Examples of Limited Lifetime Goods
- Laptops
- Television sets
- iPods and MP3 players
- Some clothing and accessories
- Current movie or television merchandising goods
How Demand Works—In Brief
- Absolute demand is limited early in the product life cycle, but due to extremely low supply before and at the time of product launch, even limited demand among early adopters can drive prices very high.
- Demand increases steadily, but supply tends to increase even faster as the market sees opportunities to move product and production ramps. This drives prices gradually downward.
- When the product reaches end-of-life, liquidation stock enters the market in large quantities just as demand drops off in anticipation of the next product or fad, causing prices to fall precipitously in the flash of an eye—not years or months but weeks or even days.
Understanding the Market and Pitfalls to Avoid
Limited lifetime goods are goods that live in the world of product
cycles in one way or another, meaning that the current incarnation of the product (whether it is a video game console, a movie action figure, or a designer purse) is only valuable until it is replaced (whether by an upgraded console, the next movie's action figures, or the next big designer's hot accessory).
The key to selling in this area of the market is timing—which makes it a precarious way to sell. Though these issues also arise in brick-and-mortar inventory management, you must remember that on eBay to be early you have to be earliest in the world, and when you liquidate, you're not selling off to a constrained market, but to a single global market in which the entire worldwide liquidatable stock for this product is simultaneously on offer. Can you compete? If you're not sure, watch out!
Selling Early
When sourcing, you'll pay much more early on in the product cycle, but if your sources can get you sellable product with a window of opportunity before it is available to the general marketplace, some of the highest margins to be made on eBay are to be made here. As an example, witness the prerelease sales of game consoles like the XBox on eBay. The sellers who get them before or at release can enjoy one-to-two week window during which they can sell the items for two or three times the value they'll hold just a few short weeks later as supply increases.
Selling On Time
If you don't have the ability to source product before the rest of the market, you'll have to compete in-cycle along with everyone else. Here you're operating much more like a traditional business—your margin comes from efficiency, good source relationships/deals, and volume discounts. Just be sure you don't buy yourself off a cliff by failing to anticipate the final part of the cycle.
Selling End-of-cycle
If you're a gambler, this may be the place for you. End-of-cycle selling is tricky, risky, and timing-intensive. Your goal here is to buy product in volume just as it hits liquidation channels but before demand has dried up as the result of market saturation or the public's anticipation of the replacement product. There
is usually a window, but you
must be critical and smart. Are you really ahead of the market, and can you really buy liquidation stock
early and
cheap? If so, you can make a killing buy buying at liquidation prices and selling at near-reatil prices.
Beware though that during this part of the cycle, demand is not increasing—at best, it hasn't yet started to exponentially drop—but by pushing this additional liquidation supply into the market, you and your competitors will cause it to drop, along with prices. If you buy too late, too high, or too much, you'll lose your shirt, as this type of stock typically loses 90 percent or more of its value once the next product cycle begins in earnest.
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