What I learned buying a video store, confessions of an Amazon seller

Confessions of an FBA seller who bought a video store: Approaching the two year anniversary, I share the lessons I learned driving cross-country for 3,000 DVDs.

(If you’re not in the mood for a cool story about a big score, skip to the end for the profitable lessons.)

The time: Almost two years ago.

A friend tipped me off to two friends of his whose video store had just closed in Des Moines, Iowa. And they were actively liquidating their inventory.  In fact, they had debts to pay and were getting desperate. And it was thousands of DVDs

That was everything I needed to hear. I drove to Iowa.

I did it despite these facts:

• There was no offer on the table.
• I had no specifics on how many DVDs were for sale.
• I had no direct contact with the sellers.

I just knew a video store had closed, and I was determined to own everything that was inside.

Here’s why I was so determined:

• The store was across the street from Drake University, and had a collection that appealed to a hipper, younger audience. To me, that meant money.
• The owners had gotten out of the business and just wanted to liquidate the leftovers. To me, this meant making a lowball offer they just might take.
• The volume. I’d been told, through my friend who knew the owners, that the collection was estimated to be “around” 2,200 DVDs. They also admitted they were just eyeballing it, and the number could be much lower or much higher.

Knowing only this, I drove to Iowa. I drank a lot of coffee, ate hash browns at a few trucks stops, and after many hours, arrived in Des Moines.

Viewing the collection

My friend arranged a meeting with the owners at the house where the DVDs were stored. They greeted me at the door and said “follow us.”

They took me into the basement, and there they were: box after box of DVDs. The number was definitely in the thousands. This was big. While my pulse quickened, I maintained my poker face and started the pre-deal banter.

I first asked them if this was the store’s entire inventory, or if it had been picked over by other sellers.

They explained they had been trying to sell the collection on Craigslist since the store closed two months before, but had gotten few inquiries and no buyers.

I’m going to return to the massive lesson we can draw from this later, but until then let me  just yell at the corn belt for a second: Hey Iowa – are you all asleep out there? This collection was on Craiglist for two months!

Dropping the mini-bombshell

“The only interest we had on Craigslist was from people who just wanted those,” one of them said, pointing to a giant box in the corner.

“What are those?” I asked.

“The Criterion Collection DVDs.”

Oh. My. God. In my head, I raised the amount I was willing to pay by at least $1,000.

If you know a little about film, you probably know about the Criterion Collection. They have an expertly-curated catalog of films packaged and marketed to film aficionados. They are known for their highbrow film selections (including a lot of foreign films and cult classics), their extensive and high-quality extras, and elaborate packaging (some of their DVDs even come packaged with books). If you are extremely passionate about film, and you have money, you probably own at least a few Criterion Collection DVDs.

And I was laying eyes on the largest lot of Criterion Collection DVDs most people would ever see. There were at least 100. And it’s the rare Criterion Collection DVD that sells for under $15 on Amazon. Do the math.

Off to a good start.

The art of the deal: testing my ad-lib, totally made-up, amateur negotiation moves

The collection was very impressive. It was also a massive gamble.

Even attempting to estimate my potential profit would be complete recklessness. I was looking at over 2,000 DVDs, only 5% of which I could actually see and scan. The rest were buried inside the many boxes that surrounded us.

Here’s what I could see: A lot of music-related DVDs. Cult classics. Anime. And so on. All of this was encouraging. This was, after all, a store across the street from a major university, and the collection reflected the hip and “edgy” tastes of its one-time clientel. There were all good indicators for Amazon profit.

Some of the collection. I kept the one on top because the Murder City Devils are awesome.

Have you heard of “price anchoring”? It’s this negotiating tactic used by salespeople where you get the customer to say aloud how much money your product will save them. Well I was pioneering the “reverse price anchor,” where I tell them all the ways buying this collection was going to cost me money, and all the ways it would potentially lose me money, before getting them to throw me out a price. Truth is this is probably the oldest negotiation device in the book, but it felt new to me.

“Right off the top,” I said, “85% of these won’t make me more than 40 cents.”

This was a fair estimate. There’s a glut of the majority of films on Amazon, and most are penny-DVDs.

“And these are ex-rentals, so I’ll probably have to buy a high-end DVD cleaning machine to refurbish them.”

Also true.

“So…. What were you thinking?” I said.

They looked at each other. Clearly they hadn’t talked this through beforehand.

What was going on inside my scheming head

I had already appraised this as a very high-value collection. I estimated the Criterion Collection box alone would bring in at least $1,000. And there were over 2,000 more DVDs on top of that. Maybe 3,000+.

Based on this, I was willing to pay $2,500 on the high end. I had $2,000 of that in my pocket. But I didn’t tell them any of this.

If it came to me actually offering $2,500, and they still said no, I had a Plan B. I would ask if I could be alone with the DVDs for a couple hours, scan a thousand or so, and adjust my estimate based on what I learned.

They didn’t seem to have prepared for being pressed for an amount. They went in circles for a couple minutes without giving me a number, so I changed my approach.

“You mentioned you had some store-related debt to pay off,” I said. “How much is that debt?”

They didn’t even pause.

“$1,790.” One of them said.

I took out my cash-roll, peeled off two $100 bills, and extended my hand with the rest.

“Does $1,800 work?”

We had a deal.

The logistical nightmare of owning thousands of DVDs

I’d brought a truck, but there was no way it was carrying this many DVDs. I needed to get the collection down by 40%, at least.

The guys I bought from were really cool, and we worked out a deal where I would stay in town for a couple days, scanning & listing DVDs in the basement until I could fit what was left in my truck.

This was the scene:

Problem was, these were ex-rentals, so there was an extra step: Cleaning. Nearly every DVD was visibly scuffed, and selling a DVD that skipped was the fastest way I knew of to receive negative feedback on Amazon.

I had heard people chatting on an Amazon FBA forum about the “JFJ Easy Pro Universal CD/DVD Repair Machine.” So I went on Amazon and had one overnighted to the house (thank God for Amazon Prime).

The next day it arrived and I got to work. Or I tried to. But there was one massive problem: The JFJ Pro was painfully, brutally slow. Between adding the cleaning liquid, cleaning off the DVDs, and all the back and forth, it was over a minute per disc, at the quickest possible pace. I did the math and realized this just wasn’t going to work.

I also did the math on shipping them to myself via Media Mail. That wasn’t appetizing either.

So I went to the hardware store and dropped over $100 on the two things that will get you out of most problems in life: Tape & bungee cords. Lots and lots of bungee cords.

I was going to solve the lack of truck space by taking a page from the Beverly Hillbillies playbook. I was stacking upwards.

I’ll skip my woeful tale of getting the DVDS into my truck, by myself, with the muscles of that guy from the comic book ads that got sand kicked in his face. But this was the scene when I was finally finished:

Amazon inventory, on the road

If that image above looks perilously unstable, you’re right. Somewhere outside of St Louis, I lost an entire box on the interstate. And the box held hundreds of DVDs. Picture it: Me darting in and out of traffic, grabbing armfulls of DVDs and retreating to the shoulder, watching 18-wheelers turn copies of Kentucky Fried Movie to dust while I waited for the next break in traffic. I got most of them, but this folly cost me hundreds.

It was a long trip.

Getting home and sorting the haul

Once home, I brought the entire collection into my office and started assessing my potential profits.

Right away, things were looking very, very good. I never had any doubt I would make money, but I didn’t know if it was $3,000 or $30,000. My early estimates were that this was somewhere in the middle.

Then the real labor began

The real work came over the weeks that followed. And yes it literally took me weeks.

Scanning everything. Determining what went in the “sell on Amazon” pile and what went in the “sell somewhere else” pile. Inspecting each DVD for scuffs. Setting aside the DVDs that needed cleaning.

Speaking of, none of what happened up to this point was the hard part…

The biggest challenge of all of this was something I never expected. It was the DVD cleaning. The cleaning terrified me.

This one issue threatened to eat up a huge portion of my Amazon profits. Every inquiry into companies that cleaned DVDs in bulk returned quotes that averaged about $1 per disc. This was a massive blow to my profit margins. I was desperate for a solution.

Angels come in many forms. Like guys in Philadelphia with industrial-sized DVD-cleaning machines who take trades.

About 1,000 of the DVDs definitely needed cleaning. The rest I could take my chances with on Amazon. I went onto an Amazon FBA forum and put out a cry for help.

Enter this story’s hero. Brian Freifelder of Philadelphia Media Exchange contacted me privately, with an offer: He would clean DVDs in bulk for $1 each, However, he would also give $1 credit towards this for any DVD I gave him ranked better than 100,000.

The clouds parted and angels started singing from the heavens. I had hundreds of DVDs that would net me mere pennies on Amazon. This could solve my biggest problem totally for free.

I spent days and days putting hundreds of scuffed DVDs into spindles (to save on shipping), and scanning everything to separate the DVDs I couldn’t sell on Amazon. It’s been two years and the numbers are a little fuzzy, but I think I sent Brian roughly 1000 DVDs to clean, and 700 DVDs for the $1 credit. Meaning I had this massive DVD-refurbishing job done for $300.

Major bullet dodged.

The comedy of errors continues

Buried at the bottom of one of the boxes was a smaller box, and in it were 200 DVDs without cases. I hadn’t noticed it until I got home. For a moment I considered this a nice bonus, something I could bundle and sell on eBay.

But this fanciful notion didn’t last. In a moment it hit me: My last move before leaving Iowa was throwing away a another box of DVD cases. Empty cases. 200 of them.

Do you see where this is going?

Back in Iowa, I’d noticed the empty cases and asked the guys I bought them from what the story was. They told me they weren’t sure, but that they’d lost the DVDs that were inside and weren’t charging me for those. I only took the box out of the basement as a gesture of politeness, and promptly threw the box in a dumpster behind the Hy-Vee grocery store.

This was easily a $1,000 folly.

I’ll go ahead and wait for you to stop laughing at me…

Back to business: My pricing and listing formula

Here’s what I do when I know I’m at least tripling my money on a haul no matter what: I price high. Really high. I get really, arrogantly bold with my pricing.

Now I always price high with my Amazon FBA offers, but I priced outside even my comfort zone. If an item had a good Amazon sales rank (better than 100,000), I didn’t even care if I was the lowest FBA offer. I’d go for second or third-highest, knowing it didn’t matter if it paid off or not. I would probably make my money back on this whole collection in two weeks, making the rest gravy, so I could afford to be bold. And if certain DVDs weren’t selling, I could always lower the price later.

With DVDs ranked worse than 100,000 on Amazon, I aimed to match the lowest Amazon FBA price. Unless it was stupidly low (like only $3.99 above the lowest merchant fulfilled price), in which case I’d match the next FBA price, or go $7 to $9 above.

Worse than 200,000, I’d price a flat $3.99 above.

And if a DVD would bring me less than a $2 payout, it went in the eBay lot pile. Messing with $1 DVDs would take over my life if I let it. So I deemed them trash and moved on.

That was my formula.

Profits? There’s no reason to dance around this issue…

The collection was a goldmine.

First, I’d been told it was “around” 2,200 DVDs. When I actually counted, it was a hair over 2,900. That’s 30% more than I thought I was getting.

The quality was insanely high. 75% were giving me a net profit of more than $2. Go to a thrift store and tell me if 75% of the DVDs there will bring more than $2. No way.

Oh, I didn’t even talk about the box sets

There were two massive boxes that contained nothing but box sets. Hundreds of them. You wouldn’t even believe it. TV shows, movie collections, Simpsons box sets shaped like Homer’s head… It was just about everything you can think of. Major, major money.

Tragic sidebar

In a cruel irony, I owned more DVDs than almost anyone on earth, and I didn’t even watch movies. Seriously. I’ve probably seen less than 50 movies in the last 10 years.

Of the nearly 3,000 DVDs in my possession, in the end I kept six of them. Six.

(And now, two years later, I’ve watched exactly two of the six. Cannonball Run and the documentary about the metal band Anvil, if you’re wondering.)

It would be irresponsible to claim a realistic profit estimate, but…

I easily brought in $15,000 on Amazon off this collection. And two years later, they’re still selling.

Story over. Now the lessons.

Lesson #1: Expect the unexpected

Of the Rolodex of perils when making a big buy like this, the biggest obstacle ended up being something I never anticipated: The DVD cleaning. And it almost ruined me. Expect the unexpected.

Lesson #1.5: Don’t attempt cleaning 1,000 DVDs by yourself.

You need professional help.

And if you’re an Amazon seller and are ever in this situation, get in touch. I’ve got a guy.

(His name is Brian Freifelder of Philadelphia Media Exchange, but saying “I got a guy” sounds much cooler.)

Lesson#2: There are massive amounts of Amazon inventory sitting right out in the open. All you have to do is take it.

Of all the lessons here, this is the one with the broadest (and most profitable) implications. Amazon sellers, pay close attention.

The sellers in Iowa had this DVD collection on Craigslist for two months. I want to scream at the entire Midwest right now. A $15,000+ DVD collection, on Craigslist, for any Amazon seller to see, for two months.

No buyers. None.

And let’s just set aside the Amazon sellers in Des Moines being totally asleep at the wheel. I’m going to call out Amazon sellers in Chicago, Minneapolis, Omaha, St Louis, and several other massive cities I can’t think of now who are in short driving distance and also totally missed this. I was twice as far away from Des Moines as all of them, and I still made the trip.

To recap – In two months not a single Amazon seller from Chicago (population: One bazillion) bothered to look at the Des Moines Craigslist. Not one Amazon seller in Minneapolis bothered to look at the Des Moines Craigslist. Same for the Amazon sellers in St Louis, Omaha, and so on.

Would you drive 6 hours for $15,000? Apparently, this math is not appealing to people in the corn belt.

It’s not fair to single out any one region of course, I’m just saying this to drive home a point: Your Amazon selling / FBA competition is so incompetent, they can have $15,000 dangled in front of them and not even see it.

This should be an extremely empowering lesson.

Lesson #3: There’s money in the leftovers

Even in your “trash,” there is a lot of money to be made.

I talked about getting a $1 cleaning credit for about 700 DVDs. That’s like getting $700, right off the top.

I ended up with a couple hundred more DVDs my cleaning guy wouldn’t take, which I divided by genre and sold as lots on eBay. That was another $100+.

And I did the same with the case-less DVDs, which brought in even more.

Lesson #4: DVDS are a volatile category. In a good way.

I told you how I priced the DVDs arrogantly high. And after the passing of two years, I can report a useful observation.

I watched a lot of DVDs get under-priced over time by other FBA sellers, to the point that my FBA offer was often 5th, 6th, or 10th down the list. Then later – sometimes many months or a year later – that DVD would sell.

I noticed DVD prices are a lot more volatile than book prices. When I see an Amazon FBA seller underprice one of my Amazon FBA book offers, I usually lower my price to match it (high-ranked books excluded). With DVDs, I find those lower Amazon FBA offers sell out at a much higher rate. This all depends on demand for a particular title of course, but the point remains that a much higher percentage of DVDs on Amazon sell high volume than books.

This is somewhat of a complex point, but stay with me: There are just over a million DVDs (&VHS)  for sale on Amazon, and nearly all of them have sold at least a single copy. Compare this to books, where there are 50 million on Amazon, and only 15 million (less than 1/3) have sold a copy.

Prices simply fluctuate much more wildly with DVDs. Meaning if you don’t have the top FBA spot on Amazon, you can rest more soundly knowing you will reclaim it again before long.

Because of all this, I have largely a “hands off” approach to repricing DVDs on Amazon ranked better than 150,000, and I think my bottom line is much better for it.

Lesson #5: A good goal is better than a good plan.

I had no solutions for all the obvious problems in buying a collection of this size (chief among them, that I had no idea how I was getting thousands of DVDs back home), but my goal trumped all of them.

In other words, when you have a strong enough “why,” the “how” takes care of itself.

Lesson #5.5: Related lesson – Driving through the night to Iowa with no promise of a payoff is a good approach to doing business

In other words: Big risks, big rewards.

I drove to Iowa pretty much blind, with only a flimsy hope this would pay off. But I knew the potential payoff was huge, so I took the risk. And I got the reward.

Unrelated Endnotes

1) I have a series of emails I’m sending out over the next week you may want to read, with some cool material and an offer that’s only going to people on the FBA Mastery email list (none of this will go on the website).

Here’s a hint: my mom started selling on Amazon, inspiring me to put together a Christmas gift for her. It was so much work, and cost so much money, I decided to make a few more of this mystery gift just for my extended Amazon FBA family. Get on my list and all will be revealed in two days. Go here.

2) Check out the new project from Ryan Grant (of Online Selling Experiment) called “Online Selling Reviews,” and go leave a review of my books here.

3) For a very short time, my friend Jordan Malik is giving away his (awesome) book  “The FREE eBay Products Worth Thousands that You Can Sell Today” on Kindle, starting tomorrow (Tue 11/25), through Thanksgiving. It’s normally $7. And he’s just doing it because he’s a nice guy. His books are consistently awesome, so pick this one up (and go over to his site Honest Online Selling and get on his email  list).

Bonus gangster negotiating tip:

When you’re about to make an insultingly low offer, have the cash visible when you spit out the number. It’s like casting a spell.