profitting from fear during a crisis business failure
June 2, 2020

Profiting From Fear During A Crisis: The Hand Sanitizer Business Lesson Gone Wrong

Matt and Noah Colvin.  Amazon.  Hand sanitizer.

You wouldn’t think those three together would make for an interesting story, but they do.

I’m sure with the recent outbreak, you’ve probably heard of people buying up all the toilet paper, paper towels, and other items.

But this story is on another level. As the beginning of the Coronavirus was just starting to take shape in the United States, Matt and Noah Colvin saw an opportunity to profit from this scenario.

Now, they aren’t strangers to retail arbitrage. They’ve made a living selling on eBay and Amazon, and they planned to do what has been working for many… buy goods cheap in discount stores, and sell them online at higher prices. It’s a simple business model that normally works well and is popular among people starting a simple business online.

However, in this case…they crossed the line. Literally.

When the news about the virus was starting to take shape, Matt and Noah embarked on a 1300 mile road trip between Tennessee and Kentucky. The goal? Buy up all the hand sanitizer you can from places like Dollar General and more.

Why? Because the public was starting to panic and the ‘news’ told the public to make sure they washed their hands to prevent from getting the virus. So Matt and Noah decided that it would be cool to control the supply since the demand was already set. But here’s where it went wrong….

They began to mark up the hand sanitizer to enormous prices. Seeing that so many were making major profits in days, (some $20k, others $40k) by reselling hand sanitizer and breathing masks, these two brothers knew that their pot of gold at the end of the rainbow was finally here.

At first, everything was going well. Until…people started to complain to Amazon.

Now, it wasn’t the fact that they (the brothers) had raised the prices. It was that people couldn’t get any from the local stores and felt they were victims of price gouging.

The end result? Amazon closed down their accounts. And I believe that eBay followed suit.

Warren Buffet said when others are fearful, that’s the time to be greedy, but I don’t think this is what he meant!

What Matt and Noah Should Have Been Thinking?

Firstly any business model which relies on making a quick buck is flawed. You are chasing trends and lack of stability. It requires you constantly reinventing your business by finding the latest short term trend.

Secondly, if you treat people badly, then you risk repercussions and rightly so. 

If these two brothers would have been thinking a bit longer term, they would have stood to make much more profit (possibly this year) than what they were trying to get while being heroes at the same time.

If they actually sourced hand sanitizer themselves rather than taking it off the shelves, or set up a factory to make more to help alleviate the lack of supply, they could have sold the product into the long term. 

In doing so they would have a large customer database, positive press for being helpful, and ongoing business. Yes, it would have been more work and made less in the short term, but in the long term, they would be better off. 

SHARE ON:
Share on facebook
Share on twitter
Share on linkedin
Share on pinterest

Related Post