Why your high-margin Whatnot shop might be making less money

A high profit margin feels like proof that your shop is doing well. But margin only tells you how much you make on one sale. If your stock sits on the shelf for a month, a seller with half your margin who sells out every week can end up with more profit from the same money.

Two sellers, same money, different speed

Take two Whatnot sellers. Both have $500K to put into inventory. The only differences are their margin and how fast they sell through what they bought.

	Seller A	Seller B
Money in inventory	$500K	$500K
Profit margin	40%	15%
Time to sell through the stock	30 days	7 days
Times the money is reused per month	1	about 4.3
Gross profit per month	about $333K	about $378K

Seller A earns a lot on every sale, but only gets through the stock once a month. That works out to about $333K in gross profit.

Seller B earns less than half of A's margin. But because the stock clears every 7 days, the same $500K gets spent, sold and spent again about 4.3 times a month. That works out to about $378K in gross profit, roughly $45K a month more than Seller A.

This is an illustrative example. It is before Whatnot fees and shipping, which will change the real numbers for both sellers.

Margin and speed answer different questions

• Margin tells you how much you make each time you sell.
• Sell-through speed tells you how many times a month you get to make it.

Neither number on its own tells you how profitable your shop is. You need to multiply them together. A shop with fat margins and slow stock can look great on every invoice and still lose to the shop down the road that prices lower and empties its shelves every week.

Where slow stock hides

Most sellers know their margin. Far fewer know how long their money stays tied up in boxes. Slow sell-through usually shows up as:

• Lots that sit for weeks because one or two chase items made the buy look good.
• Prices held high "because that's what it's worth", while the same item sits unsold show after show.
• Cash you can't use for the next good buy, because it is still sitting on your shelves.

Every day stock sits unsold is a day that money is not being turned over again.

What to do in your own shop

1. Write down what you have tied up in stock. Add up what you paid for everything you haven't sold yet.
2. Measure how long it takes to sell through. Pick a recent buy and count the days from when it arrived to when the last of it sold.
3. Work out your turns per month. Divide 30 by the number of days it takes. Seven days is about 4.3 turns. Thirty days is one.
4. Compare monthly profit, not margin. Multiply your profit per turn by your turns per month. Do this for your slow categories and your fast ones, and see which is actually paying you more.
5. Test a lower price on slow items. If a lower price clears stock much faster, you may make more each month even though each sale earns less. Our free BIN price calculator can help you find the price that earns the most per show.