From eBay Seller to Software Entrepreneur: Seller Labs CEO Paul Johnson (Part 3)

Sramana Mitra: You shut down that business?

Paul Johnson: We did. We sold all the inventory that we had and cashed out. I met up with a business partner and went for the most peculiar e-commerce business anybody has ever done.

While we were still operating the guitar store, I was looking for something else. I knew that there was a time for it. I would say that this is one of the important things in business – to be able to understand the horizon and what’s coming next. I could see the price erosion that was starting to happen.

We happened to live outside of Atlanta. In Atlanta, the United States postal auction takes place. That is where all of the lost mail in the entire world ends up. It’s called the mail reclamation facility. I was googling one day when I found an article talking about this auction.

Me and my buddy decided to go to this auction. It was the most incredible thing we have seen in our life. It was a giant 100,000-feet warehouse where they have lots of every single type of thing you can imagine that’s lost in the mail.

They sold tons of books. They would package books in a box that is the size of watermelon boxes. It would just be full of books. Then they would have pallets of all kinds of different merchandise like electronics. You have 30 minutes to walk around the floor and look at everything. Then you would come back to a feeding area. They would just auction these lot numbers. You would have written down on your sheet what you think lot number one was worth. People would just bid on it. There were only a hundred people or so.

You had to come with funds on hand to buy stuff, and you had to be there in person. It was only people who lived there or locals that came. You had to have a good amount of cash to participate. It’s like Storage Wars but just on a massive scale, and you’re not buying junk.

We went and they started auctioning these items. We had no idea what these were worth. We weren’t allowed to touch anything and take pictures. We just guessed. We decided to buy a pallet of books and electronics. That was our first taste.

We spent about $5,000. We loaded up a pickup truck and we brought this stuff back to my house, and we listed it online. It was very profitable. We doubled our money very quickly. We started going back to this auction more and more.

We ended up starting in our houses and buying all this merchandise. I ended up moving to a larger house with a full basement. I turned my entire unfinished basement into a warehouse. I hired people to work in my basement. I built a team that just listed stuff online.

We would bring in the most random stuff. We sold everything from headphones, snowboards, to heart rate monitors. Once we got $2,000 worth of dental drills. We just became really efficient at logistics. The business ended up growing from a basement to a 17,000 square foot warehouse.

We realized that there was this big opportunity if you have a lump sum of cash. You can buy inventory in bulk. We started buying books. We bought out Fanatics which is the largest sports memorabilia store. We bought two tractor loads of merchandise from them.

We kept going to the postal auction and started buying tons of inventory in bulk. We had teams of people who would process this inventory. We would take this unstructured inventory and have people list it. 

This segment is part 3 in the series : From eBay Seller to Software Entrepreneur: Seller Labs CEO Paul Johnson
1 2 3 4 5