Subscriber Q&A #2
Follow-up to one of my most popular posts!
Hey friends,
A couple months back I did my first subscriber Q&A:
It got an overwhelmingly positive response so I figured I’d do them a handful of times a year. Instead of honing in on a singular topic, I’ll be tackling some questions that pop up frequently or that I think provide a great learning opportunity. Here are the questions we’ll be answering today:
How ‘passively’ can you invest in toys / can I do this while having a 9-5?
How do you know the proper time to start selling a toy?
If you could go back a few years and teach yourself a lesson about toy investing, what would it be?
It seems reprints of action figures are becoming more common. How are you adjusting to this?
How much do you spend per month? How much cash do you keep on hand for unexpected deals?
You’ve recommended networking with other sellers that are at a similar level to yourself. Where do you find these other sellers?
Do you have any tips for wholesale toys?
How do you utilize Amazon vs. eBay vs. Walmart vs. other marketplaces?
What are the biggest red flags to look for before purchasing a toy?
Do you have any tips or tricks for reducing costs / saving money when running an Amazon business?
What is the point of having long term holds if short term holds are more optimal for cash flow and growth?
What are the biggest mistakes you see people make when toy investing?
Is this distributor legit?
How come you don’t use a prep center?
When is the earliest you will ship toys to Amazon for Q4?
1. How ‘passively’ can you invest in toys / can I do this while having a 9-5?
First things first, we need to remove the word ‘passive’ from anything related to ecommerce. Whether you sell on Amazon, Walmart, or just flip locally — you’re going to have to do some form of work. Sure, once you purchase a product you can forget about it for some time, but eventually you’re going to have to make some sort of effort if you want to be successful. Not only that, it’s important to remember that toy investing takes up physical space. It’s not like a stock that pays dividends and deposits currency virtually — you have physical inventory you need to handle.
It’s not just physical space either. You will get from this game what you put in. The more hours you spend learning brands and doing product research, the better your product selection will be, and the better your results will be. You can’t just clock in whenever is convenient for you and expect to have great results. You have to adhere to how the game is played, not check in from time to time and hope it works out.
On top of that, Amazon has made it abundantly clear that they aren’t the biggest fan of casual or ‘hobby’ sellers selling their biggest and best brands during peak season. LEGO being restricted for many smaller sellers was not a coincidence. So while you can put minimal effort into this business and still make money, I can’t confidently say Amazon is the place to do it anymore. You never know when they will restrict you. I’d turn your eyes to eBay or Walmart.
The second part of the question, doing this while having a 9-5, of course you can. But again, you get out of this what you put in.
If you have 0 experience selling online, you definitely are going to be in for a rude awakening of how much upfront effort is needed to establish yourself in regards to familiarizing yourself with Amazon or Walmart, product research, etc. Someone who has experience with Amazon and then decides to do a 9-5 will have a much easier time than someone just looking to start this off casually from the get-go.
If you still want to give this a shot, I’d recommend sticking with LEGO and Pokemon cards. Longer holds, requires more patience, but these are two reliable brands that won’t lose you money (compared to some other brands that require more consistent attention).
So, to answer the question, you can’t literally do this passively, but you can balance this niche and make it a side hustle to your primary income once you’ve got the ball rolling and understand the basics (I just wouldn’t recommend Amazon as your platform of choice).
2. How do you know the proper time to start selling a toy?
This is entirely dependent upon your goals and the return you want from an investment. That’s why I always tell people to identify your ideal exit strategy, a worst case exit strategy, and an in-between strategy before you make a purchase. Proper is relative, and honestly varies by SKU. There are lots of factors at play such as risk of Amazon restocking, current ROI, opportunity cost, reprint rumors, etc. We’ll touch a bit more on this question in the next question.
3. If you could go back a few years and teach yourself a lesson about toy investing, what would it be?
I could probably give a few answers to this question, but here’s one that has been on my mind a lot lately.
You don’t always need to get the maximum profit out of an investment.
Early on, I was obsessed with making sure that I sold my items for the most profit I could possibly get. That sounds like something everyone should do, but we need to factor in opportunity cost and risk.
For example, let’s say I have 600 units of a Marvel Legend action figure that I paid $18.00 for in February. My ideal, realistic exit strategy was to sell for $49.99 about ten months later during Q4, and snagging an 87% ROI. A number I was very confident I could get and would be very happy with.
But let’s say this figure is a mega hit and by May is selling for $41.99, about a 49% ROI.
Old me would completely be attached to that $49.99 number, and not let a single unit go early.
But the thing is, 49% ROI is great. Not as sexy as 87%, but are those extra 5 months of holding worth 38% ROI?
Think about all of the opportunities that are greater than 38% ROI that I’d be missing out of because I didn’t have the capital.
Not only that, but there is a very real risk that during these five months, Hasbro sees the demand of the figure and issues a reprint.
“A bird in the hand is worth two in the bush.” is a famous quote that depicts this situation perfectly.
So in short, I’d tell myself that it’s okay to let things go earlier than you planned. You don’t always need your predictions to come true down to the exact dollar sign. Nothing wrong with snagging that 49% ROI, or even just drip feeding to get the best of both worlds.
You can see how this ties into the previous question — it always depends. Take it SKU by SKU, but don’t get too greedy. You can’t lose if you’re taking profit, but you can lose if you hold too long.
4. It seems reprints of action figures are becoming more common. How are you adjusting to this?
It seems the pendulum is starting to swing back towards a bit of over-production rather than the under-production we had for the end of 2023 and much of early 2024. It’s not as bad as during the COVID-era, but definitely seeing stuff printed too much that shouldn’t be from most of the major manufacturers. For example, you’ll order 300 of a figure because it appears to be “discontinued”. You may even have confirmation from the manufacturer that it’s “discontinued”. Since it’s “discontinued”, you’re not in a rush to sell and would rather let time do it’s thing and make the price go up. Then seemingly out of nowhere, the manufacturer changes their mind and does another production run. It’s deceptive, especially when they confirm it, but it’s becoming more common as manufacturers are becoming more and more in tune with aftermarket prices.
I think you have two solutions here:
Order less upfront so you aren’t stuck with tons of inventory if a production run does happen so you can sell through your inventory before the new production run hits the shelves.
or
Order the same amount you usually order but just start pricing more aggressively and raising prices as supply dwindles. This somewhat ties into the last question as it seems to be the solution I am preferring.
I’ll be doing a blend of the two, depending on the toy. All I know is that buying 800-1200 units of something and sitting on it isn’t as “safe” as it used to be for many major brands.
5. How much do you spend per month? How much cash do you keep on hand for unexpected deals?
I don’t have spend goals or anything like that. I don’t like to pressure myself to make sub-optimal buys just for the sake of doing so. Deals will come, just need to be patient. But to give you an idea, I spent about a million bucks on inventory last year. I could definitely get away with spending less to make more, just need to continue to optimize purchases.
As for how much I keep on hand, I’m the definition of “inventory rich, cash poor”. For better or for worse, I am really inventory heavy. Whenever an opportunity comes up and I need capital, I will let go of my ‘weakest’ holds to generate capital.
It’s probably not optimal. It’s definitely not safe. It’s something I’m 100% committed to improving this year, especially going into Q4.
Less falling in love with items hoping for a base hit, and more of having cash on hand for those grand slams.
6. You’ve recommended networking with other sellers that are at a similar level to yourself. Where do you find these other sellers?
This was one of the best things I ever did for my business. I simply posted a screenshot of my sales in a Facebook group of Amazon sellers (in this case, Hustle Buddies), and asked if there was anyone else around my level who was interested in starting a mastermind of sorts. I made sure everyone was spread out in different regions so we didn’t conflict with retail arbitrage, and have made some lifelong friends from it. I would recommend keeping it small, maybe five people max. Remember, you can always add more people, but asking someone to leave isn’t as easy.
As for where to find these likeminded sellers, I’d say Facebook groups would be the best place, followed by Twitter and Instagram. Make sure you ask some preliminary questions, such as what they mostly sell, how active they are, if it’s their primary income, if they’re in any other masterminds, etc.
Nothing worse than partnering up with someone just to realize you’re not their primary Amazon friend and they’re feeding all the info you tell them to another group.
Also sucks to have people who aren’t as active or as serious about Amazon as you, so make sure you do some “interviewing”!
7. Do you have any tips for wholesale toys?
Without going into too much detail (I could probably write a short book on this), wholesale toys are a completely different beast from “regular” wholesale. It isn’t like Grocery where you request a catalog, find some profitable items, and place an order.
If you’re reacting to data that something is profitable, you’re most likely already too late.
Wholesale toys is all about pre-ordering, and pre-ordering early. You want to be first to order or last to order, being in between is often a death sentence.
The best tip I could give is don’t dive in with the bulk of your capital. Start with an excel document and track items you think are going to pan out.
Re-evaluate your performance after the upcoming Q4 and see how your virtual portfolio is doing.
If you failed miserably, hit me up for a coaching call. If you did okay, then start putting more capital towards it.
Also, keep in mind that you are never going to get the best price possible unless a distributor is offering some sort of crazy deal.
There are sellers with physical storefronts who have direct access to the big manufacturers and will get better pricing than you. They are becoming more common, and you cannot compete with them unless you have a physical storefront of your own.
8. How do you utilize Amazon vs. eBay vs. Walmart?
Amazon is my primary driver of revenue simply because of the volume of customers. If I’m ordering hundreds or thousands of something, it’s safe to say the bulk of the items will end up at Amazon. With that being said, I am starting to shift a good chunk of business to Walmart for various reasons listed below.
Walmart is slated to be 20-30% of my revenue this year. Maybe more. I am sending stuff here that is older, just to reduce risk from Amazon on the off chance they don’t like an older invoice. I’m still sending older stuff to Amazon too, just not as much now that Walmart is an outlet. I use Walmart for all the same products as Amazon, it’s just another way to get items moving. I just send less of it to Walmart. However, if I have an item that maybe I only have a couple cases of, I may send it exclusively to Walmart if it seems like it sells decently and is being sought out. Why not? Fees are less. I also like sending items to Walmart where I can sell it for less than Amazon but make more money.
eBay I use for damaged or loose returns, toys where I’m one of the very first to have it and don’t want to wait for FBA check-ins, or stuff that is high value that I deem too risky for Amazon/Walmart like Pokemon cards or high end collectibles.
9. What is the biggest red flag to look for before purchasing a toy?
First, I think you should take a look at this article:
This is an article that is a constant work in progress to help you make buying decisions. It should help you un-earth any major red flags.
But aside from the obvious, such as account health related listing issues, the biggest thing to look for is probably available supply on the entire marketplace, not just Amazon.
If you see several sellers with hundreds of units available, major retailers are in stock, and distributor sites are also in stock — you’re probably looking at the peak of supply of a product. Red flag, avoid.
But imagine the opposite is true: Major retailers sold out, very few sellers and none of them have any large quantity, distributor sites are sold out — you’re likely look at the end of life of a product. Green flag!
The more products you study, the more you’ll start to notice supply trends and what they indicate.
10. Do you have any tips or tricks for reducing costs / saving money when running an Amazon business?
This is a constant work in progress for me. This year I plan to:
use more discounted gift cards (not just for inventory, but supplies too!)
make sure I’m using the optimal cash back add-on for each purchase
utilizing the best cash back credit cards for each purchase
better managing my storage fees by selling stuff a bit earlier and sending stuff in later in Q4 rather than earlier
continue to optimize how I ship my products by finding the ideal box sizes and item combinations for the products I ship to reduce shipping fees using Amazon optimized splits
Be a bit more lenient on what gets polybagged. A $30 DUPLO LEGO set doesn’t need a polybag as much as a $60 collectible action figure does.
better repricing strategies that cater to each specific SKU and the time of year
less Doordash!
Please send me more ideas if you have them, I’m all for saving a penny or two as fees continue to rise.
11. What is the point of having long term holds if short term holds are more optimal for cash flow and growth?
Simple answer here: diversification. Even though I’m technically still selling toys, my long term holds usually have much higher ceilings (Pokemon cards for example) and will be sold many years in the future on eBay or locally. They are a physical 401(k) of sorts, and if something were to happen to my selling accounts I’d be able to at least get somewhat back on my feet much easier by selling Pokemon cards locally within a day than I would with a bunch of action figures or dolls. Long term holds are nowhere near the bulk of my portfolio, but every year that percentage increases. It’s just so hard for me to justify truly diversifying into literal index funds or stocks when I know my toys will get me a better return, even though they take a little bit more work.
12. What are the biggest mistakes you see people make when toy investing?
Lots of answers to this, but the most common ones I see are:
Utilizing all of their capital for holds too quickly when first starting out. It’s important to have a base business / be doing quick flips so you have cash flowing, can’t just tie everything up in holds right from the get-go. There needs to be a ramp-up period where your percentage of holds can slowly overtake your percentage of flips
Going after the ‘obvious’. It’s Batman, of course it will sell! There are thousands of Batman toys friend, gonna have to do more research than that.
Ignoring the fact that some toys are collectible and some are not. Big difference between a Cocomelon doll and a Monster High one
Paying full MSRP too often
Buying too early (especially LEGO. No excuse here, you know when things are retiring)
13. Is this distributor legit?
It’s pretty easy to find most authorized distributors of toys for the major brands. Most are even listed on the actual manufacturer websites. You can even usually just fill out the Contact form for a manufacturer and ask them if a distributor is authorized or not and they’ll let you know. If they aren’t, they are often buying liquidation from places like Target or Macy’s and selling it to you as ‘New’ even though they might not be. Supply chain can get muddy here, and you definitely need to approach with caution. There are no legit, secret toy distributors that will make you rich. It’s not like Grocery where millions of a SKU are produced every year and the items spread out to hundreds of different distributors. It’s a much smaller category and the known players are the bulk of the game in town (if you’re playing by the rules).
14. How come you don’t use a prep center?
This question has been popping up a lot on social media and I’ve been asked it a few times, so I’ll paste what I usually answer here:
The risks far outweigh the benefits to me.
Account health is fragile, the last thing I want is someone with no skin in the game making a mistake that gets me shut down.
It’s no secret that Amazon was questioning several people repeatedly during section 3 interviews about their prep centers - I’d be surprised if a lot of these brand restrictions weren’t also tied to prep centers in some way.
All it takes is one bad customer sending stolen or fake goods from the same ship from address as you and you’re screwed.
On top of that you may deal with stolen leads or inventory, getting banned from some of the best OA sites, items getting priced incorrectly, duplicate listings putting you in violation of TOS, etc.
There are benefits for sure, but pretty much every benefit aside from sales tax arbitrage can be had by just hiring someone to come to your actual house a few times a week and prep.
I know I’m in the minority with this opinion but just sharing why I’ll never use one and would rather hire help in my home or get my own warehouse before using one.
15. When is the earliest you will ship toys to Amazon for Q4?
Personally, the absolute earliest I will ship is mid-April. And that’s only if I’m desperate for space and think the item has a high chance of selling way before Q4. The reason I pick mid-April is because that gives us 8 months until Christmas, allowing us to hopefully sell through the product and dodge the 9-month inventory surcharge. This is far from optimal though, and I’d much prefer to ship items in October for Q4. It just isn’t possible for my current setup because I have more inventory than I have storage space, so I need to ship stuff in at sub-optimal times. If space is a luxury you can afford, then shipping in mid-October seems fantastic to me. Maybe even early November.
I’d say the less inventory you have, the later you can ship it in for Q4. If you have ten units of something, you’re very likely to be able to sell that in a single day the week before Christmas. No need to pay unnecessary storage fees. Have 600 units however? May need a couple months to sell through it so you’ll want to send in early.
All comes down to how much space you have though, and it should vary SKU by SKU and year by year.
Alright friends, going to wrap this one up here. As always, feel free to send me more questions for the next Q&A which will likely be sometime in the spring.
If anyone needs clarity on anything, feel free to shoot me a message and I can update the post.
Where do you even start to look for wholesale connections in the Pokemon TCG world? I've watched Rudy's Alpha Investments for years now, because I play MTG and Pokemon, but it seems impossible to get direct wholesale access on either of these TCGs.
I only mention Rudy because he has a patreon that you can get reduced prices, but then I could never sell those items on Amazon.