In December 2020, Jamie and Sarah McCauley stumbled into their strangest side hustle yet: Buying pallets of items people returned to Target, Walmart and Amazon.
The pair — who also flip furniture and renovate and rent out properties in West Michigan — first saw a distributor selling the boxed collections in a Facebook group. The process seemed simple: Interested parties visited a local warehouse and paid $550, on average, for a pallet of returns.
The caveat: You don't know what items are in the boxes, or what condition they're in.
Since then, Jamie, 33, and Sarah, 32, estimate they've spent about $7,150 on pallets from Amazon, Walmart and Target.
They've made about $19,500 in profit by reselling the items in those boxes on eBay and Facebook Marketplace, they say. A single $525 pallet from Amazon resulted in 25 resalable items that collectively went for $1,880 in July, according to documents reviewed by CNBC Make It.
"It really started off as an experiment to see if you could make real money from it if you treated it like a job," Sarah says. "So, we kind of did it for fun, then realized it was a really great way to make money."
But pallet flipping is a gamble, the couple says. Even the lucrative Amazon pallet contained 19 pieces of inventory that still haven't sold, including some items too damaged to list at all.
Here's how the side hustle works.
After selecting a pallet, Jamie and Sarah load its saran-wrapped cardboard boxes onto trailer behind a pickup truck, bring them home, and film themselves unboxing the products for their YouTube channel.
As they unwrap items for their 109,000 subscribers, they estimate each product's retail value based on its list price and condition. Most items are opened and lightly used, which means the McCauleys typically list them for resale at roughly 60% of their original price.
Jamie says it typically takes one to two weeks to make their money back, and four to eight weeks to sell 90% of the items. Notably, they've never lost money on a pallet, he adds: "We've had some really bad pallets, but we always at least break even."
The McCauley's aren't alone. Dozens of YouTube and social media accounts are dedicated to giving tips and tricks to maximize return value on pallets.
When online shopping's popularity rises, returns skyrocket too. Last year, an average of 16.6% of all retail purchases in brick-and-mortar and online stores were returned, according to a National Retail Federation report.
Some of those returns get sent to liquidation warehouses, primarily when retailers don't have space for the extra inventory. It can also happen when retailers want to save money, says reverse logistics company Optoro: Between hiring people to inspect the returns and the cost of repacking the items, processing returns can be expensive.
There's another reason pallet flipping is particularly lucrative right now, Jamie and Sarah say: With a potential recession on the horizon, people are more willing to purchase lightly used items at a discount.
"When a recession hits, people don't want to pay full price for things," Sarah says. "[Resellers] thrive in a recession because people are trying to save money in any way they can."
The couple's pallet-flipping videos are popular on their YouTube channel, which also includes content about reselling furniture, home renovations and real estate investing. The McCauleys have brought in more than $102,000 from YouTube so far this year, adding significantly to their pallet-flipping haul.
The videos have a dual purpose, too: Jamie and Sarah say they want to show viewers anyone can make money in reselling, especially during an uncertain economic climate.
"We started to realize: This is a great way for people to make extra money if they have bills, or they just aren't able to pay their rent, or they want to go on a nice vacation with their family," Sarah says. "Anyone can do it."