You have most likely come across the term “retail arbitrage” if you’ve thought about launching a company on Amazon. You may have heard stories of merchants who benefited significantly from Amazon retail arbitrage. Selling on e-commerce sites has rapidly grown since more people choose online shopping.
Entrepreneurs now have more options for making money online because of the expansion of e-commerce. Retail arbitrage is a fantastic way to get started. You may get started with as little or as much money as you feel comfortable spending. It is perfect if you don’t wish to establish a brand or create a unique online store.
We have created this guide to help you understand what Amazon retail arbitrage is and how you can get started yourself!
Retail Arbitrage Overview
Arbitrage, often known as reselling, is profiting from a price difference among two or more markets. Retail arbitrage refers to purchasing things at a discount from merchants, including online stores or local retail stores. And then resell the products at a higher price.
Online arbitrage is where sellers also purchase items they discover online. The strategy is the same. You buy items for a low retail price to sell them for a higher price on Amazon, earning the profit margin. For some people, online arbitrage is much better as you can do everything from home.
You may wonder if retail arbitrage is legal. Thankfully, it is. The first-sale rule suggests that if you legitimately purchase discounted products, you have the right to resell it, provided it is undamaged. The item must always be sold in brand-new condition if resold as new.
Comparing Business Models On Amazon With Retail Arbitrage
Purchasing goods in bulk straight from a brand or wholesalers with extra inventory to sell on Amazon means engaging in wholesale. This kind of Amazon business also involves an initial investment. It does not entail placing a purchase order with a retailer.
Since you can replenish orders each month and you’re an authorized reseller, you don’t have to worry as much about false claims. Wholesale provides a more viable business strategy.
Private labeling is developing your product label or brand, typically by changing an already-available product. For instance, you might build a garlic press from a manufacturer of higher quality than the ones sold on Amazon and incorporate it into your logo.
It is the most popular form of selling on Amazon and can be very lucrative. Most sellers require some initial funding.
Handmade is where you make or create your items or products. These are then what you sell on Amazon. This type of business model is a lot more hands-on and will require additional work from yourself.
Drop-shipping is purchasing goods from a supplier, who then ships them to the client after processing the purchase. It is a simple business model, but you must ensure that you partner with a reliable supplier.
Why Should You Consider Amazon Retail Arbitrage More Than Other Selling Models?
You may wonder why you should consider Amazon retail arbitrage compared to the other business models we have outlined above. There are three main benefits to choosing to sell using retail arbitrage on Amazon. These are as follows:
- Easy to start
- Lower initial fees required
- Can help you to expand your sales strategies
Easy To Start
Amazon retail arbitrage is so easy to start that many sellers are using it as a gateway to begin their private label business.
Lower Initial Fees Required
Surveys of 1,000 Amazon sellers found that 32% of retail arbitrageurs could start their Amazon enterprises for less than $1,000, while 12% could do so for less than $500. In comparison, 80% of private label retailers invested $1,000 or more in their initial launches.
Can Help You To Expand Your Sales Strategies
Arbitrage is a terrific, low-risk way to sell on Amazon if you need sellable and profitable items without the funds to buy goods in bulk. If you start selling arbitrage, you may broaden your approach to incorporate various sales channels:
How To Start An Amazon Retail Arbitrage Business
Finding profitable products to sell and setting up an Amazon seller account are requirements for beginning to sell retail arbitrage on Amazon. You’ll need to choose whether to manage the packing, shipment, and customer service yourself. You can do this by using Amazon’s Fulfillment by Merchant Program. Or you can leave it to Amazon’s Fulfillment by Amazon. You could also opt for both if you don’t know which would be best.
You can identify things to resell using a variety of tools and programs, and they are helpful in running product researches before decide your niche.
Meanwhile, you are recommended to use Amazon seller APP. You will use this app to scan product barcodes in a store. With this APP, you may scan products to see different postings. You can also view the sales ranking, whether you are permitted to sell a product, and the opportunity to input your buy cost to calculate profitability. Even from the app, you may put items for sale.
Take some time to examine the many features of the Amazon seller APP if you are still getting familiar with it. With the app, you will be able to complete some of the following tasks:
- List of items on Amazon
- Manage your returns and orders
- Check the profitability of certain items
- Manage messages from customers
- Keep track of your sales
Sourcing Products To Sell On Amazon
Now it is time to find profitable products to sell. A neighborhood “big box” retailer or discount store is an excellent place to start. A few stores you may wish to look at when it comes to reselling on Amazon include:
In any of these stores, you can walk into and start scanning using the Amazon seller APP to see which items you could be reselling for a healthy profit.
Examples Of Items You Can Sell On Amazon With Retail Arbitrage
When reselling on Amazon, certain products do better than others. Below, we have compiled a list of the top 10 most popular item categories that retail arbitrage sellers use the most.
- Kitchen and home goods
- Mobile phones and accessories
- Electrical goods
- Crafts, sewing, and art supplies
- Food, including pantry staples and gourmet food
- Kids’ games and toys
- Health and beauty
- Outdoor and sporting gear
There are a lot of possibilities within all of these sectors to resell and make a good profit margin. It is always worth considering the types of products you want to purchase from Amazon. It could be a good starting point if you don’t know where to start after choosing a popular category.
Step 1: Visit Stores And Scan Items
Even though it could seem frightening and strange to enter a retail store and start using your phone to scan products, remember that everyone started somewhere.
Press the camera button in the upper right corner of the Amazon seller APP. It will appear as though you are utilizing your phone’s camera, so you don’t have to feel awkward about scanning products in public. You can search by image or scan a barcode with the app’s camera by scanning the product’s packaging.
Step 2: Scroll Through The Results And Pick The Right Listing
Multiple results come while scanning merchandise using the Amazon seller APP. You’ll see numerous products have listings that are duplicates or 2-pack, 3-pack, etc. Make sure you select the correct listing.
For example, when you scan an item like Crayola Washable Sidewalk Chalk 48-Count, multiple results appear. The first listing could be restricted, which means you aren’t allowed to sell this item when it is in good condition.
While the first listing may not have been for you, the second or third listing could be. You want a listing that will allow you to sell that product in good condition.
Step 3: Examine The Listings Data
Once you have found a listing that is suitable for you, then you should select the listing. On your screen, you need to check the following details:
- Sales Rank – This is displayed directly beneath the title and in the Features & Details column. On Amazon, the Best Sellers Rank varies depending on the category, but as a general rule, search for products with sales ranking under 100,000. The more items sold, the lower the number is. For example, for office products, a sales rank of 1,573 is excellent. Remember that this figure could be deceptive because it might represent an unexpected surge in sales that day. Due to this, it’s critical to utilize a tool to check the consistency of that rank. You can also use a free sales estimator to examine the monthly projected sales figures based on sales rank.
- Details And Features – To find out exactly how many boxes this listing is for—one box, two boxes, etc.—check out the features and details of this listing. You can tell what this listing is offering by looking at the specifics.
- Who Is Selling This Item – You can check whether Amazon is the named seller on the listing, how many Amazon FBA sellers there are, and how many total merchants there are, including FBM. All this information is in the second column under “New.”
- Price And Profit – The most crucial component of the puzzle is whether you can sell the item for a profit. You can enter your purchase price in the pricing column, and Amazon will list all the costs. Now you can see whether you should purchase this item or not.
Step 4: Determine The Quantity Of Unit You Will Be Buying
Your choice of the number of units of an item to purchase depends on your risk tolerance. For instance, if the sales rank indicated that there were 22 FBA sellers, they would generate approximately 5,000 monthly sales. Divide the total monthly sales by the total number of FBA sellers to determine the estimate number of units you could sell in a month.
In this case, 5,000 / 22 = 227.
The example implies that you might be capable of selling more than 200 of these items per month. This may change if additional vendors join the listing, the sales rank declines, or the current Buy Box price drops.
We advise beginning with a small number of units to validate the product when you are inexperienced at retail arbitrage or selling with Amazon. For example, you could start with 5 to 10 units to see how well the item sells. You can always buy more units if the product does better than expected.
Step 5: Figure Out Your Profit Margins
Your ROI, or return on investment, is the money you earn from your company venture that hopefully outweighs the amount you invested.
For instance, if you bought an item for $10, you received gross profits of $12 per sale. Your ROI would be the difference between these two figures. Your ROI would be the profit divided by 20% or your investment. In this case, the ROI is $2.
Of course, you should aim for the best ROI, not only to increase your revenue per transaction but leave some room for error if the Buy Box price drops.
Tips To Succeed At Retail Arbitrage On Amazon
Even though retail arbitrage is quite simple, there are a few tips you should keep in mind. These tips will help you to become more successful at retail arbitrage on Amazon.
Sell Seasonal Goods And Follow Trends
You can look online or in retail stores for products that would be profitable to sell on Amazon. Research and plan for particular things you want to find, with possible places to find them.
You need to consider the seasonality of a product. Try to discover products that are currently trending or soon to be trending. Think about items that sell much better at certain times of the year.
For instance, toys are popular throughout the holidays, as are inflatable pools and floats throughout the summer. Due to the great demand at particular times, availability often decreases quickly in physical stores, which results in higher online selling prices.
An inflatable pool would cost $20 at Walmart during the summer. On Amazon, you could resell it for $40. Customers will pay much more for a product if they can’t locate it in a store and genuinely want it.
When it comes to trends, there is always a new trend on the horizon. You need to keep an eye on up-and-coming trends to see what will do well. Then you can hop onto that trend and make a ton of money while that trend lasts.
As trends are only for short periods, you can waste too much time considering your options. You need to make quick yet planned decisions to stay ahead of trends.
You may build a successful Amazon resale business if you keep up with trends and current affairs like these.
Make Enormous Profits By Selling Discontinued Items
Have you ever had a product you were in love with, but the company decided to stop making it for any reason? Everyone has been there, and we all agree that we would pay more to get those goods back. Some customers will spend astronomical sums of money on things that seem to be hard to locate.
But how can you locate a discontinued product in a store? Some discontinued items are occasionally available at grocery stores, discount stores, and other establishments. Simply being in the correct place at the right time is your goal.
- Shop Locally – Instead of shopping at large retailers, go to much smaller and local stores. Smaller stores are more likely to have discontinued and old products.
- Old Items – Look for older items. You may find products that have faded, dusty or outdated labels, which showcase their age.
- Refill – In the cleaning area, numerous products need refill packs. Although many refills are no longer available for various reasons, individuals still enjoy using them.
- Search Discontinued On eBay – Look for discontinued items on eBay. Following that, only display sold listings. It will display all the “discontinued” products recently sold on eBay. Once you find a discounted item on eBay or another store, you can go onto Amazon to see how much that item costs and if there is still a demand for it.
Patience Is Key
It can be scary or tiresome to visit retail stores and scan various items. It is frustrating when you can’t find any successful items. You need to stay persistent and keep going. You will find products on Amazon that will bring in money and profit.
The first item you decide to resell on Amazon may not be the best product you could have chosen. Retail arbitrage is all about trial and error and finding the best goods for you to resell.
It is crucial to do your product research and take your time when selecting well. Being patient is vital, as you will get there in the end.
Use Data To Base Your Purchases On
Make purchasing selections based on the information given in the Amazon seller APP. You shouldn’t waste money on things you won’t be capable of selling.
It is also vital to keep an eye on your sales. If something has stopped selling, you shouldn’t be purchasing more units. You want to feel confident that you can sell out of your current units before buying more. It is vital to keep an eye on your data.
Prices Change Quickly
If one vendor lowers the price, then prices could quickly fluctuate. Consequently, the thing you purchase may no longer be profitable. You also need to look at the price history when you are first looking into buying any goods.
You don’t want to over or underprice your items. It is about getting a balanced medium where you will still get a decent potential profit, and people will be willing to pay that higher price.
Start With Fewer Units
Start slowly to become used to the process. To better understand issues such as product acquisition, listing, shipping, price, and other considerations, start with a small number of units. It is preferable to do this rather than going all-out and shelling out a ton of cash on goods to resell on Amazon.
Once you are more confident with the process and what you are selling, you can purchase more units. You don’t want to rush into anything and make mistakes by having too much stock that isn’t performing well.
Listing Your Arbitrage Goods On Amazon
Correctly listing your items for sale is the following step in reselling goods on Amazon. You won’t need to create a new listing because this is not a private label item. The existing listing you wish to sell on can be used. Adding the ASIN to your catalog in Seller Central is a simple process.
You will eventually share the Buy Box, as opposed to a private label, in which you would be the sole seller of your goods. If you find an item that sells 500 times each month, remember that you may get less than 500 of those sales if additional sellers are on the listing.
When you want to list your arbitrage goods, there are two ways in which you can do this. We are going to talk about both methods below.
Method One: List Your Goods Using The Amazon Selling App
List an item as fulfilled by Amazon (FBA) or fulfilled by Merchant (FBM) after scanning it in the seller APP. You can include your stock levels in the app when listing as FBM so that your offer is always for sale.
Click “List”, which is in the bottom right corner. Quality, SKU, price, and fulfillment channel will all be displayed. It is vital to select “New” as the condition.
Please pay close attention to this section, as the cost section is difficult to navigate. Match Low Price” will be an option on Amazon. It can seem like what you want to do but compare it to the FBA pricing first.
According to Amazon, the cost of New might be $6.72. This pricing could prevent the product from being profitable as it would be the lowest price for an FMB item. Instead, the minimum FBA price is $22.39. If you go back to the pricing area, you will notice this. You should list your item at that latter price point.
If you reduce the price, you become the seller who destroys the market value and profitability. You can adjust the price once your inventory is delivered and ready to be sold.
TOP TIP #1
You can include your personalized seller stock-keeping unit (SKU) to assist you in determining more effective pricing for your products. Amazon will create one for you if you leave it empty.
However, we advise arranging your SKU so you know the actual price you paid for the item, the location of your purchase, and your breakeven point.
For instance, if you paid $5.75 for the chalk at Walmart and your breakeven price is $14.00, you would include the following in your SKU: WM_5.75_BE14.
The example indicates that your break-even value is $14 and that you paid $5.75 at Walmart. If you resell this item for more than $14, you are making a profit.
TOP TIP #2
Fulfillment Channel comes next. You may add your stock availability to the app by selecting “I will ship this item myself” and choosing FBM. While you will be required to arrange your shipment in Seller Central if you select: “Amazon will ship and provide customer assistance” (not in the app).
The software will immediately add the posting to Seller Central if you select the FBA option.
Now your listing offer will go live once you generate an FBA shipment.
Method Two: List Your Goods On Your Laptop Or Desktop On Seller Central
Method two is the easier method for listing your products for retail arbitrage on Amazon.
You will first locate the listing on which you want to sell. Copy the ASIN and enter it into Seller Central. Go over to your Inventory and select add a Product in Seller Central. Here you will paste the ASIN. You could also search for the listing instead of pasting the ASIN.
Pick “Sell this product” and select “New” as the condition. Now, Amazon will generate a listing on your inventory page once you click “Save and complete.” Allow up to 15 minutes for this listing to arrive.
Now, you can make a shipment. If you don’t have any stock at Amazon’s warehouse, the status will read “Inactive” in Manage Inventory.
Creating A Fulfilled By Amazon Shipment
It’s time to mail in your products once you purchase them and post the listing in Seller Central.
Step 1: Locate Your Products
In Seller Central, head towards managing inventory. Find an ‘Edit’ button on the far-right side, which leads to a drop-down menu. From the drop-down menu, pick ‘Send/Replenish Inventory’.
Step 2: Select The Goods You Want To Ship
During this part, you can edit and alter the packing template. This template will feature a template name, dimensions, preparations required, how many units you require per box, and weight.
You can select the number of boxes you wish to send to Amazon. Once you have chosen how much you want to ship, select ‘Confirm and Continue.’
Step 3: Confirmation
You will select your ship date, shipment method (choose small parcel from “small parcel” or “less than truckload”), and inbound shipping cost in this area. There’s not much to do here, as you already included the dimensions and weight in the previous section.
You will pay low shipping costs when using UPS, an Amazon partner. Please click “Accept charges and confirm shipping” if you accept these conditions at the end.
Step 4: Print Labels
The only thing left to do is print an FBA label and attach it to your box now that your delivery is verified. Two barcodes are on the label. Place these on the boxes, ensuring that both are visible.
The first label refers to the UPS label, and the second is the method used by Amazon to determine who sent the package and what was inside the box.
Now you can start monitoring your sales and begin your Amazon retail arbitrage business.
If you wish to become a retail arbitrage on Amazon, it is a much simpler process than you may first think. It is all about finding the right products for resale and selecting the best prices to resell those products for. You can become a retail arbitrage seller by using either the Amazon seller APP or Seller Central on your desktop.
It isn’t difficult to start a retail arbitrage, and it is a great way to earn extra money fast. Very few initial setup costs are required, meaning anyone, no matter their financial status, could give it a go.
We hope this guide has been helpful and given you a better understanding of how you could kickstart an Amazon retail arbitrage business.