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A Peek Inside My Newest Venture

by

Cereal Galore

 

Can anyone guess how many boxes are here?  How about how much I paid for each?  One thing I always preach to friends and family is there is one sure fire way to make $100 extra a month.  And that is to save $100 from the money you already have.  Like Hope, who will find an extra $30 a week from cutting out soda in her life.  And Ashley, who found a way to cut her car insurance and save money.  For me, I like to coupon.

Personally I spend between $300-$500 a month and I get at the very least $1200 worth of products each month.  Most of the time it is like $1500-$1800.  This picture alone retail value is at least $560.  That is going off that they are $4 a box.  So this new business venture you ask?

Arbitrage!

Now I won’t go into detail about this for I will be have an introduction post to this on my blog when it launches (which is one month away!  eek, gad),

Someone asked me why I wasn’t planning to increase my pay if one of my ventures panned out, this is the reason why.  I want to be able to able to put in all the money I make off this venture back into the business to be able to increase my inventory quickly and steadily.  Now this isn’t to say that I won’t take the money once I get to a point, but I haven’t made it a goal to do just yet.

Now I might get criticized about this, and I am prepared for it.  I do plan to add to my emergency fund, hit debt head on, but I won’t let this hurdle stop my entrepreneur spirit.  I won’t go into more debt from it, for I swore I wouldn’t use any cards to fund this project.

I was thinking about doing a weekly update on my own personal shopping trips and what I got and for how much.  If anyone is interested in seeing this let me know in the comments!


39 Comments

  • Reply gloria-victoria |

    Buying groceries in big quantities is only as good as you ability to eat them before they go bad or bugs get into it. I tried this but found I could not eat, drink or otherwise use such ‘great deals’ before my family got tired if eating that thing.

    It did not matter to them that I got 57 pounds of hot dogs free. They did not want to have hot dogs in any incarnation 2-3 times a week to eat them up. This happened time and time again. As soon as I found a ‘cracking deal’ they would suddenly decide that they really did not like !!!!!! so much. Now I buy all thing in moderation and only enough to last the 12 week cycle that the grocery industry has.

    • Reply Jim |

      It all depends on the product Gloria. Personally I bought myself 20 additional boxes for myself, One box lasts me 3 days, and I eat cereal about 5 days a week. You are right about getting only what you can use. I have a price book and an inventory spreadsheet of what exactly is in my stockpile. There are many things that I keep more of, I have a year supply of both laundry detergent and toilet paper.

  • Reply Joe |

    I would make sure that you’re conservative about the true value of the goods you’re purchasing. For instance, is that cereal in the picture really worth $4 a box? (I don’t know). It seems like it might be difficult to find people who will pay $4 a box when the grocery store is selling them for half-price pretty regularly (at least where I live).

    At least with food it’s always an option to eat your inventory, although just thinking about eating all of that cereal gives me a stomach ache! (My twelve year old self would have been ecstatic).
    If you get stuck with 200 boxes of laundry detergent instead, that could be a problem!

    • Reply Jim |

      You are totally right about this Joe, but there are many reasons why people would in fact by this even more than $4. The place I am doing this, does all the heavy lifting, it even have items ranked. Like for instance I know the one box of cereal is ranked 30,000ish in grocery. Anything under a certain rank sells great. I have already sold two 4 packs of this, and for a great profit. After they took their cut out of it, I made close to $34. Now this doesn’t take into account of what I paid for the item or the shipping. But if I sell two more multipacks of these I will be in the black.

      • Reply CanadianKate |

        Explain the numbers to me…

        Two four-packs sounds like 8 boxes to me. You made a profit of $34. So that is $4.25 per box profit.

        That just doesn’t sound right to me especially in the grocery business where margins are so low. Of course, perhaps your definition of packs may be different of mine, and you are talking about two batches of 4 cases each (with 8 – 12 boxes of cereal in each case.)

        If not, this sounds like a scheme where they reel you in with great profits to begin with and when you invest more and more in the program, they make off with your profits.

        • Reply Jim |

          It might not sound right but that is the way it is. And let me ask you something you think Amazon, the world’s largest retailer is going to ripe you off?

  • Reply AS |

    What is the competitive advantage here? If you are getting these items via couponing, can’t everyone else?

    It seems like the hope is that you can create a secondary market for food and household items, but with less convenience than the grocery or superstore or Amazon?

    Plus someone is going to have to pay for shipping if you sell to anyone not local, which will eat into your margin or cost advantage.

    • Reply Jim |

      No AS, not everyone can get these deals. Now around me, yes they very well can do this, but I will not be selling these around me.

      There you have it AS, that is the thing with less convenience than those three stores. But here is the kicker I am partnering with Amazon. And with partnering with them the consumer will be able to get this with free shipping with Prime. Now granted it cost me $54 to ship 150lbs of product to three fulfillment centers around the US. But when I sell just 4 of these multipacks, I have made my money back. And as I stated I have already sold two of them.

      • Reply CanadianKate |

        I see on Amazon that I can buy the Mini Wheats for $3.69 a box ($3.51 if I have a standing order.) Of course that’s as an add on with $25 of other goods but still affordable.

        With your shipping charges, their cut, and your original cost, how much a box are you really making?

        • Reply Jim |

          Actually Prime went up so you would need $35. And yes you are right Kate, now look at the 4 pack multipack. And I don’t mean four cases, 4 actual cases. No scheme, I know many people doing over $100k a year in sales with Amazon FBA.

          • Jim |

            Here is the link for it. http://www.amazon.com/gp/product/B00406XSHW

          • CanadianKate |

            My question is that if I can easily find, on Amazon, much cheaper deals than the one you linked to, and others have found much cheaper deals through other online retailers, who would buy through the link you pointed to?

            As far as I can figure, only incredibly lazy/stupid people. And building a business based on lazy/stupid people as your customer base doesn’t sound like a good business plan. First, because they don’t have money for long so while they may mess up once, they aren’t likely to do it again. And secondly because it is ethically wrong to take advantage of those incapable of making good decisions.

          • Jim |

            There are many reasons why they would buy. Free two day shipping, they don’t have the time to go shopping, they can’t get to the grocery, etc.

  • Reply Joe |

    Also, please keep track of your return on investment including time. Right now you can make a 15+% return on investment with no time investment at all by taking your $300-500 and paying off your debt. The couponing will always be there, so I don’t see any opportunity cost in not starting immediately…

  • Reply CanadianKate |

    It will be interesting to see where this is going.

    I have huge ethical issues with this. For each box I see there, I see someone, trying to cut her budget, who couldn’t get a good deal at the grocery.

    If these are being sold to low income people, I also have a problem with the quality of food resold.

    The poor just can’t seem to catch a break when it comes to groceries. Both my kids have experienced it. They’ve given up owning a car and live in urban areas so they can use transit but use me to take them on buying trips in the suburbs where staples cost them 1/3 less.

    I see it as well when I travel – urban grocery stores are much more than suburban. I’m planning to move to an urban area and know my local store (huge chain, big store, within a short walk) is a good 20% more than suburban stores so I’ll be taking the car out at least once a week in order to keep my food budget lower. I can do that, because I have a car and the time; this isn’t an option for most working poor.

    Your ‘stock’ has a shelf life so you’ll have to move it quickly. I hope you are paying attention to best before dates.

    Finally, there’s the extra in housing costs to have room to handle your stock and how much time and other expenses (gas, opportunity cost – which as others have pointed out is significant due to the interest rate you are paying on your debt)

    So both from a practical and ethical point of view, I look forward to seeing how this plays out.

    • Reply Jim |

      There is no extra cost, so far I have only bought from stores I normally go to, and at the times I have gone there. I am not using my personal income money, but my business income, so there is no extra costs. It might be cost me debt money that I could pay myself, but if I did pay myself that money I would be paying a good bit on self employment taxes as well. My business holds money for ventures just as this one.

  • Reply Jim |

    Joe, there really is no more time added, unless I start doing arbitrage in other stores that I don’t shop at. Plus I do have the time if I decide to go that route. When you are trying to get something going, you usually have one of two things, money or time. Most of the time it is the time that you have plenty of when starting out.

    That $300-$500 isn’t what I am going to be throwing at the business. That is my personal grocery monthly spending. I stated in comments before that I don’t take the full amount of money out of my business that I can. This money will be used for the most part.

  • Reply Sandra G |

    I coupon personally for my own family. We have saved a ton of money! We used to stop at the store on the way home every day after work and would think nothing of spending $60 per day on groceries. We both work at the same company and were laid off one winter and had to do something to curb expenditures and groceries is what we chose. I converted my husband, now he tells me when we are out of something and asks me if it is on sale or if I have a coupon on it. We hardly ever run out of pantry or personal hygiene items anymore and we save tons of money!

    • Reply Jim |

      There is very few things I run out of as well. Usually it is an item that I didn’t have in the first place. Have you used a price book to know when exactly it will go on sale?

      • Reply Sandra G |

        I have not used a price book, from what I see it takes a lot of time to compile. I know it would work great after I finished it, I just don’t have the time, I barely have the time to clip and file all the coupons. I work up to 12 hours a day, sometimes 6 days a week.

        • Reply Jim |

          Understandable… You could just start with products you most regularly buy. Even if that is a list of 10 products.

  • Reply Mary |

    When I first got married, I couponed at the grocery store and averaged a 40% reduction between coupons and store sales. I also shopped around prior to picking my main store, to see what store saved me the most money on the items that “I” bought regularly. Back then, I shopped to save money. That was thirty yeas ago.

    Today, I shop for good health. I make everything from scratch, purchase mostly organic (50% on a normal week and 75% on a good week) and we eat good, healthy food on a budget. My son was born with major health issues and I changed his life with a blenderized diet made from whole foods. I eat the same things, just not blended. I try not to purchase anything in a box and would never eat a box of cereal with all the high fructose corn syrup and genetically modified corn and other ingredients, even for free. There is a health cost to all of that so even if it were “free”, a person would pay with their health. Certainly everyone can choose how to feed their family and how to make money but for me, eating good, healthy food is important. My son uses a feeding tube and all of those infant/adult formulas have corn syrup as the first or second ingredient. They are nothing but junk even if kids are healthy. Eating well takes some effort at the grocery store and some effort at home to cook the foods but it’s worth it. Tonight my son will go with his Dad until Tuesday morning so I am making 14 meals from scratch (includes the 3 he’ll eat today). I bake all of my own bread (since there is high fructose syrup in bread too!) too. Today alone, I’ve cooked 5 items plus I am making these meals. I rarely use grocery store coupons because there aren’t coupons for produce or good foods, just processed foods. I do however use internet coupons when I purchase material goods, just not food items because it’s junk. For my family, health is important, not only in the food we purchase but how I cook the food. I have eliminated items with BPA in my kitchen and use only glass, stainless steel or cast iron for cooking. No Teflon or aluminum. I use mostly natural cleaning products and eliminate as many toxins in our home. That’s how we live and it feels good. I also am proud of what I do for my son and the gift of good health that I give him and myself.

    As you pay off your debt, you may want to step back and look at your vision of the big picture. What is your goal for your family? Is it to be a financially secure, to be healthy, to provide for college or a secure retirement? Only you and your family can decide that. I just don’t think that eating and/or selling junk food is very good for anyone’s health.

    • Reply Jim |

      That is great to hear Mary… We eat good (remember I have a culinary degree), yes we eat some things in the box. We have done 30 freezer meals in one day already, and I have also started to make my own bread. There isn’t any high fructose corn syrup in this, but there is rice syrup.

      I see your point, but the fact of the matter is that I am the only one that eats this cereal, and that is because I get up at 430 every morning. My family usually have a hot breakfast waiting for them when they get up.

  • Reply hannah |

    When I got married 4 1/2 yrs ago I also learned to coupon to save money. Back then it was relatively easy to get cheap packaged junk food ( cereal, pancake mix, hamburger helper, cookies etc) with coupons and sales.
    Then couponing hit tv and those extreme couponers ruined it for us normal folks. Now coupons are few and far between, the value has drastically dropped, and the sales are not near as good.
    I have to lay the blame at couponers who buy up mass quantities of coupons and clean off grocery shelves, so they can resell product at a profit.
    So, I have to highly disagree with your business, based on the damage it does to normal people trying to save with one or two coupons.

    That said, I no longer use coupons on packaged food. I quickly learned that all that packaged food is junk and it catches up with you.
    Now I buy whole food, meat, dairy, vegetables, fruit, nuts – and the best quality I can afford. I eat healthy, my family eats healthy and we are better off for it.
    Sure you can eat cheap on junk, but you’ll also feel like junk. Feed yourself quality food and you’ll feel the difference.

    I have to heartily agree with Mary, she is bang on.

    Food is not something to be purchased as cheaply as possible. Rather you need to view it as fuel for your body – fuel that needs to be full of nutrition and health, so that your body can stay healthy.

    • Reply manda |

      hannah, I agree with you. The way I save money at the grocery store, because I buy Real Food, is by buying bulk (steel cut oats, popcorn, nuts, rice, beans, etc.) and shopping the sale for that week. Whatever is on sale that week is what we eat for dinner. Because I shop the Co-op it’s smaller so I know the average price of my squash and Kale and lettuce. Whatever is on sale I buy and we eat that week for dinner.

  • Reply Jim |

    But here is the problem in your logic Hannah, I spoke with managers at two different stores and they specifically ordered me these. So on the last day of the sale I went there and bought them when they came in with the truck the day before.

    I have never said where the bulk of my savings on coupons were coming from. My family eats hearty meals 5-6 days of the week.

  • Reply SammieK |

    Hi Jim, just wanted to say that so many people have come back at you with reasons why you shouldn’t do this and that, but I think doing something is better than doing nothing!

    My fiancée was in the Australian Army for 7 years (we’re both Aussies living in Toronto for a year) and he always says doing nothing is the worst thing you can do, you need to make a choice and commit to it 100%. Yes there’s the possibility that the above venture might not make you as much money as you hoped, but there’s also the chance you will make a lot of money 🙂

    Keep up the good job and remember – haters gonna hate, lol.

    • Reply Jim |

      Hey Sammie!

      Thanks for the great advice… Even if I don’t make the money I am hoping for, I can still make money, doing what I love to do and that is being an entrepreneur. While yes about 90% of the people here think I should get a “real job” I know I would die slowly on the inside.

      Once again thanks!

  • Reply Kiki |

    I am very interested to see how your business plays out. I am always fascinated by the entrepreneurial spirit!

  • Reply Meg |

    I think I’d just buy from Walmart. Way cheaper there. http://www.walmart.com/ip/Kellogg-s-Original-Frosted-Mini-Wheats-Cereal-36-oz/25875665

    • Reply Jim |

      You are very right about this Meg, but there are many people out there that will buy from Amazon, for many various reasons. (Which might just be another post)

  • Reply ECD |

    I say go for it! I would start slowly and make sure that you are able to make a reasonable profit for the time and effort you put into this project. I am very interested to hear updates on how it goes – maybe not weekly, but at least once a month. Good luck!

    • Reply Jim |

      Thanks for the advice ECD… from everything I am learning about FBA, they said starting out you want to make a 100% ROI, and so far I am just doing what I normally would do with grocery shopping.

      Finding the deals, then looking if it would be worth selling on Amazon. So far the only thing that really stood out to me is the cereal. But I have sold 3 of them so far. So 1 more and I will be a few dollars in the black.

  • Reply CanadianKate |

    Here’s my last post on this. I promise!

    Found this article.

    http://www.startupnation.com/start-your-business/plan-your-business/third-party-sellers-need-to-rethink-theamazon-fba-program/

    The circumstances are different to yours but chilling and could also apply to you.

    The scariest part, they bankrupted this person for something he didn’t do.

    “Once your product is at FBA, they’ve got you. Amazon can raise fees on you, which they have done, and they can even implement fees that didn’t even exist when you sent them the items….

    For the love of all that’s holy, NEVER agree to use Amazon’s co-mingling program. If you do, my situation proves that you are liable for other sellers products, not Amazon.”

    All it takes is for one co-mingled box of food to be contaminated and you are legally responsible, whether or not you provided the box. Think about the huge liability risk you are exposing yourself and your family to.

  • Reply Jim |

    This has makes the rounds every three months, there are many things that came out after this was posted.

  • Reply Angella |

    I also say go for it. Doesn’t hurt to try it out if you’re not going further into debt for it, right? In 2008 I was into couponing big time. We had been trying to conceive, so I was stocking up on diapers and wipes left and right. Finally we figured we wouldn’t be able to have children, and I sold all of it, at a HUGE profit. (Of course just a few months later I ended up pregnant, ha!) There are definitely deals to be had, and I got sucked into it for awhile, even reselling deals.

    I can see both sides of this. I loved the deals and making money from them. However, when we moved and were tight on money, I couldn’t find any deals, yet we came across yard sales with people reselling those coupon-bought items for double/triple what they paid and it killed me.

    With that said, I’m definitely interested in weekly updates on your deals! Especially groceries – those are always a budget buster for me. Also, for those Amazon-naysayers, I know a LOT of people who purchase their groceries on Amazon! But as a seller on Amazon you do need to be careful. I sell on there for work and we’ve been screwed over a lot.

  • Reply Frugal Soldier |

    I am really curious to see how your new venture works out. I wish you the best. I love the quote about the best way to make $100 is to save $100 from what you already have. That makes great sense and it definitely gives you a new perspective on money in general.

    • Reply Jim |

      It is one of the main reasons that my family is able to live off so little. We still have our moments where we self indulge… what person can tell you differently?

      My venture is going good, I have sold 5 sets so far this month, so I am positive $16.

  • Reply Grayson @ Debt Roundup |

    I think this is an interesting venture. I deal with a lot of Amazon sellers. The only thing I would warn you of is insurance. When you sell these products to other people, you can be pulled into a lawsuit if someone gets sick due to the product you sold. You may not think this is true, but it happens all of the time. Anyone in the supply chain can be brought into the lawsuit, especially with food. That would mean Amazon, which passes that blame onto you, you, the store you bought them from, and the manufacturer. All I say is make sure you have adequate business insurance.

    I talk to many sellers that have no idea about this and think they can just blame the person they got it from. It doesn’t work that way. In the US, everyone in the supply chain is responsible.

So, what do you think ?