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Can you resell Xbox One or PS4 consoles and make bank?

Posted By Claes Bell On 11/04/2013 @ 8:30 am In Personal Finance | 6 Comments

The new video game consoles being released this month look cool, but will they flip?

If you’ve been reading this blog for a while and followed our McDonald’s Monopoly Challenge [3], you know that we here at Bargaineering love a good financial experiment. As part of a series of stories on the financial side of the new video game consoles being released this month, we wanted to test whether flipping highly in-demand merchandise can actually make you money.

It seems like every Christmas or at other so-called “retail events” such as the launch of a new iPhone, you hear about people reserving or otherwise getting their hands on a coveted product and then reselling it on eBay for a substantial markup.

On the other hand, it’s definitely possible for that to backfire. I once went to a yard sale where a guy was selling a huge cardboard box full of Furbies, those animatronic toys that were once so much in demand from desperate parents that they commanded huge markups. Those Furbies looking sadly up at me from the bottom of the box had no doubt been purchased for the purpose of flipping, but had failed to flip and would be lucky to fetch pennies on the dollar.

The point being, flipping can be a financially risky business, which is why I was glad when our coworker Keith volunteered to do it for us. Here’s his story so far.

I’d like to claim that I’ve been planning it all along.

It would be nice to say that I predicted there would be a huge demand for the new Xbox One and PlayStation 4 this holiday season. That I, using my incredible knowledge of advanced economics, predicted there would also be a very low supply. That I proceeded to scheme for months so I could hatch the perfect plot to make some easy cash by buying these consoles and flipping them on the open market. Yep, planned it all along.

Except it isn’t true. Alas.

The reality is, I wanted to buy one of these two next generation consoles for myself, but I couldn’t decide which one. So, when Amazon started offering preorders for them in June, I decided pick up one for each and decide later. Sure, they’re $900 total, but I’d never actually buy both, right?

Time passed. I wasn’t all that impressed with either console’s launch day lineup of games. My interest waned. To be completely honest, I was actually considering cancelling both preorders until my co-workers Claes and Brandon mentioned they were planning a package of stories about the new consoles, coming out later this month. One of those stories, they said, would be about the console resale market. Could you really make money flipping one of these things on launch day for some quick cash?

“Uh, well, could you?” I asked. I was under the impression that there was going to be plenty of Xbox Ones and PlayStation 4s through the holiday season and, thus, that my preorders were worth exactly zilch.

Not the case, it turns out. As Brandon was quick to point out, even a cursory glance at ebay shows there’s actually a pretty tidy demand for both the PlayStation 4 and the Xbox One. Most preorders are currently going for about a $200 premium. Not bad.

Being a generous colleague, I agreed to flip my two preorders and help document the process. My plan is to sell my preorders for both consoles and then ship them off to the winning bidders the moment they arrive at my house.

So, will it work? Will I be able to make some scratch flipping these bad boys, or will I get stuck paying for two bleeding-edge, top-of-the-line next generation video game consoles I have no interest in?

Stay tuned.

We’ll keep you posted on Keith’s progress, and whether he can actually pull this off.

Let’s take a second, though, to look at what’s happening here. In financial nerd terms, what Keith has essentially done is purchase a futures contract on these next-gen consoles, similar to the ones that investors trade furiously on the floor of the New York Mercantile Exchange every day. By preordering, Keith has made an agreement with Amazon to take delivery of the consoles on a certain day at a given price, which he can then sell at a profit. On the other side of the transaction, the console makers do preorders to lower their risk of being stuck with a ton of consoles no one wants.

Initially, when Keith made the preorders, the expected prices of the consoles on their launch days and the prices of preorders were the same. But since then, because of increasing console demand, the expected price of a console on launch day is now higher than what he paid for the preorder initially. Because of that, he should be able to sell the preorder for more than what he paid for it and capture some of that price increase.

If Keith does sell his preorder, and prices continue to rise, he might miss out, but he’s also locked in a pretty nice profit for himself at the cost of just a little bit of his time (Amazon didn’t even ask for a deposit).

What do you think? Have you ever tried to flip an in-demand new product? If so, did it work out?


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