by Trevor Mountcastle, author of Tagging Miles
“Manufactured Spend” is a collection of techniques for increasing credit card spend in ways that results in getting most or all of your money back. The reasons for doing so include: meeting credit card minimum spend requirements, earning credit card big spend bonuses, or simply earning credit card rewards. Perhaps the most common method is buying prepaid Visa or MasterCard gift cards, and liquidating (please see: Beginner’s guide to buying & liquidating Visa & Mastercard gift cards).
Another way to manufacture spend is to buy products with a credit card and resell. Reselling has a great deal of potential, but there are also real risks and caveats (please see: Considerations for Reselling as a Method for Manufactured Spending).
Advantages and disadvantages of manufacturing spend through reselling
Increased time between purchase and liquidation: With conventional manufactured spend options, you can generally liquidate visa gift cards quite quickly, within minutes or hours. When purchasing products, you have to obtain the product, send it into Amazon (assuming you are using Fulfillment by Amazon), and price it appropriately to sell, then you have to wait until Amazon pays out, which is generally every two weeks.
Taxes are a real thing when you generate profit: Reselling is a business. While manufactured spending through gift cards is usually tax free, there is a larger paper trail when it comes to reselling. Amazon will send you a 1099-K when you exceed $20,000 in gross payments. If you do this to manufacture spend, it’s very likely that you’ll top $20,000 and get that 1099-K. It’s important to plan ahead, and track your purchases and sales efficiently. You can start with this spreadsheet, but may need to adapt it to your own needs.
Returns can reduce profits to losses: Returns can happen for a variety of reasons, not the least of them being “Buyer’s Remorse”. In the best of scenarios, the returned product can be immediately returned to inventory, but beware, as it is not always the best option. Alternatively you could have all returns sent back to you for inspection and potential re-listing. The thing to remember here is that even a single unsellable return, can make an overall product choice un-profitable, if not a loss.
Earn more miles: You aren’t limited to 1x, 3x, or 5x per dollar spent. You can utilize shopping portals (read: Earn oodles of airline miles from shopping portals), which can significantly increase the total miles you earn.
Manufacture spend in your pajamas: Some of the best opportunities for sourcing products for resale are via Online Arbitrage (OA), meaning that you have a greater opportunity to manufacture from the comfort of your own home.
Stack store programs, earn money: If you’ve been manufacturing spend for a while, you know to stack store programs for greater benefit, whether it is gas points, Kohl’s various promotions, or others. Regardless, it makes sense to aim for a profit. Assuming things go according to plan, you may see a net gain in addition to your miles.
The first step to manufacturing spend through reselling, is to determine what you are comfortable with regards to “float.” Put differently, how much money could you cover, if it were tied up in product, and your credit card bill came due? This is an important consideration.
Next you need to decide on a marketplace to sell on. There are a few options: Amazon, Ebay, Sears and Craigslist are the most common four. My recommendation, is to go straight to Fulfillment by Amazon (FBA). You have two choices, you can create an Individual Seller account, or you can upgrade to a Professional Seller account. The differences are:
- Individual Seller Accounts are limited in which product categories that they can sell, and charge $0.99 per item more in referral fees.
- Professional Seller Accounts can sell in more product categories, and pay $39.99 per month vice $0.99 per item.
If you plan to sell 40 or more items per month, go professional. If you’re dipping your toes in, and don’t think you’ll sell 40 or more items per month, go individual, you’ll save a little bit of money.
Reselling through Fulfillment by Amazon
The overall process is simple. Sourcing products is key — that is where you will spend most of your time. First you need to become familiar with the key parts of an Amazon Listing:
There are also a lot of great free tools to help you with analyzing products, below are three that I use on a regular basis:
- The Amazon Seller App (read: Beginner’s Guide: Amazon Seller App) – If you happen to be in a store and see a product that might work, you can scan it to see whether it is profitable.
- CamelCamelCamel – This site shows you the price progression of an ASIN. This is important, just like stock picking, you probably don’t want to get in on a product that is progressing downward.
- FBAToolkit — You can enter the ranking of the product, and see roughly how many sales per day the product has. This helps you determine the velocity of sales.
Once you’ve sourced your products, whether bought online, or in store, you will need to ship them, then it is just a matter of tweaking prices as appropriate, and accounting for all products. Remember, you want to find profitable products in order to cover seller fees, risk of returns, and risk of non-sale.
Overview of manufacturing spend through reselling
Unlike most other manufacturing spend opportunities, reselling is actually a business and it involves additional effort and risk. On the other hand, if all goes well, reselling can lead to far greater rewards both in the form of cash and miles.
Last updated on February 23rd, 2016