Permanent Price War

WEEK 40.1 PERMANENT Price War

Recently precious metal price war in SLS facebook is very fierce and killed off many of the reseller. Now, it remains a question whether it will be a permanent thing or just a one time kill.

Well, let do some computation to justify this claim. Assume someone managed to get a loan of RM100K to do this precious metal business. Normally GLC and government staffs are entitled to get a lower interest personal loan. The effective interest rate for such loan is around 10% per annum.

For the ease of calculation, let assume the following

Loan amount : RM100,000/=

Interest rate: 10% or RM10,000/- per year.

Silver price :- RM100/oz

Nett Profit margin before interest cost : 3.33%  (dump prices)

Assume, price is stable around USD29 – 32/oz

So at RM100,000/= he will be able to source 1000 oz for sales. So, he needs to sell 3000 oz per year just to recover his interest margin. Can the market absorb 3000 oz per year?

Let assume there are 10 persons following his footstep, the total loan amount is RM1 million and 30,000 oz of silver per year sales is required to cover the interest cost. Thus, a 3-10x increase in existing customer base is required to support this business expansion.

Thus, be prepared for permanent price war. It’s just the beginning. Nevertheless, it’s an opportunity for everyone to make $$ and losses some as well.

Price War

Week 39.2 Price War

Throughout my selling experience, I think this is the first time where the price war has become so fierce that some even can afford to sell at extremely low price. Wow! I think at the moment I surrenderlah. I also cannot beat their price. Now have to wait and see lah. Just hang on to my stock.

Most of the sellers and buyers are advertising at Facebook SLS website. Wow! Tonnes of traffic there. Last time my phone used to be “Telefon berbunyi ring2”. I used to say “Sorrylah brother I don’t have stock lah. You wait for the next round lah”.

Now no more, in fact got to call some customer asking them

“Just to get it all out, what's in my head
And I, I am feeling a little peculiar
And so I wake in the morning and I step outside

And I take A deep breath and I get real high
And I scream from the top of my lungs,
What's goin' on

And I say hey.... hey....
I said hey, what's goin' on
And I say hey.... hey....
I said hey, what's goin' on”

Hi:- I tak boleh buat business lah, orang jual bayar murah. Saya punya petrol, SMS pun tak cukup. Buang masa saja lah. Simpan saja lah.

I cannot do business lah, people selling so cheap. Not enough for my petrol and sms. A waste of time only, now just keep lah.

For buyer, now the sale is on. You should grab some coins and bar from those seller as they are all selling cheap now, once if there is a rapid price up movement, seller will get caught for selling too cheap. Then it may not be that cheap anymore.

Location Location (2)

Week 39.1 Location Location (2)

Well, it’s known that Precious Metal trading is best done via COD. Postal is a problem. You will bump to it later on. CityLink who lost my shipment 20oz silver, last week just got a letter stating that they only pay me RM200/- for the losses. Let move on from here.  The location of your workplace must be good. If you work in good location area town center Masjid Jamek, KL Sentral, Mid-Valley etc. You can meet up with lot of people in a very short time.

If your location is good you can sell at higher prices lah. Think about it, you only see Tesco, Giant, Ecosave in sub-urbans area. You don’t see Tesco in KLCC correct. 1 meal in KLCC cost RM10/person, similar meal cost only RM5 in Cheras.

If you are in high density area and have the time to COD, don’t do wholesale deal lah sell few hundred oz in one goal after that nothing to sell at higher price. Sound very stupid for you to do wholesale deal. Do lot and lot of small deals lah each 5oz or 20oz each. Each will earn you RM3-5/oz extra, think about it. Sometimes, wholesale can give you quick bulk for little work, after that you will run out of stock, now what? How long for you to restock? At the meantime, no business can be done.

I work in far-far away places thus I have to do wholesale. No choice.

Nobody knows about the future. When will be your next sales and how big will it be, nevertheless you should put this in your mind ok.  Things can happen very odd.

You decided not to sell 100 oz @RM100/oz sales to Mr A, but sells 40oz @RM103/oz to Mr B and hope to sell to the remaining 60oz other customers at @RM104/oz. Nobody turn up to buy the 60oz you are stuck with 60oz.

You sold 100oz @RM100/oz to Mr A, the Mr B&C&D call you and said they willing to buy at RM105/oz but you have nothing to sell.

Which one will happen first, you won’t know. Make the best guess ok.

What is my conclusion from this?

Dealer will get 100-1000 oz from main dealer each time, then they will go and sell back to their client in their own area at small quantity. Then you will have SilverKlang, SilverShahAlam, SilverPJ, SilverSubang, SilverBangsar, SilverKL, etc. Crossing border/district will be unsustainable unless the order is very big. Cost per km for car is around RM.30-RM.40 (all in maintenance, petrol, toll etc) + telephone charges etc.  The most expensive part is the time spent on making the CoD.

Hedging

Week 38.1 Hedging

When I sell 1 oz, I will try to buy back 1 oz from my supplier almost immediately. Most of the time, I will not try to speculate as I tried a few times before and most of the time the end result is not so nice. It is better to have some fixed income rather than gambling all the time.  If you are gambling all the time, over time you will be finished (Customer quote).

However hedging is only possible if you are buying in bulk of few hundred oz. It is impossible to get few hundred oz sales in one shot all the time, most of the time it may take up to 1-2 week to accumulate few hundred oz. Thus, as the seller he will have to make up the losses with a higher sales premium. There is no other way out. Hedging is only possible for big sellers where they can buy and sell in big volume. There is no such thing as exact hedging. One can only do estimated hedging.

How does a middle size seller deal? Well, it based on fine-tuning of their sales based on expected previous week sales. Let said last week sales is 200 oz, so this week you order 220oz so that you have enough for next week sales. If sales are good, order extra the following week. Vice-versa.

How does a small size seller deal? Well, the simplest will be buy at RM100 and sell at RM110. For those who are more experience, they will ask their supplier the replacement cost first before they sell. Once they have a confirm sales of 50 oz, they will lock the price from their supplier for 50oz. They will use their own stockpile for trading.

For minter, normally they will sell their orders in 1000 oz because 1000 oz silver bar is widely available. For example, you order 1000 x 1 oz of sunshine 1 oz bar from sunshine mint, the moment the order is placed, sunshine mint will place a replacement order of 1000oz silver bar from their supplier.  They will make the differences in minting charges.

E.g.  transaction.

Supplier : Well, the minimum order is 200 oz.

You:  If I buy from you, will you accept return for any left-over sales let said 60oz.

Supplier : Orh! The moment you order 200 oz, I placed a replacement order of 200 oz from someone else. You will return me the 60oz I will have to pay you back this will put me in cash tight position. So, the answer is no few years back. But now it’s yes as I can still accept return because I will order 60oz less on my next replacement order from another customer.

Internet Marketing

Week 37.1 Internet Marketing

How do you reach your customer in the quickest possible time?

Here is the order of speed from fastest to slowest.

Phone call, SMS, email, forum, popular website (mudah.my, ebay.com,lelong.com) and lastly  own website.

Once you have your stock arrived, send sms to a list of your potential customer. If the price is attractive, they will respond and the deal is on.

It‘s also depend on your customer set whether it is new customer or repeating customer.

OK you got stock and you want to dispose it depending on your disposal objective. Make the highest profit, make the least effort, make the quick sale and easy job. You won’t get all of them.

The first 3 approaches are mainly for sellers who you already has a customer databases of more than 100 customer.

Description	Suitable	Not Suitable
Phone Call	Only for attractive deal with people you deal with for quite sometimes. Normally after 2-3 SMS, just call that fellow and sort out the deal. Normally, e.g. spot price went down to USD26/oz, you call your good friend whether he want to share your order or not. Within 2 hours, spot may be USd28/oz. So get it done quick.	May be offensive to others. Difficult for them to said no.
SMS	It’s the quickest form of email. Can send to lot more customers. Once you have something to offer, just sms to 10- 20 close/recent customers of yours. After a few sms reply, call them up and get the deal done.
Email	People will read their email everyday, so it will reach them latest 2-3 days because some of them don’t read their email during the week ends.	Too many email, may cause your email id to be listed as a spammer.

If you have some stock for sales but not enough to cover the whole market, then just start off with SMS first with your close and most recent customers. First come first serve. They should get back to you within 2-4 hours. If there is still some left-over stock within 4 hours, then it is time to do some masses emailing. Masses emailing you should expect respond within 1 day.

If there are still some left over stock, it is now open to all new customers. You have fulfilled your responsibility to existing customer. Then now, you can go and make the announcement in online forum and facebook and see whether there is any respond. If there are still got left-over stock then list them in ebay or mudah and wait for the customer respond.

Description	Suitable	Not Suitable
Forum	Depending on which type of forum, some active forum you can get a lot of sales. But the problem is your price must be among the lowest.	Inactive forum is useless. Choose your forum properly. Activation period may be 2-3 days, after that it gone as advertisement is too deep inside the forum. People cannot see.
Facebook	Lot of traffic.	Your advertisement may only valid for 1 hour, after that it is gone for good. All your friends now know U sell something, you may not want them to know at the first place. Your competitor can get hold of your customer as well.
Popular website	For getting new customer. The problem is timing, it can be 1-2 days, it can takes weeks, you really won’t know	Your price must be the lowest in that website
Own Website	Mainly for own customer and some new customer who suddenly bump to your website	Very low traffic

Today, people are also smart enough to search on facebook, forum, ebay, mudah, lelong etc. So if your prices are compatible then you can get some sales lah. In the end it’s all about price as silver is just a product with little variation, if you get from Mr A or Mr B, it is almost guarantee it is the same thing.

Unless you have plenty of stock, you don’t fire all at one shot, sms, email, forum, facebook, popular website, own website. You will end up disappointing lot of people. You also cannot fire too many times otherwise people will immune to it. Different variation of firing will enable you to understand your customer better.

Customer A is in forum XXX, email everyday, which website.

Customer B only see ebay.com. Etc.

Malays customer mainly from mudah.my

It is best to try different thing at different time and after some time you know what is the best way to advertise.

Good Luck.