Marketing
March 23, 2022

Amazon Retail Arbitrage and Everything You Should Know

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There are numerous side hustles to choose from, but only a few are as simple as retail arbitrage. Finding yourself at checkout with a cart full of valuable things or many carts is the best feeling for someone who does retail arbitrage. So, what is retail arbitrage?

Items for retail arbitrage are typically purchased on sale or clearance, giving a considerable discount over retail and the possibility for significant gains when sold online.

We'll go through some of the retail arbitrage strategies if you want to start retail arbitrage on Amazon.

What is Retail Arbitrage?

Retail arbitrage is an eCommerce business model that involves purchasing inventory at a discount from offline and online shops and then reselling it for a profit online.

The true cost is the time, effort, and resources spent going back and forth between merchants, looking for discounts, and taking advantage of bargains. All of this is together with listing products online and dealing with logistical issues.

As a result, if you are interested in pursuing a retail arbitrage strategy must have a strong desire to find bargains. In this article, we'll look at some of the greatest areas to look for retail arbitrage items and how to find them. But before we do that, there are a few questions we need to address.

How Do You Earn Profit from Retail Arbitrage?

Buying in bulk amounts is uncommon in retail arbitrage. Instead, the majority of retail arbitrage sellers will "pre-sell" things based on current discounts or deals.

Consider a local clothing retailer that gives a significant weekend discount on sports shorts. You'd instantly post those identical things at a higher price in your preferred shop.

Retail arbitrage sourcing involves physically acquiring those products from a retail store after you've attained a critical mass of sales that cover your costs and demonstrate demand for the product. Then you process and dispatch them to clients while profiting.

Savvy retail arbitrage sellers may combine this method with dropshipping, which eliminates the need to obtain things physically. However, profits for retail arbitrage sellers might be hampered by a variety of factors.

How Does Retail Arbitrage Match Up to Other Amazon's Business Models?

1. Private Label

When you develop your own product label/brand, usually by changing an existing product on the market, it's known as private labeling. For example, you might make a higher-quality garlic press than one now available on Amazon, have it reproduced from a manufacturer, and brand it with your logo.

It's the most popular way to sell on Amazon and maybe quite successful, but most sellers will require some initial funding.

2. Wholesale Business Model

Wholesale is when you acquire things in large quantities straight from a brand or from wholesalers with excess inventory to sell on Amazon, and it also requires startup capital.

This does not entail purchasing anything from a store. Instead, wholesale is a more long-term business strategy since you can replace orders every month, and because you are an authorized reseller, you don't have to worry as much about false claims.

3. Dropshipping

Dropshipping is another business model that allows you to purchase things directly from a manufacturer, who fulfills the order and sends it over to the client.

Benefits of Retail Arbitrage Over Other Business Models of Selling on Amazon

1. Startup at a Low Cost

Unlike wholesale and private label selling, which involve significant upfront commitments, you can do retail arbitrage with a small amount of money.

Experienced retail arbitrage dealers that have developed their company to over $10,000 every month are not unusual. However, for a few hundred bucks and a free Amazon Seller Central account you can get by, retail arbitrage is worth it after a month or two of continuous sales.

2. Flexible Schedule

You, like all Amazon employees, are your own boss. You determine when to engage in Retail Arbitrage and when not to. You'll have to find the items on your own time. Retail arbitrage can be a full-time job or a part-time hustle.

3. Simple to Start

None of this is complicated. You will learn the trade techniques after reading this blog article and will be able to get started right away.

This is an amazing place to start if you've always wanted to sell on Amazon. You will rapidly become comfortable with the selling process and FBA preparation method with lesser numbers.

In the beginning, scaling is also fairly straightforward. The more time you use to put in the work, the more goods you'll be able to find. This is especially true since, after a few runs, you'll notice that you're getting a lot faster.

4. Low-risk, High-Return Investment

There is a certain measure of danger associated with anything. However, if you understand how to source your items effectively, you may greatly reduce your risk.

Retail arbitrage's strong return almost pays for itself. Finding things that will give you 50% or more returns is fairly common. A 50 percent return is astounding considering the degree of risk involved.

a). Getting Started With Retail Arbitrage on Amazon

Retail arbitrage on Amazon

1. Create an Account with Amazon as a Seller

Setting up an Amazon seller account is the first step in getting started with retail arbitrage. You'll need this account to sell products on the marketplace. It will also provide you with the necessary tools to get started.

To do this, go to services.

Become an Amazon seller

To sell on Amazon, you must first create an account (Sign Up). If you click the yellow "sign up" button, you'll be sent to a page where you may sign up for either an individual seller account or a professional account.

Individual Seller Account

This account is free to set up, but you must pay a $0.99 commission on every Amazon transaction you make. A 15 percent consolidation charge is also applied to the sales.

You are only permitted to sell up to 40 goods as an individual seller. If you don't plan to sell more than that many items and won't be selling products from the prohibited categories, this account is perfect for you.

If you don't have a professional account, you won't be able to apply to sell in these categories. You might wish to consider a professional account in the future if you want to offer a wider choice of items.

Professional Seller Account

A monthly fee of $39.99 is required to register for a professional account. There are also changeable closing costs and extra referral fees with this account. You can list more than 40 items on Amazon, and you won't have to pay a set fee every time you sell something.

A professional account also allows you to join up for Amazon's Fulfillment by Amazon service (FBA). Your sole responsibility as an FBA seller is to guarantee that your items reach Amazon's warehouse. Everything else will be handled by Amazon after that, including:

  • Your merchandise will be stored at one of their fulfillment facilities.
  • Shipping to the product's purchaser
  • Getting the goods ready for shipping
  • Customer service if the buyer has any issues with the product.

Although this service may appear to be a little pricey to newcomers to retail arbitrage, it is well worth the money. Professional account users not only get all of the above privileges, but they also have a greater chance to win the Buy Box and are eligible for Prime delivery.

You'll want a professional Amazon seller account in the long term since you'll save money once you're selling more than 40 products each month, and you'll need one to earn the purchase box. Professional accounts also provide you the opportunity to seek permission to sell in limited categories, allowing you to offer a broader choice of items over time.

However, if you don't want to spend a lot of money to get started with retail arbitrage and open your own online store, you may go with the free alternative. As you begin to list your products, keep in mind the costs they impose.

2. Download the Amazon Seller APP

The next step is to download Amazon's free seller app. This app will give you all of the information you want to quickly determine the finest things to purchase.

It works in a very basic way by scanning product barcodes using your phone's camera. The price of the goods on Amazon will then be shown. The software will also show you the costs for selling the item, as well as other useful information that will help you assess product profitability.

b). Sourcing Retail Arbitrage Products

When deciding which items to buy, you must first determine the return on investment (ROI) on potentially profitable products. As a general guideline, you should purchase any things that provide you with a profit of over $3 and a 50% return after shipping and costs.

You'll need to submit the product selling price, the cost of purchasing the item, and the cost per pound for shipping to Amazon in order to get this information into your app.

After you've supplied this data, the program will calculate your predicted profit on the product based on that data. At this point, you should double-check three things:

  • Are You Eligible to Sell The Product?: The first thing to look into is whether you are eligible to sell that specific item. You can find out quickly by looking through the categories listed here. You'll never be able to sell the product if you mess this up. Make sure you don't make this mistake.
  • Will You Make Money? : Examine the net profit amount to check if it exceeds the minimal profit criterion. You may set your minimum profit criterion to any amount you like, but I recommend starting with $3 per item. This implies you will not buy any goods with a profit margin of less than $3 per unit.
  • What is the ROI Percentage? You must now compute the ROI % if your product matches the minimum profit criteria you've chosen. Simply divide your estimated profits by the product's cost to arrive at this figure.

Steps to Retail Arbitrage Sourcing and Starting Your Own Retail Arbitrage Business

1. Check Out Local Retail Stores

There are options when it comes to picking which local stores to start with when it comes to retail arbitrage.

Start with the retail store that is nearest to you and that you have the most convenient access to. Make it simple for yourself on your initial excursion, and then you may test out a range of local stores as time goes on.

Here are some of the best retail stores for you to consider;

  • Target
  • Walmart
  • Shopko
  • Home Depot
  • Menards
  • Lowes
  • Walgreens
  • Office Depot
  • Bed Bath & Beyond

2. Scan Clearance and Sale Products

It's time to utilize the Amazon Seller App to identify lucrative things to sell on Amazon once you've installed it and entered a business.

The best things are those that sell quickly and have a good return on investment. There is no magic bullet; you must seek until you locate these objects, and you must not limit yourself to one sort of item.

Before you buy anything that you plan to sell on Amazon, you should scan it with the Amazon Seller App or a comparable application.

This will show you the actual fees for that item, allowing you to make an educated decision about it. With these types of calculators at your disposal, you should be able to estimate your potential profit on any item you want to sell ahead of time.

3. Examine the Search Results and Select the Appropriate Listing

When scanning things using the Amazon seller app, it's fairly usual to get numerous results. Many goods will have duplicate listings, or some listings will be a 2-pack, 3-pack, or other combination.

On the screen, you should be looking at the following:

  • Features & Details: First, make sure you understand what this listing is for – one box, two boxes, and so on.
  • Sales Rank: This is displayed both under the title and in the Features & Details section. On Amazon, the sales rank varies per category, but a general rule of thumb is to seek goods with a sales rank of less than 100,000. It sells more if the number is smaller. Using a program like Keepa to check if that rank is consistent is critical.
  • Sellers: In the second row, you can see if the listing is on Amazon, the number of FBA sellers, and the number of vendors, including FBM.
  • Gross Profits and Price: The most crucial aspect of the challenge is if you can now sell the goods at a profit. If you go to the pricing area, you can enter your purchase price, and Amazon will break out all of the costs so you can determine whether or not to buy this item. Input your purchase price into the program, and it will automatically calculate your possible profit.

4. Determine the Number of Units to Purchase

Your decision on the number of units a product to purchase for retail arbitrage is dependent on your own personal risk tolerance. If you're new to retail arbitrage or Amazon selling in general, start with a small batch to validate the goods. Consider starting with 5 or 10 pieces and see how it sells.

5. Determine your Desired Return on Investment (ROI) or Profit Margin

If the amount of money you make back surpasses the amount you invested into your business venture is called return on investment, or ROI.

For example, if you paid $20 for a product and received $24 in gross revenues after a sale, your ROI is equal to the difference divided by your investment, or 20%.

However, you want to aim for the maximum possible ROI, not only to make more money for each transaction but also to give yourself some leeway in case the price drops.

Depending on your own preferences, you might accept a lower minimum ROI. Some sellers are content with a minimal return on investment, like 20%, as long as the product is sold within a month, whilst others want a return of at least 50% to justify their investment.

Types of Products for Retail Arbitrage Sellers to Sell

Not all items are suitable for flipping. Here are some of the top retail arbitrage categories. We'll go through the best sources to getproducts in each of these categories later.

1. Items on Sale/ Clearance Items

Anything on clearance sales, regardless of the store, is frequently the greatest retail arbitrage product. In general, the clearance section of every physical store you visit as part of your sourcing strategy should be one of your first stops.

Simply have your Amazon Seller app on hand to scan goods and determine possible ROI.

2. Health and Beauty Products

Sub-$20 products will be the strongest retail arbitrage candidates. This makes everything in the health and beauty sector ideal for bulk purchases, discounts, and profit.

3. Home Items

Reselling home decor, accessories, and home care supplies are among the most popular choices. This is owing to their widespread availability (making them ideal for the clearance items), consistent market demand, and mid-to-low price range.

4. Clothing and Footwear

You'll see that some of the most successful categories are ones with continuous demand throughout the year. Clothing is, of course, a basic human requirement. People will continue to buy clothes even if the economy is in a slump.

In addition, nearly all major retailers have a clothes department. Clothing and shoes are among the top retail arbitrage goods due to their steady demand and reduced price tag, as well as regular sales.

5. Sporting Equipment

Sporting goods are one of the few non-essential product categories that appeal to a large market. Sporting equipment is required by men, women, children, casual athletes, and weekend warriors alike.

This does not have to be a physically demanding sport. It might be for recreational activities like hiking, fishing, or camping. Since sports goods have such a wide price range, you may make a considerable profit if you take advantage of a large-scale retailer's offer, such as Bass Pro Shops or REI.

6. Toys

Toy demand is fairly stable throughout the year, although it spikes around the Christmas season. Retail arbitrage sellers can research prevalent discount trends and exploit seasonality, particularly for items in high demand or at danger of stock-outs.

c). Listing Your Arbitrage Products on Amazon

The next step after purchasing products to sell on Amazon is to list the things for sale on Amazon.

Post your items on Amazon and be ready to make your first sale. You may then ship the products to the FBA warehouses if you're using Fulfillment by Amazon.

Under some circumstances, fulfilling orders yourself could be a good idea. However, you will almost always discover that FBA will give greater benefits than merchant fulfillment.

You may not appreciate some things, yet they might nevertheless be incredibly profitable to sell. Allow the data to help you in making the best judgments possible on which things to purchase.

d). Create an FBA Shipment

It's time to send in your inventory now that you've acquired and posted the listing to seller central! You've taken the first step toward reselling things on Amazon. Here are the steps you should consider;

  1. Go to Manage inventory and look for your product
  2. Decide on the inventory to send
  3. Confirm your shipping
  4. Print FBA labels

e). Monitor Sales

You are on the way to becoming an Amazon retail arbitrage seller! You can use the Amazon seller app to keep track of your daily sales, manage orders, and adjust pricing if necessary.

If you notice that your products are starting to sell well, but the retail arbitrage work on finding more inventory increases, so you can keep selling.

If your products aren't selling as well as you expected, adjust your pricing to increase sales. Remember to format your SKU so that you always know how much you paid!

In a reselling business, the key to success is to always be hustling and looking for new products. Retail arbitrage might be the right business model for you if you enjoy the hustle of going from store to store.

Online Arbitrage vs Retail Arbitrage

Online arbitrage is similar to retail arbitrage, except that you search for things on merchant websites rather than in shop aisles. The best aspect of online arbitrage is that it can be done from the comfort of your own home.

Online businesses, like physical stores, will feature sale and clearance sections with a variety of reduced items. This is a smart place to start because the pricing on Amazon is likely to be higher. Although this work will take time, it will be worthwhile if you are consistent and put out some effort.

Go through each clearance or sale item manually and look for the same item on Amazon. You can use software like Jungle Scout's Extension to predict how many times the product sells each month if the price is greater on Amazon. You may also utilize Extension to figure out how much money you could make.

Keepa can also show you historical pricing and sales statistics for a product, as well as if Amazon has ever sold it.

The next step is to place an order for the items and have them delivered to your home. You may prep, pack, and send your goods to Amazon and have them fulfilled through FBA once you get them.

Tips and Tricks for Retail Arbitrage on Amazon

1. Selling Discontinued Products for Maximum Profits

Have you ever had a product that you simply enjoyed but the brand chose to discontinue for whatever reason?

We've all been there, and we'd be willing to pay top dollar to have those items back. Some customers are ready to pay exorbitant prices for things that appear to be hard to come by.

You might be wondering how, if a product has been discontinued, you can still find it in stores. Some discontinued items are still on the market and may be found at retail stores, discount stores, grocery stores, and other places.

Techniques for discovering discontinued items include the following:

  • Instead of going to a large shop like Walmart, go to stores that are unique to your community.
  • Look for things that appear to be old. While this may sound strange, you could come across certain items with labels that appear to be old, faded, or even dusty.
  • Look for things with the word "refills" on them. In the cleaning department, there are several items that require refill packs in order to continue using them. Many of the refills have been discontinued for various reasons, yet individuals still like using them.
  • Look for the term "discontinued" on eBay. Then just look at sold listings. This will display all of the "discontinued" goods that have recently been sold on eBay.

2. Check on Trends and Sell Seasonal Products

While you might stroll into a shop or browse the internet for things that would be profitable to sell on Amazon, you could also conduct some study and plan ahead for certain products you want to discover.

Seasonality is one factor to consider. Try to find out which items are presently or will soon be popular, as well as which products sell more at particular times of the year.

Toys, for example, are particularly popular during the Christmas season, as are inflatable pools or floats throughout the summer (and profitable). Since demand is so strong at certain periods, stock in local retail stores tends to run out quickly, resulting in a higher selling price for online retailers.

You'll be well on your way to running a thriving Amazon resale business if you remain on top of trends and current events.

3. Patience is key

It might be tiring to go into a retail store and scan item after the other. It's also aggravating when you can't seem to locate any profitable items. Simply keep going! On Amazon, you will eventually locate things that will make you money.

4. Be Data-Driven

Base your buying decisions on the different data you see in the Amazon seller app and Amazon seller account or other resources like Jungle Scout and Keepa. However, you don't want to get something that you won't be able to sell.

5. Always Check the Price History

With this business model, if another vendor "tanks the price," pricing can shift in an instant. That is to say, the thing you buy may no longer be lucrative. This is why you should also check the pricing history.

6. Keep Note of the Customer Purchases

In contrast to private label, where you will be the sole seller of your product, reselling items on Amazon will result in you sharing the purchase box with several sellers. If you find a product that sells 300 times every month, keep in mind that if there are other sellers on the listing, you will not earn all 300 sales.

Is Retail Arbitrage Legal?

Retail arbitrage is still extremely legal in the United States. The strategy also includes legal safeguards to ensure that major companies cannot bully resellers into shutting down small businesses.

The First Sale Doctrine permits people to resale products as if they were brand new. The sole need is that resellers have lawfully bought the products in issue. However, this rule has few exceptions, such as selling counterfeit or illegal goods, but a retail arbitrage seller does not have to worry about authorities knocking on their doors.

Furthermore, most marketplaces, such as Amazon and eBay, permit retail arbitrage on their platforms. In any case, always keeping an eye on the terms of service anywhere you're selling is usually a smart idea.

Why Does Retail Arbitrage Still Work?

You might be questioning why retail arbitrage still works and why people would buy things that are sold at a higher price rather than just going where they are sold at the lowest price. Here are three main reasons why that happens.

1. Different Pricing

In one location, a handbag that costs $15 could cost $45 in another. Leather handbags may be widespread or slow-moving in one location, while in another, they may be in high demand. This is something that retail arbitrage sellers take advantage of to increase their profit margins.

2. Convenience

A large number of customers are ready to pay a premium for convenience. For example, some individuals would gladly pay a little extra to have things delivered to them rather than having to travel to the store, look for what they need, and wait in lengthy lines to buy it.

3. Supply and Demand

Supply and demand are the most basic economic laws. Prices can increase when there is a lack of supply and high demand.

Consider the demand for hand sanitizer in 2020 during the COVID 19 epidemic. Since the supply wasn't accessible locally, people were marking up these things by 100 percent or more on Amazon and selling out without a hitch.

How Much Can One Make from Retail Arbitrage?

One of the drawbacks of retail arbitrage is that many parameters are outside the seller's control:

  • You have no control over when products go on sale.
  • You have no control over which things go on sale.
  • You can't control market demand for products.

In many instances, the retail arbitrage seller is susceptible to the fluctuations of giant multinational merchants. As a result, people who lack the discipline to hunt through discount bins and persevere through unsatisfactory starts may find this model scary.

On the other hand, retail arbitrage is a viable business strategy for those prepared to put in the effort. It may be necessary to sell smaller goods in order to reinvest revenues in larger items.

Many Amazon arbitrage sellers earn a living solely from selling on the Amazon marketplace. Resellers can also use a variety of scanning programs, including one given by Amazon for free. These technologies make it simple for sellers to take a photo of a barcode and assess their potential income right away.

In summary, there's never been a more rewarding moment to engage in retail arbitrage, given the speed and capability of mobile devices and internet tools.

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