Re-Selling 101 – Act Quick When the Opportunity Presents Itself – FX and Interest Rates

kaws

I haven’t written a re-selling 101 blog in a while since there were other more interesting topics I had on my mind.  But recent movements in interest rates and forex rates triggered me to talk about how I started.  As you all know, I’m based in Toronto Canada and I source some of my stuff outside of Canada.  Back in 2013 when I was first got started, the CAD/USD rate was approximately at par, meaning $1 CAD = $ 1 USD.  And to put things in perspective, the rate as of today is $1 CAD = $0.77 USD.   What this means is for the same pair of shoes that cost $100 CAD/USD to buy back in 2013, will now cost $131 CAD.  Yes, it is a BIG difference if you live north side of the border and when shoes are usually are never $100.

I first started Netmag with approximately $2,085 CAD.  I remember vividly that my first batch of shoes were 8 pairs of SBs all literally my size or close to my size because at the time my intent was to wear all of them.  It took me an average of 20 days to sell, but as you can tell I came up pretty well with the 8 pairs, making a little less than $1,000 on my first ever batch of shoes I flipped.  Some of these margins don’t exist anymore because there are so many people doing it, but at that time I knew I had to act quickI needed money FAST! The CAD/USD exchange rate was to my advantage at par and I knew this rate is not going to stay forever.

The first spreadsheet I recorded from my first 8 pairs:

first batch

I’ve seen this situation before in early 2008 when I literally saw the CAD/USD bounce back so hard from par, I was kicking myself on why I didn’t buy more USD back then.  So this was like one of those DeJa Vu moments.  I maxed out my line of credit and even borrowed from my best friend Wesley.  He was the only friend that believed in my business model and dropped me $10k CAD without even asking twice.  I was on a mission to ramp up capital to buy as much as I could and I was literally back at the bank every few months to ask for an increase my line of credit.

Interest rate was at an all-time low where the government was promoting consumer borrowing, and I was still working at the bank at the time and I was able to take advantage of the staff discount rate at prime + 1.25% on my line of credit.  Keep in mind, if I was a non-staff the rate would probably have been prime + 5%.  I blew through money so fast in buying anything I could that I felt was undervalued till a point I couldn’t sell as fast I could buy, but at the back of my mind I knew exactly what I was doing as if I miss this FX rate point, I probably won’t see it again for a long while.  I was also banking that the USD would rebound soon which meant my shoes would indirectly go up in value.

Fast forward today where CAD/USD rates are higher and Interest rates have started trending up, which meant borrowing money became more expensive. Hindsight is always 20/20, but its always necessary to review what you did right and what you could have improved on.  Ramping up buying in the early 2013 and 2014 stages during my start was easily the best business move I have made.  Not only did my $1 of CAD back then appreciate 30%, but the amount of times I have flipped that same $1 to make another $1 has probably compounded to maybe $20-30 by now.  So imagine that with my original $2,085.   Obviously not all of my $2k could have been perfectly allocated as I’ve made mistakes in overpaying or purchasing what I thought would have sold well, but that’s just part of the game.  At the end of the day, understanding FX and FOREX rates is one of the very fundamentals needed to run a business especially in today’s time when international business has become an important factor in a lot of businesses.

[VERDICT] – Sometimes when an opportunity presents itself, you just have to go ALL IN.  Most of us are very rational and risk adverse thinking we shouldn’t put all my eggs in one basket, but if you want to make it BIG sometimes you just have to make BOLD moves.

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