits for it to be scalable business.
I have no idea whether you have a point that you're getting at. Amazon wasn't profitable for a long time and only scalable because of massive investments. They don't buy used goods and resell them. Same for netflix. His main argument is that the acquisition of items for resale is not scalable, because you are dependent on people to supply used goods. You cannot make the market provide more used goods to meet demands.…
The list I quoted all applies to selling new goods, too. It's very strange to assert that it's not scalable to procure, sell, and ship goods at a profit when the bulk of business growth in the past 20-30 years has all involved those activities. (Apple included--their engineering and design are no doubt important, but their success is built on a strong operations backbone.) His main argument didn't look anything like the argument you paraphrased.
My point is that it's folly to try and argue this particular negative. I'm not so confident it's impossible to scale reselling of used goods when there's been so much growth in optimizing operations processes.
Re: Adventures in Aeron Chair Arbitrage
#105Earlier quoted context omitted.
I'm not sure I agree with the description of arbitrage as "riskless". The arbitrageur is accepting the risk that the arbitrage opportunity will go away in between the buy and the sell. This is true whether you're arbitraging salt via caravans across the Sahara or arbitraging currencies in millisecond trades.
It's the idea of simultaneous transactions that makes it riskless. Whether millisecond forex trades can be modeled as "simultaneous" is another question.
Yep. Also have counterparty risk. Just because you have a contract for a purchase and a sale doesn't guarantee that the transactions will go smoothly.
Re: Adventures in Aeron Chair Arbitrage
#106While making a sweeping statement about such business models not working, I guess the op failed to take notice of Gazelle.com, which has been in operation for 3 years now, has raised $46.4M in total with the last round being a series D of $22M. And guess what their business model is, arbitrage on used electronic products. So safe to say, such models can and do work.
I also believe that these models will increasingly become more mainstream, because they save people 'time', time which is increasingly becoming the most precious resource that we have. You save 2 hours of time for someone, and pay him $40-50 dollars less than craiglist or ebay, and I am sure you can find a large percentage of people for whom the opportunity cost of 1 hours is more than $20-25, and voila, you have customers.
Re: Adventures in Aeron Chair Arbitrage
#107The variance you are exploiting in this arbitrage setup is a result of the inherent variance in information about the chairs, i.e. uncertainty. Since they are used, there is lemon's principle at work. You can argue that Aeron's don't really depreciate in quality that much though over time so that variance in unjustified and in fact there should be some exact market price (perhaps as a function of time used, or more simply just dependent whether its used or new). But the thing is, more likely than not, that variance IS justified. Some of the chairs may be less broken than others. Some of the sellers may be less dependable than others. You can of course condition on this stuff - pick the low price chairs and mark them up by being the most dependable supplier, vouch for the chairs, become an expert in the chairs and be better at out the lemon's, but those things all add cost, so NOT doing all that work is already priced into the market. But cool experiment nonetheless! I have also found that I can buy a used Aeron, use it for a few years, and sell it back for like the same price. Not really a quickly depreciating asset .... maybe better than the stock market the last few years ...
Re: Adventures in Aeron Chair Arbitrage
#108Earlier quoted context omitted.
I have no idea whether you have a point that you're getting at. Amazon wasn't profitable for a long time and only scalable because of massive investments. They don't buy used goods and resell them. Same for netflix. His main argument is that the acquisition of items for resale is not scalable, because you are dependent on people to supply used goods. You cannot make the market provide more used goods to meet demands.…
The list I quoted all applies to selling new goods, too. It's very strange to assert that it's not scalable to procure, sell, and ship goods at a profit when the bulk of business growth in the past 20-30 years has all involved those activities. (Apple included--their engineering and design are no doubt important, but their success is built on a strong operations backbone.) His main argument didn't look anything like…
True, it does, but it's entirely different still. "searching, inspecting" are just different with used goods. For one, "searching" involves finding out whether there is anybody who can provide any goods, not whether there is a supplier who can give you as much product as you need. You cannot find a supplier in China to build you more used Aeron chairs. Apple and Amazon have wildly different options in that area.
Secondly, "inspecting" may boil down to a similar process of QA, but I think it should be obvious that assuring quality in a production process of new goods is a very straightforward thing while for used goods, you probably need a new process with every supplier you find.
And I agree that there is an astonishing growth in optimizing any kind of operations process. However, that still doesn't increase supply. This cuts back to his main argument: "grow revenue without costs growing proportionally". If you have a finite supply of used Aeron chairs, acquisition of the remaining chairs becomes increasingly hard - up until the point where there aren't any, anymore.
So yes, I added the argument of finite (if only temporary) supply, but it was only to extend his argument of proportional growth of cost. And yes, there is room for optimization and that may be sufficient to keep a business afloat - certainly if they are flexible with their inventory - but there are still natural limits to such a business, and that makes all the difference in the world.
Re: Adventures in Aeron Chair Arbitrage
#109Earlier quoted context omitted.
The list I quoted all applies to selling new goods, too. It's very strange to assert that it's not scalable to procure, sell, and ship goods at a profit when the bulk of business growth in the past 20-30 years has all involved those activities. (Apple included--their engineering and design are no doubt important, but their success is built on a strong operations backbone.) His main argument didn't look anything like…
True, it does, but it's entirely different still. "searching, inspecting" are just different with used goods. For one, "searching" involves finding out whether there is anybody who can provide any goods, not whether there is a supplier who can give you as much product as you need. You cannot find a supplier in China to build you more used Aeron chairs. Apple and Amazon have wildly different options in that area. Seco…
The entire retail business is already constrained by demand. No one is demanding that "scalable" mean "scalable without bound".
For most durable goods there's a never ending supply of used goods already; the supply of new goods a couple years later. Once you solve the business problem of building a good funnel for used goods to come into your operation, you can probably boost or create resale value for used goods, indirectly pressuring the original suppliers.
Re: Adventures in Aeron Chair Arbitrage
#110Earlier quoted context omitted.
He said they only worked for about 3 hours. Even if you take out $75 for the GF subsidy (being generous and assuming she gets an equal share), each guy made $25/hour, cash (i.e. ~$30-$35/hour pre-tax), which is >3x what they'd get at a fast-food joint. Now of course, one does need to take into account the fact that they're restricted in spending their loot on beer, which they are obligated to share. From a short-term…
Wouldn't the $25/hour still be taxable? (I understand that nobody pays taxes on small cash amounts, but if we're considering its viability as a business it seems unfair to compare one option with tax evasion and one without.)
Definitely true, but the tax evasion is made possible by the nature of the work (i.e. it's not an option at all in the fast food job)