Are you looking for a way to make money online? Have you heard about Amazon’s Retail Arbitrage business model, but don’t know where to start?
If so, then this guide is just what you need! In this guide, we’ll walk you through the basics of Amazon retail arbitrage and how it can be used to turn a profit.
Retail Arbitrage: What is It?
Retail arbitrage is a business strategy where someone buys goods at a lower cost from a wholesaler or retailer and then resells them on Amazon for a profit. With new, secondhand, or even overstocked goods, this is possible.
The secret to profiting from retail arbitrage is to identify goods that may be bought at a discount from wholesalers and sold for more money on Amazon’s marketplace.
Online arbitrage, on the other hand, involves purchasing items from online retailers such as eBay or Craigslist and then selling them for a profit on Amazon.
Not only does retail arbitrage provide an easy way to make money online, but it also helps create more competition amongst sellers and drives down prices even further.
Why Would Retail Stores Markdown Their Prices When They Could Sell Them Online?
There are many reasons a retail store might mark down their prices. For instance, they may need to clear out old inventory and make room for new products. Or, the store may want to attract more customers by offering discounted items.
Regardless of why retail stores do it, this is great news for those who engage in retail arbitrage, as it creates an opportunity to purchase items at huge discounts.
Keep in mind that retail stores have limited room for stocking merchandise. It is a difficult and constantly-evolving task to fill that small space with the products that will bring them the most clients, sales, and profits.
Sometimes retail stores must cut ties with a product that isn’t selling as well (or doesn’t have as much long-term promise) as that new product to make room on their shelves for a new shipment that arrives.
Sales and clearance aid retail stores in getting rid of excess inventory to create a place for new deliveries. Despite the fact that you might think they are losing out on a chance to earn money, they are actually given the opportunity to increase their income in another area.
You can benefit from these unspent funds by purchasing those goods and engaging in retail arbitrage, where there are no physical restrictions. You can also engage in online arbitrage for this.
Amazon Associates Program: Individuals can earn commissions by referring customers to Amazon’s website through this program.
Dropshipping: This business model involves sourcing items from a third-party supplier and then listing them on Amazon for sale. When an item sells, the dropshipper ships the product directly to the customer.
Handmade: Sellers can create and sell unique, handcrafted items on Amazon.
Regardless of which business model you choose to pursue, understanding the basics of retail arbitrage is essential if you want to succeed as an online seller. So take the time now to educate yourself and get the most out of retail arbitrage.
Why Choose Retail Arbitrage Over Other Amazon Business Models?
Retail Arbitrage is a great choice for those who are looking to make money online without investing too much time or money into the process.
Unlike other Amazon business models, you don’t need to create any products yourself or deal with the storage and shipping of items.
In retail arbitrage, all you need to do is purchase items at wholesale prices from wholesalers or retailers and then resell them on Amazon for a profit.
You also have the flexibility of choosing which products you want to sell and how often you want to source inventory so that you can tailor your retail arbitrage business model around your lifestyle.
Popular Product Categories Used for Retail Arbitrage
The next step is to download a retail arbitrage app. This will allow you to quickly and easily search for items online that can be purchased at discounted prices and resold on Amazon for a higher price on your online store.
It works by scanning product barcodes with your phone’s camera, which then brings up all relevant product information on your phone, including expected profits, which products are already oversaturated on Amazon, and how much the item currently sells for there.
Consider Working With an Existing Private-Label Brand
Private label companies will provide ready-made products with their own packaging, product descriptions, and photos. This eliminates the need for you to spend extra time and money on creating your own custom product listings from scratch.
Examine the products for similarity, and investigate the product listing to learn who the real manufacturer is. From there, you can check the manufacturer’s website or contact information and ask them about branding a product for your shop.
You can also look for local makers or craftspeople. For instance, if a local soap manufacturer is aware of you, you could contact them to see if they’d be open to making soaps just for your shop that include your logo. Being local also makes it simpler to establish an excellent working connection with the supplier.
Once you’ve identified your products and wholesalers, it’s time to purchase the items at wholesale prices.
Be sure to factor in all costs associated with the purchase, such as shipping fees, taxes, and any other miscellaneous expenses, when calculating the total cost of the product.
This includes providing detailed product descriptions, using keywords in the title and description, and including high-quality images.
Monitor Listings Regularly
It is important to monitor your listings regularly to ensure they are priced correctly and accurately reflect stock availability. You should also check in on your competitors’ prices to ensure you stay competitive in the online marketplace.
Ship Orders Quickly and Provide Excellent Customer Service
It is important to ship orders quickly and provide excellent customer service to maintain a positive feedback rating as well as increase repeat business. This will also boost your sales rank.
Don’t forget to market your products! Utilize social media, email marketing campaigns and other tools to get the word out about your store and drive more customers to it.
Run Amazon-Sponsored Ads
One of the best ways to increase sales is by setting up Amazon-sponsored ads. This will allow you to target potential customers who are already interested in your products, increasing the chance for more purchases.
They operate on a pay-per-click (PPC) basis, where you are charged a fee each time an advertisement is clicked. If you intend to use them, set daily restrictions because they can grow quite expensive. Increase the daily PPC budget if you notice that many of your clicks are leading to sales.
Participate in Amazon’s Lightning Deals
Amazon’s Lightning Deals are limited-time promotions that allow sellers to offer their products at a discounted rate for a set period of time. Participating in these deals can help increase your sales and generate more revenue.
Promote Your Amazon Store Externally
Consider promoting your Amazon store externally. This includes building an email list, using influencers to market your products, and advertising on other websites or social media platforms.
The Advantages of Amazon Retail Arbitrage
Now that you know the basics of Amazon Retail Arbitrage, let’s look at some of the advantages it offers:
With retail arbitrage, you can choose which products you want to sell and when to source new inventory. This gives you the freedom to customize your business around your lifestyle.
No Storage or Shipping Costs
As opposed to other Amazon business models, such as FBA, there are no storage or shipping costs associated with retail arbitrage because all items are purchased from wholesalers or retailers and shipped directly to the customer.
The Disadvantages of Amazon Retail Arbitrage
While there are many advantages to using Amazon Retail Arbitrage, there are also some drawbacks that you should be aware of:
Time-Consuming Process
The research process for retail arbitrage is quite lengthy and time-consuming as it requires you to look up prices on various websites in order to determine which items are most profitable.
This means that to make a good return on your investment, you must take the time to research products and wholesalers properly.
Risk of Inventory Not Selling
There is also always a risk that your inventory may not sell. This could be due to inaccurate descriptions or pricing, the item being out of season, or simply because there is too much competition in the market. It’s important to consider this when selecting which items to purchase.
How to Choose the Right Products for Amazon Retail Arbitrage
Now that you understand the basics of Amazon Retail Arbitrage and what it entails, let’s look at how to choose the right products for your business.
When selecting products to sell, it is important to keep in mind certain criteria such as:
Keep up with the latest trends in consumer products so that you can identify potential hot items to sell. This will help you stay ahead of competitors and maximize your profits.
Consider Seasonal Products
Consider selling seasonally relevant products to tap into the increased demand for these items.
For instance, toys are very popular throughout Christmas, as are inflatable pools and floats during the summer. The great demand at these particular times, availability often decreases quickly in physical stores, which results in higher online selling prices.
Certain items that have been discontinued are still available and occasionally turn up at grocery stores, discount stores, and other establishments. Simply being in the right place at the right time is your responsibility.
Learn Individual Store Markdown Schedules
Knowing the markdown schedule of your local stores will help you find items that are discounted and can be resold at a profit.
Ask store employees when they usually mark down items, or try to keep track yourself by visiting the store regularly. This information can be invaluable in finding quality products for your Amazon Store.
Make sure to check the condition of any product you plan on buying, as well as its expiration date if applicable, as these factors can greatly affect how much you can sell it for on Amazon.
Track Competitor Prices
Regularly check competitor prices so that you can adjust your own listings accordingly. This helps ensure your prices are competitive and encourages customers to purchase from you instead of other sellers.
Collaborate With Other Sellers
Networking is key when it comes to being successful on Amazon. Try joining a Facebook group or forum dedicated to retail arbitrage and collaborate with other sellers who are engaged in the same business model as you. This allows you to share tips, resources, and even find new suppliers for inventory.
Be Patient and Persistent
It is important to remember that success doesn’t happen overnight. Building a profitable retail arbitrage business takes time and persistence, so don’t be discouraged if you don’t see immediate results.
Rely on Data When Buying Things to Sell
Data is your best friend when it comes to making decisions about which items to buy and how much to pay for them. Monitor sales trends, competitor prices, customer reviews, and other data points to make informed decisions that maximize profits.
Start Small
Start by selling a few items at first and then expand your inventory as you become more comfortable with the process. This helps you manage your expenses and avoid any risks associated with investing large sums of money upfront.
Final Thoughts on Amazon Retail Arbitrage: A Beginner’s Guide
Amazon Retail Arbitrage can be a great way to make money online and have complete control over your business. It is important to do your research, prepare yourself for any risks that may come up, and remember that success doesn’t happen overnight.
By following the tips outlined above and keeping up with market trends, you should be able to develop a profitable retail arbitrage business on Amazon.
Frequently Asked Questions
Is retail arbitrage legal?
Yes, retail arbitrage is legal. However, you must be aware of any tax requirements in your jurisdiction and make sure to register for sales tax collection accordingly.
How much money can I make with retail arbitrage?
The amount of money you can make with retail arbitrage depends on how much time and effort you put into the business. Proper research and analysis are key when it comes to making profits.
Do I need a business license for Amazon Retail Arbitrage?
In most cases, you don’t need a business license for Amazon Retail Arbitrage. However, it is important to check with your local authorities or consult an accountant if any specific requirements apply to your location.
Is retail arbitrage risky?
Yes, retail arbitrage carries some risk. As with any business venture, there is always a possibility of not selling your inventory or losing money due to inaccurate pricing or other factors. It’s important to do your research and weigh the risks before investing large sums of money into inventory.
Does Amazon prohibit retail arbitrage?
No, Amazon does not prohibit retail arbitrage. However, you must be aware of the Terms of Service and all applicable laws when engaging in this business model.
How much time do I need to devote to Amazon Retail Arbitrage?
Generally speaking, most sellers spend several hours each week researching products and managing their listings. Be mindful that this type of business requires ongoing effort if you want to see consistent results.
Is there any way to automate my Amazon Retail Arbitrage process?
Yes, there are certain tools available that can help automate the process of researching and sourcing products and managing your listings. These tools can be quite helpful for busy sellers who do not have time to manually research products on a daily basis.
Do I need to buy in bulk for Amazon Retail Arbitrage?
No, you don’t need to buy in bulk for Amazon Retail Arbitrage. You can start with just a few items at first and then gradually expand your inventory as you become more comfortable with the process. This helps minimize risk while still giving you the opportunity to make profits.
8-figure Amazon seller and serial online entrepreneur since 2015. Research and practice various online business models, and apply his in-depth learnings to further expand and grow his businesses as well as help others to achieve greater successes. Ex-VP of a high tech VC in Vancouver and a Management Consultant with over a decade of experience in the industry. Master's Degree from HEC Paris.
