Thursday, 15 September 2016

The Business Of Second Hand CDs (1/2)

I'm unsure an exact date can be defined - as I suppose it varied from person to person - but there came a point somewhere in between 2005 and 2010 that a lot of people wanted to get rid of their old CDs (presumably having ripped them first, but let's not go near the technical legalities of that whole issue) and, as a result, a whole bunch of companies sprang up, all offering to pay you for the privilege of taking them off your hands.

I don't really want to sell any CDs to be honest - I quite like having the physical things and it's not as though they take up too much space.  They can actually look quite pretty, with their colourful spines and all that, if you're into that sort of haphazard decoration type of thing:

But that's not important right now.

There's loads of these "we'll buy your CDs" companies out there, the biggest of which by far is Music Magpie.  They're certainly the only ones with a lot of TV advertising - which doesn't come cheap - and I'd be willing to bet they're the first one that pops into anyone's heads when thinking of offloading old CDs.  As far as I'm aware, they're also the only outfit that will guarantee you a price for any CD album - they don't do singles - but plenty of other places will buy from you, too.  They're generally slightly more selective, but may well offer a better price.

Generally these companies then re-sell what they buy on Amazon; Music Magpie are well-known for selling most of their second-hand stuff - irrespective of condition - at a penny each (plus the £1.26 that Amazon automatically applies as postage and packing for a CD).  Now interestingly - at the time of writing, 15th September 2016 - for sending a single CD, in a jewel case (and let's add a padded envelope to ensure that the thing is less likely to be damaged) the Royal Mail charge £1.20 for second-class post, or £1.27 for first class.

So what's the business model here?  As far as I know, all the major UK resellers send CDs out like this - i.e. complete with jewel case and all inlays, and in a proper padded envelope - and usually first class post.  There are of course methods of cutting the postage down to Letter rate - £0.55 second class, £0.64 first class - but that would either mean dispensing with the jewel case and/or inlays - and the big resellers don't do this.  They send out the whole thing, properly packaged, first class.  So how do they do it for a penny a CD?

(The short answer is:  they don't always charge a penny, and they get a substantial postage discount for volume postings.  But that's boring.  That's just to cover their run-of-the-mill stuff.  It's when they don't charge a penny that things start to get interesting).

Anyway, I thought I'd have a look, just to see what's out there, you understand; I've no intention of selling any CDs (unless some mad person wants to offer me a ridiculous price for something of course; I'm not daft).  But the more I got into it, the more interesting the various business models of these companies became and before I knew it, I had to do some sort of more rigorous exercise (to be honest I was hoping to be able to play one off against another, but this is only possible in very rare cases, so far as I can tell).

I chose 100 CD albums, pretty much at random, all in full size (i.e. full thickness) jewel cases and all in at least "Very Good" condition (going by Amazon's guidelines), to see if I could find some sort of correlation between the prices that various companies will give you and what they're trying to sell them at on Amazon.  I tried to choose some massive sellers and some stuff that I thought might be obscure, but I must stress that the choices weren't exactly scientific.

I started off checking out about eight or nine companies, but some quickly fell by the wayside, as they would accept so little stuff.  It ended up that just four were prepared to accept a reasonable number of the albums:  Music Magpie, Ziffit, Momox and Zapper.

Music Magpie would accept 100/100 at a combined £32.67 (let's call it 33p each)

Ziffit would only accept 74/100,  at a combined £28.00 (about 38p each)

Momox would accept 88/100, at a combined £31.34 (about 36p each)

Zapper would accept 91/100, at a combined £41.57 (about 45p each)

Taking the best offer from each company would get £56.57, incidentally (although this is doubtful anyway, Music Magpie in particular are notorious for making "deductions" based on their subjective appraisal of some items, and I'd be amazed if the others don't do similar).  But for the purposes of and all that, let's assume they'll pay up as promised.

(As an aside, I suspect had I chosen a different 100 albums, the general results might well have been different; from that, it looks as though Zapper is winning by a country mile, but with a different selection, who knows?).

But the thing considered as a whole is pretty meaningless, as it turns out that the real devil - and how these companies turn a better profit than I would initially think, even given their sending-in-bulk advantage - is in the detail.   It's a very strange market indeed.  A lot is obviously based on algorithms, but it does seem as though some of it isn't and is obviously being monitored by actual humans, some of whom react like lightning and some of whom don't seem to react at all.

To be continued etc....

No comments:

Post a Comment