What I did wasn't anything special. I simply incorporated the junkyard system into the secondhand goods business, since I was already dealing with used computers.
CEO Wu, acting as the smelter, set the final price. I, as the wholesaler, determined the unit prices considering processing and margins. And the employees at each branch acted as middlemen, collecting secondhand goods from junkyards and earning their own margins.
It was the same structure as the discarded computer network I had envisioned.
Although the profit margin per unit decreased, the increased volume collected by the employees working day and night to earn their margins would more than compensate for it.
But the unexpected effect of this system started to show in a different area.
"What is this? This came from North Chungcheong-do? Didn't they come last week too?"
"Yeah, why are they sending us so many clothes instead of the computers we asked for?"
The employee I had assigned to the North Chungcheong-do branch arrived with a truck full of used clothes. I stared at him in disbelief, and he approached me.
"Sir, it's about 600 kg of clothes. There are about 2 tons piled up in the warehouse already. And there are two computers and a TV too."
"Two tons in the warehouse already?"
"Yes. The price for used clothes this week is 200 won per kg, so that's 120,000 won. And the price for two discarded computers and a working 15-inch TV is 30,000 won."
"This is driving me crazy. Maru, take care of the payment."
"And sir, can I use the 5-ton truck? The junkyards are begging us to take the goods, but the 1-ton truck is too small."
"…The 5-ton truck is already being used by the South Chungcheong-do branch."
"Alright."
The employee clicked his tongue in disappointment and went to unload the clothes into the warehouse. Behind him, a truck from South Jeolla-do, loaded with used clothes and dining chairs, was waiting to be weighed.
"What's going on? Why are they all coming to me instead of the secondhand dealers?"
"Mr. Park, our boss says it's because you disrupted the unspoken rules of the secondhand industry."
That's what Manager Cheon told me when I asked CEO Wu directly while delivering the clothes.
"Unspoken rules?"
"We're not the only ones buying used goods in Korea and selling them to China. But the prices vary among secondhand importers, and they don't share that information. When Korean secondhand traders bring us goods, we determine the prices based on the current market situation in China. And the same goes for when those traders buy from their sources. Junkyards and small secondhand traders call in secondhand wholesalers when they have a certain amount of goods, and the wholesalers set the prices and buy from them. Of course, the prices are kept confidential among Korean secondhand wholesalers. Since everything is confidential, the buyers can set the prices as they please. We estimate that they're making at least a 50% profit margin at each stage."
"So they were colluding and making huge profits by keeping everything secret…"
"And then you suddenly came along and made the prices public. Moreover, you offer fixed prices every week. Our boss says it's a brilliant idea."
In short, I had disrupted the system where secondhand wholesalers were ripping off junkyards and small secondhand traders by offering low prices. And I did it from a completely unexpected industry.
"He says the situation is quite interesting. 80% of the secondhand goods in the market come from junkyards, and now that the price list has been distributed nationwide, they're saying there are no goods left."
"So that's why all these goods are coming to me?"
"Yes. Some of the secondhand traders who used to supply us even came by. They asked if we were receiving goods from the crazy guy who was disrupting the market. They threatened us, saying that if we did, they would stop supplying us."
"Hmm, I didn't intend for this to happen. I can't let CEO Wu suffer because of me. I'll stop distributing the price list."
Manager Cheon translated my words to CEO Wu, who shook his head. Manager Cheon listened for a while, nodded, and then said,
"He wants you to continue. We're fine with buying at fixed prices, and if you continue distributing the price list with a reasonable margin added to the prices we give you, the volume of goods you'll receive will be enormous. Your price list has already become the benchmark in the secondhand industry. He says that even if the profit margin per unit is small, the increased volume will make it profitable. He wants to take this opportunity to drive out all the Chinese importers and the secondhand wholesalers who are manipulating the market. He wants to control the secondhand market together with you."
It was an unexpected situation, but it wasn't necessarily bad. It could even be an opportunity.
If I could really influence the secondhand market through the price list, drive out other businesses, and establish myself, the price list itself could become a weapon.
"I could raise the price of used clothes, let the traders buy them up, and then crash the market, causing them to lose money."
The more I thought about it, the more appealing it sounded. My intuition was tingling with excitement. As I was organizing my thoughts, Manager Cheon said,
"Our boss says he's willing to lend you money for investments, like hiring more salespeople, if you need it."
I shook my head and said,
"I don't need investment money. Instead, Manager Cheon, ask CEO Wu if he can raise the prices. I'll reduce my margin significantly in return."
"If we raise the prices while you reduce your margin, all the goods will come to us."
"That's right. It won't take long. Even if we take a loss for now, we can crush them with a price war and then buy at our own terms. We can always recover the losses later, right?"
"He says it sounds interesting. He wants to know how much you're willing to reduce your margin."
I spread my five fingers and said,
"5%. Let's take only a 5% margin."
***
Yoo Cheon-sik was a secondhand trader operating in Gyeonggi-do. He mainly visited junkyards, bought sellable items, and sold them to Chinese importers.
Chinese secondhand traders had entered Korea in 1992 after the establishment of diplomatic relations between the two countries. China was a developing country with a large population of low-income earners, so secondhand goods were incredibly popular there.
As a result, items that were once considered trash and discarded started being sold as secondhand goods, and anyone who started a secondhand trading business during that time must have made a fortune.
I thought it was beneficial for junkyards too. In the past, they would have just burned low-quality used clothes, but now secondhand traders were buying them, which helped the junkyards.
It had only been three years since he started this business, and he had already bought an apartment and a mid-sized sedan for his wife. He had gone from being nagged for not earning enough to walking with his head held high. His in-laws treated him differently now.
But lately, it had become incredibly difficult to find goods.
"No, Mr. Kim, I'm telling you, my price is the best! You even treated me to drinks a while ago, saying you made a good profit. Why are you suddenly like this? I won't make any profit if I offer more than this. Really!"
"Look, I told you I'm not selling. Why are you bothering me? I have another buyer coming, so go find another source."
"I'm offering 180 won per kg for used clothes, when you were getting 50 won not long ago. And why won't you sell me those radios? I'm offering 5,000 won each!"
There were over 100 boxes of radios stacked in a corner of the junkyard. The junkyard owner said impatiently,
"Those radios came from a factory that went bankrupt. I already negotiated the price with another buyer when I collected them, so don't worry about it. Can you please leave? I have work to do."
Yoo Cheon-sik was rejected. But the problem was that it wasn't just one place. He was repeatedly turned down. He headed to a junkyard owner he was friendly with and occasionally had drinks with. The owner greeted him warmly, and he said hopefully,
"Sir, please sell me some used clothes. I'll give you 200 won per kg, just for you."
"The price has gone up quite a bit. But I already promised to sell them to someone else. Sorry."
Yoo Cheon-sik exclaimed in frustration,
"What's going on with everyone? 200 won is barely any profit for me!"
The Chinese importer he supplied to paid 250 won per kg for used clothes. A 1-ton truck could carry about 500 kg of used clothes, and when he used to buy them for 50 won, he would make a profit of 100,000 won per truckload. He used to buy radios for 2,000-3,000 won and sell them for 20,000 won each to the importer. But now they wouldn't even sell them to him for 200 won, leaving him with a measly 50 won profit per kg.
As Yoo Cheon-sik was about to lose it, the hesitant junkyard owner took out a piece of paper from his pocket.
"Take a look at this. This is the price list from the buyer I'm dealing with now. I'm not heartless. If the prices are similar, I'll sell to you. Try to match it."
Yoo Cheon-sik hurriedly took it and unfolded it.
"Chunha Trading Price List… April 24-30, 1995… Used clothes… 260 won???"
He was shocked.
"My selling price is 250 won, and they're offering 260 won? Radios for 30,000 won? How can they even collect them at those prices? Is the Chinese importer directly collecting from junkyards now?"
"They're not collecting directly, but we have to deliver the goods to their designated warehouse. The collection price is 230 won, it's written there. So to save time, I'll sell to you even if your price is similar or slightly lower. How about 230 won?"
Yoo Cheon-sik said with a long face,
"My selling price is 250 won, so 20 won profit per kg means I only make 10,000 won per truckload. I'd rather not do it at all."
It was the difference between retail and wholesale. The way they made money was different.
Existing secondhand traders, working alone or with a few employees, bought used goods cheaply from nearby sources and sold them to Chinese importers, making a profit from the price difference. But I adopted a high-volume, low-margin approach, sacrificing profit margin per unit for volume.
"The problem is that we have too much."
I quadrupled the number of branch employees. I hurriedly procured trucks from everywhere. I bought several forklifts and grapple excavators and hired 50 day laborers to sort and load the various secondhand goods.
But it still wasn't enough to cover all the junkyards in the country, so starting with this price list, I added a delivery-based pricing system, where junkyards would receive an additional payment for delivering the goods directly to our warehouses.
And then the goods started pouring in like crazy. We had everything.
Radios from bankrupt manufacturers, chairs and desks from closed offices, and so on.
We were using the computer assembly factory for both computer repairs and secondhand goods collection, but the sheer volume of goods started interfering with the computer repair work. So we were currently negotiating to buy a 5,000-square-meter site near the industrial complex.
"Whew, the tail is wagging the dog now."
Our original target, discarded computers, was also doing well.
Instead of selling computers to other buyers, junkyards were selling them to us along with other secondhand goods since the prices were similar, which significantly increased our collection volume. But the problem was the other secondhand goods.
With only a 5% margin, after deducting transportation costs, driver salaries, and labor costs, the actual profit margin was only 1-0.5%. But the volume was so massive that we were surprisingly profitable.
"No one can compete with us if we keep this up for a year."
This strategy was impossible for other secondhand traders to replicate. The Chinese secondhand export market had only emerged three years ago. There was no one else with the scale and financial resources to sustain such a low-margin business.
To compete with me, they would need a nationwide network, the ability to buy in bulk, and enough cash to survive until they could sell the goods. It would be difficult unless they formed an alliance.
But would those who had never shared their prices so easily form an alliance? I didn't think it was possible.
"In just a week, we moved 800 tons of used clothes, with a purchase cost of 230 million won. 5,000 chairs, 4,000 radios, 1,000 dining tables, 500 cassette players, and other miscellaneous items…"
It usually took about five days for the goods to travel from junkyards to branch warehouses, then to the main warehouse, and finally to CEO Wu after a final sorting process. The amount of money tied up during those five days was approximately…
"1 billion won."
This strategy required at least 1 billion won in cash flow to keep the business running. And it was surprisingly profitable.
"We deliver every five days, so a net profit of 10-50 million won per delivery. That's about 40-50 million won per month."
I couldn't help but smile.
"I was prepared to take a loss, but this is great. To all the secondhand traders in Korea and China, please go bankrupt soon. Let me make some money."