When you walk into a shop that sells furniture, electronics, appliances, or other major items, the sales force is often paid on a commission basis, either a flat 5% of whatever he or she sells, or rarely, on a basis like a car salesperson, a larger percentage, say, 20 – 30 per cent, of the gross profit to the dealership. Especially in the latter case, but often in the former as well, the salesperson has some leeway in pricing the object, as long as the store makes a profit, or perhaps, a profit greater than x per cent. In those cases, the salesperson needs to be able to very quickly determine the cost, so that the minimum sales price can be determined, to be sure they don’t sell you anything below that number, for which the salesperson could be fired. There is often a cost code right on the price ticket, but not obviously so. That is, it won’t be marked “this is what this piece of crap cost the store.” But if you know that it is there, you can frequently look at the ticket and determine what the cost price is. It can appear either as actual numbers, or as letters. The numbers can include cents, or just round the cost up to the nearest dollar. If it is letters, there is a particular link as to what number each letter actually represents. That link is usually a 10-letter word or phrase with no repeat letters in it. One that we used when I first encountered this was “Winterlock.” It could even be two words, in which case you might be surprised at the order. “BlackWhite” is a possibility, but it could also be “WhiteBlack” and you might find it hard to tell the difference. I once called on a motorcycle shop which used “BlackWhite” as his cost code. He might, though they don’t usually, since they don’t want to make it difficult on the salesperson, reverse the order on different objects to make it even more difficult for the customer to crack it. It should be obvious to the salesperson which order is in use on any given item, because he or she understands roughly what the item cost, so the first digit will tell them which word comes first. Another popular one is “QuickMoney.” A liquor store might use something like “Stolichnaya” with the second “a” ignored, which is fairly easy when it comes as the last letter in the word or phrase. But in any event, the first letter represents 1, the second letter represents 2, and so on. Given the word “Winterlock” that I referred to above, if the unit cost us $579.63, we could have had a cost code of ELCRN (with or without a period as the decimal point), or rounded to EOK. We had a second word that we used in that store also, with a totally different set of letters, which would also make it more difficult for the customer to crack it. But if they have just one word or phrase, it should be fairly easy to crack it. I once spotted letters on a small appliance and furniture store’s price tags, and I told the owner that I was going to crack his cost code. He told me that it was an old family surname, and he did not think I was going to be able to crack it. I came back to him about 15 minutes later, and told him that it was “Kelvinator,” an old appliance manufacturer, already out of business at that time. He was shocked that I could figure it out.
Cracking this type of cost code, assuming that they don’t use more than one combination of letters, is not all that difficult. Profit on these items is usually 20 to 50 per cent, with 40 being almost universally common. So you write down all of the different letters you find on the price tags, and then look at the prices. Find an item with a three-digit cost code (or five if they are using cents too, but they usually don’t do that, again, for simplicity in the sales person’s calculations) that sells for more than $100, but less than $200. That first letter thus represents a 1. Next look for something over $100, but with a two-digit cost code. The lowest cost item that fit those conditions would normally have a first digit that represents a 6, at 40% profit. The highest cost item in that range would have a first digit that represents a 9, and the 7 and 8 should be pretty easy to place, based on the prices of the items with those letters. Then you look for an item over $200, with a different first letter, and that should be your 2. Remember, the cost of a $300 item at 40% profit is $180, so the lowest cost item with a first letter representing 2 should be actually at least $325 as the retail price. Then you look for an item at about $500, more or less, with yet a different first letter, and that should be the 3. Remember the cost of a $500 item at 40% profit, is right at $300. Then you should look at an item for about $700, with a different first letter, and that should be the 4. Your remaining letter should represent the 5. Put the letters together in that order, and you should have a word that is very close to a recognizable word or phrase, with perhaps one or two letters out of order. With the out-of-order letters corrected, that would be your cost code. It could also be an 11-letter word or phrase, with the second repeat letter ignored. That’s not as common, but it is possible. They could even ignore the first repeated letter, but that again is unlikely, since it makes the salesperson’s job that much tougher, and they want to avoid that insofar as possible.
The letters could be part of the dealer’s own item number, or they could be a standalone item, and in either case, there could be miscellaneous letters in front of or behind the price code, again to make it more difficult to decipher. The salesperson already knows what letters are in the cost code, and might be trained to ignore all other letters. Or they might be in a particular pattern, with the first four or the last four not being part of the code, or whatever. The cost code could also be backwards, though that is again not common, because you don’t want to confuse the salesperson.
If they are numbers, again, they might or might not include the cents figures. If there is a decimal point (period) two digits from the left end, that would indicate that the numbers were reversed as long as the cost would reasonably be more than two digits. Again, using the 40% profit, calculate 60% of the retail price, or perhaps up to 80% of the selling price, and see if the numbers in the dealer’s own item number, bear any resemblance to what you came up with. Again, there could be random numbers in front or behind, but other than a string of zeroes, that is probably unlikely. If it says this is an item number, however, there could be a series of numbers that actually represent the item in the dealer’s computer, and these would be part of a larger number, usually with a fixed number of digits, and the cost code would start at a given point within that number. If it is a stand-alone number, it is more likely to have other numbers before or after, and/or after the actual cost code, but not always. There is unlikely to be a period or decimal point in there, but if there is, that could be a clue as to which numbers you are looking for. I knew a camera shop one time that reversed the numbers, and put the decimal in there, two places to the right of the start of the cost code with random numbers in front of the cost code. Numerical cost codes are much more difficult to decipher, since they could use any formula. They might say add or subtract 5 from each number, for instance, so that one through five actually represent six through zero (ten) and vice-versa. But if you look at enough tags, and calculate cost as 40% off retail, you should be able to come up with an idea of how they coded their cost into the ticket. It’s not rocket science, but they don’t want you to know that it is there, or how to decode it….
Note that not all stores do this, but most stores that allow the salesperson to negotiate the price, do have the cost coded on the price tag. You just have to look for it, and when you see something that looks like it could represent the cost, see if the same thing appears on most of their price tags, and if the same set of rules can be formulated to make the cost appear correct. Once you have that, you may find certain items that have an unusually low cost. These will be items the store purchased at a clearance, and is continuing to sell at full retail, or nearly so, in order to make a huge profit. When I was selling motorcycle parts and accessories, we had a closeout on a Chinese made HJC helmet that they were discontinuing. Retail was $100 each, and we paid about $20 each. We sold most of them at full retail, and then closed the last few out at about $60 each (limited to sizes and colors on hand), for a huge profit! When I owned a computer store, I bought some VESA Local Bus IDE cards and video cards, for about $1.50 each for the IDE cards, and $2 each for the video cards. I bought ten of each, and then sold them for about $20 and $30 each, about 15 times what I paid for them. I had the only VLB cards in stock in the whole town, and I did a brisk business at a huge profit. Find something like that, and especially if they have a lot in stock, they might give you a good deal on them. I knew I would never sell all of those cards, but I knew that if someone brought in a computer for repair, I would have the parts, and would be able to fix computers that nobody else could fix, and score on the labor as well, and since I owned the whole stack for free after I sold the first one, that was not a problem!
Once you know the dealer’s cost you can negotiate based on the information in Jay’s book, HOW TO BUY A CAR WITHOUT LOSING YOUR SHIRT, which is available on Amazon either as a Kindle book, or as a paperback book. The paperback may be available in local stores, as well.
Can you use the information in this book to become a car broker? How can you make money using the information in this book. Find a salesperson at each of the major brand car dealers and/or independent used car dealerships in your community who would be willing to work with you, and sell cars to your clients at, say, $100 over invoice, with a reasonable profit on dealer-installed accessories and warranties. Find at least one salesperson at one dealership for each major brand, if you live in an area with more than one dealership for each brand. It usually will not be a problem if you shop slightly out of town, either. This salesman should be willing to pay you at least a $50 bird dog fee for every sold unit, and I would suggest asking for $100. They pay at least $50 per buyer for newspaper and other media ads, and you can practically guarantee that everyone you bring to them will be a buyer.
Then advertise that you can beat any deal on a new car. Charge $100 to the customer for beating their best deal by at least $100. You should know when they bring you a deal—if they do—whether you can beat it or not. Don’t waste time with someone who has already gotten a great deal. But if they are paying right at invoice for the car, and full pop for the dealer-installed add-ons, you probably can beat it handily. Collect the customer’s money up front. Refund it courteously if you cannot find him a car deal he likes, but get paid before you start negotiating with a dealer on his behalf.
And if the customer has gotten a great deal from someone OTHER than the dealers you normally work with, call your dealers and see if they are willing to beat it. It’s worth a phone call, and if there is rebate money floating around, they may be willing to sell a car below invoice. Or, of course, see if you can add his dealer to your own roster of dealers….
The dealer should pay you promptly after delivery of the car. Negotiating two orders a week like this would earn you a gross pay of over $15,000 per year and your only expenses would be advertising, phone, and transportation. You should drive a nice car for this, naturally, but not TOO nice. Leave the Cadillac in the garage, except when you are negotiating on a Cadillac, of course, and drive a Chevy. When you actually drive with the customer to the dealership, you should go with the customer, in the car that the customer intends to trade. Advertising costs can be contained by using bulletin boards in laundries and grocery stores, and by informing friends, co-workers, members of the PTA or church organizations, or whatever, or by using weekly “shopper” newspapers, and Craig’s list. The phone bill should be mostly local calls, and may not increase at all, especially if you use an “unlimited” cellular phone.
When you get larger, your local motor vehicle department might be able to sell you lists of people with cars that are older than, let’s say, three years old, and you could write or phone those prospects directly.
Dealers will not want to offer used cars at $100 over cost, but even a healthy profit of, say, $400 per unit, would likely save your client money over what they can negotiate on their own. This profit should be negotiated with the dealer up front, when you start in business. You might negotiate it as a percent, or as a fixed amount on all cars or varying by how old the car is, or some other characteristic of the vehicle. You should also know beforehand if there are going to be cars on which the dealer will balk at this agreement. If there is a car on which he knows he can make $2000, he will be very reluctant to sell it to your client for a $300 profit. If your agreement with him is that EVERY car is available for $300 over cost, hold him to it, but don’t burn any bridges, either. You need the dealer more than you OR the dealer need any one client.
This could be done on a part-time basis, until you see that you can make it work full time. Eventually, you will have dozens of satisfied customers referring all of their friends to you, and you could make a very nice living doing this, with a minimum of $150 bankable on every sale that might take you two or three hours. If you broker a minimum of two deals a week, with an average of four or five, you are making $30 K per year or more, with only a third of that reported to the IRS. If you want more than that, you’ll have to work a little bit harder, maybe offer your clients a small bird dog for each completed sale they refer to you.