These days e-commerce is booming. Retail arbitrage is just one aspect of it. This is a methodology where the seller buys products from suppliers at a lower price and then sells them online at a higher price. For him, of course, this means profit.
But is retail arbitrage as simple as it sounds? No, because it comes with a lot of additional costs in terms of time, effort, and resources required. There are also transport logistics and listing problems. You can easily buy items at reasonable prices from small stores. They can later be sold on online platforms like Amazon, Etsy, Craigslist, Facebook marketplace, etc.
That sounds exciting, doesn't it? So let's read more about retail arbitrage and all of its aspects. After reading this guide you should be able to follow it seriously.
What is Retail Arbitrage?
First of all, it is important that we understand what exactly is retail arbitrage. Apart from that, you need to know all the nuances. Retail arbitrage is a process of buying a simple product at a retail store and then selling the same product at a higher price at an online store. The difference in cost multiplied by the number of products sold gives the total profit.
Although there are many online stores that you can use to sell, Amazon is by far your best bet. The reason for this is very simple. Amazon allows the function “Fulfilled by Amazon”. This means that Amazon is tackling the final completion of the order. You should only send the product to Amazon. They handle associated emails, calls, and returns.
Retail arbitrage can easily be equated to online retailing, but there is a tiny difference. In regular retail stores, the seller buys the products from wholesalers. On the other hand, retail arbitrage involves buying products from other retail stores.
How does retail arbitrage work?
We will now explain how retail arbitrage works using an example:
One day you go you go to Walmart and find out that men's belts are being sold at a discount. The same belt that previously sold for $ 30 is now available for $ 15. If you pick up 20 of these and sell them online for $ 30, you will make a profit of $ 20 * $ 15 = $ 300.
You can also sell it online for a slightly lower price than the MSRP. Say you sell it for $ 27 and you list 20 pieces of the product, you make a profit of 20 * 12 = $ 240. This is a decent amount considering that there is no need to worry about transportation and other logistics costs.
Now let's examine the concept of retail arbitrage using another example:
Suppose You're buying an item priced at $ 6 and sold on Amazon for $ 20. When a customer purchases the product, Amazon pays you $ 15 after shipping and other charges. Now you're making $ 20 to $ 6 profit = $ 14 per item sold. There are many factors behind this. Take a look at some of these:
Products don't cost the same – A product can cost $ 15 in one place and $ 45 in another. In addition, the demand for the product can vary from place to place. A product that is popular in Location X may not be sold in Location Y. This entirely depends on the market dynamics for this product. Convenience – Many customers are willing to pay an additional charge as long as delivery is convenient for them. In addition, many of them do not have the time and patience to go to a store, look for a product, and stand in lines. For such people, paying a premium for your product is no problem. Supply and Demand – The supply and demand parameters of a market are constantly changing. For example, disinfectants and masks were in high demand during the COVID-19 outbreak. People were willing to buy them at an additional cost. During that time, people were selling such products on Amazon at a 100% markup, and yet others were buying arbitrage. Before jumping into its systems, take a look at them.
1. Low Entry Costs – While the other forms of sales require a significant initial investment, arbitrage does not. You can start your business here for as little as 100 US dollars. Because you are buying your products at a cheaper price, you won't lose much even if you don't sell them right away. You also keep the number of products low and thus reduce your losses.
2. Quick Profit- Instead of waiting many months, retail arbitrage enables quick profits. You are not in the marketplace to build your brand. Your goal is to sell the products, and that happens. In the end, you make your profit and get away with it. There is no obligation to maintain a sales relationship or anything else.
3 Authority of the Best E-Commerce Sites- When you partner with Amazon, you also get their authority . If you sell with them, Amazon will deduct some of that profit. This means that you have become a profitable entity for them. To ensure that you stay on its platform, Amazon offers a number of advantages.
4. Private Labeling- Selling on Amazon allows you to get FBA insurance. It's easy to use and adds a sense of credibility to any new product. In fact, you can always create your own private label and sell the products.
1. Trademark Register Protection – One problem that could arise while using retail arbitrage is trademark register protection associated with it. Amazon can provide some of the products with a "Brand Gate". Brand gating is when Amazon gives brands more power over the offers that are created.
So if you sell a trademarked product you may need to request some permissions. If you list your products without consent, you can be punished. To save yourself, check that the product is in trademark registration before selling it.
2. Low Margin- The products you sell are not yours. As a result, you have limits and that affects your profit margins. If you buy in bulk, you may have to pay the retailers higher margins. You could ask someone to buy the products for you. But that may not be feasible every time. You may also have to shorten it.
3. Low customer loyalty- Obviously, you can't always get the same products at a discount. This means you may have to sell a different product each time. The customers you previously sold to may not be your target audience now. In addition, the product bears its actual brand name. So if the product is good, they will be awarded. However, if the product is defective it will damage your seller's reputation.
4. Time spent searching for products – This is probably the biggest disadvantage of retail arbitrage. You have to spend a lot of time looking for products. That's because you don't always get a discounted deal. So, you end up wasting your time looking for the best deals. Also, you have to sell your products relatively quickly, or you have to pay storage costs.
Is there a lot of competition in retail arbitrage?
Many people are thinking about how retail arbitrage would opt for retail arbitrage because they think the market is already overcrowded. This misconception arises because people see a lot of people posting videos of their success online. They believe that many gamblers use retail arbitrage to make money.
The truth is the exact opposite. There aren't many players in this segment. Only a tiny percentage consider taking advantage of retail arbitrage. Those who try usually leave after a week or two as they cannot find new products.
The retail arbitrage process is not a challenge, but it takes time. At first, you may not find the products. However, if you are focused enough, you will understand the basic strategies you need to use. There's enough room for new people, provided you know how to develop products.
How to Start Retail Arbitrage on Amazon
After all the essential work, we're going to talk about how you do should start with retail arbitrage on Amazon. This is a multi-step process. Below are the steps you need to take.
1. Register for an Amazon Seller Account
You must first set up an Amazon Seller Account. This is the basic step in the retail arbitrage system. After you have created an account, you can sell your products. First you have to visit the website “services.amazon.com”. There you will see a "Start Selling" button. Click the same to open a Professional Seller Account on Amazon.
This account costs $ 39.99 per month regardless of how much you sell. You can also scroll down the page and set up a custom account. This account is free, but you pay $ 0.99 for every item you sell. After all, you need a professional account as it has more perks. In addition, the professional account proves to be helpful when you start making a profit.
The professional account gives you the right to purchase the Buybox. You can also sell your product in restricted categories. This allows you to sell a wide variety of products over time. You can start with an individual account and switch to a professional account once you start making profits.
2. Download the Amazon Seller App
Now that you have signed up for the account, you can access a free app. You can find many retail arbitrage scanning apps online. But, by far, the Amazon app is the best choice for any beginner. It has all the details you need and it's free too.
This app allows you to use the camera function and "scan" barcodes on any product. Post this; You can now see the selling price on Amazon, selling fees, and other details. With this information you can calculate your winnings in advance.
3. Visit the local shops. There are many ways to start with. But mostly, you should start with a business near your home. Some of the best retail arbitrage stores for buying retail arbitrage products are:
WalmartShopkoKmartTargetHome DepotLowesWalgreensCVSBig LotsRite AidToys r UsOffice Depot StaplesBed Bath and Beyond 4. 4. 4. Scan the sale products
It is better to find products that would sell quickly. There is no hard and fast rule of what goes down with buyers. Whichever product you choose, you need to scan it in the Amazon seller app. This will show you the taxes that you will have to pay. With the final number you can calculate your profit.
There are a few things to consider when scanning the product. Go to the product details and you will see the eligibility information. When a green arrow marks this section, it means you can sell it. The product list also shows you the sales rank. The lower the sales rank, the higher the chances that your product will sell quickly.
You should try looking for items with sales rankings below 250,000. If your item says it is eligible to sell and its sales rank is less than 250,000, you should proceed.
5 Retail arbitrage on what and how much to buy
The decision on how many units to buy depends on how much risk you can tolerate. You need to find out how many sellers are selling the product and what sales they are making. For example, if the sales are 5000 per month and 20 sellers are selling it. To find out how many units to sell, you need to divide 5000 by 20. This equates to 250 units per month.
This means that you have the chance to sell about 250 units of the product per month. However, this number can vary depending on factors such as the arrival of new sellers, the decline in sales rank, and the increase in the price of the buy box. But at the beginning it makes sense to start with fewer units and increase as you progress. * Tip – Look out for red items for sale in Walmart.
When making a purchase decision, the following criteria should be taken into account:
Min. Profit of $ 3 per unit Max. Rank 200,000 (you get this data in the Amazon seller app) Min. 3 Star Ratings At least 30% ROI 6 Review ROI and Profits
You now need to review the ROI and the profit you will get after the product is sold . Click on the right side of your product list screen. You will get a detailed calculation of all the costs incurred and the final profit for each product.
Go down and see what the final profit looks like. Ideally, you're not selling a product that makes you less than $ 3 in profit. You can also keep your own minimum breakeven point. But don't go under $ 3. If you get below that, a potential uptrend could wipe out all the profits you've made.
Now is the time to calculate the ROI or ROI. To do this, you need to divide the profit by the cost of the item. In the beginning, look for products that offer you an ROI greater than 50%. Buy at least the minimum number of the product. You could buy more depending on how much you're willing to invest in retail arbitrage.
Over time, you could buy more units, especially if the demand for this product is high. Don't take over the saleability of a product. Review the latest trends to avoid buying something that customers might never buy. Scan as many items as you can to find out what is clicking on users.
7. List products available for sale
As soon as you have decided on the products, you have to list them on Amazon. It is always better to use the FBA function when doing this. This lets you ship items in bulk while they are shipping to a customer.
You can sometimes carry out the orders yourself. For example in the fourth quarter when time is running out. Such orders are noted in the account as "fulfilled by the seller". However, in most other situations, you should use the FBA assertion.
Tips to Simplify Your Retail Arbitrage Process
To help you get the most out of retail arbitrage, here are some tips. Follow these to make the whole process go smoothly.
1 Understanding Numbers
When you scan the products, you will get all the details to all numbers. This includes profit, return on investment, etc. Some people can be bothered by Amazon shipping charges. But when you consider the kind of convenience it offers, you will be overlooked. Always choose products that are popular and offer high profits.
2. Avoid Assumptions
When starting out in retail arbitrage, avoid assumptions. Don't imagine the saleability of a particular product. Sometimes a product that you think isn't worth selling is very popular in the Amazon arena. Likewise, a product that you think will sell well may not be considered popular by Amazon. To avoid confusion, follow what Amazon mentions.
3. Find out about store discount schedules
Some stores have a specific time when they discount their products. Some of them offer discounts if their products are on the shelves for a long time. Understand how the store works. This is helpful because you know when to expect bulk product availability and discount percentage.
For example, certain stores start by dropping the price by 15%. Even if the product doesn't fly off the shelves, they keep adding to the discount. Soon the discount percentage changes to 30%, 50% and 70%. Wait for them to do so, then make your purchase.
4. Patiently Learn the Process
It will take you some time to fully understand the entire process. In the course of a day you do not know which products are profitable and which are not. Hence, patience is the be-all and end-all here. If you buy products and see the economics of each and every one of them, you will make a decent profit. This understanding of the selection of your products can take a few months or more. But once you are able to make a dent in the process, you will soon see profit.
5. Take your time in each business
Spend enough time in each business to understand how things work. Go through all of the spacing shelves. Sometimes all of the processing of the store can be completed in 30 minutes. In other cases, however, all you have to do is spend hours in a store. Do not see this as a waste of time, as you can use the knowledge gained for future prospects.
6 See the trends and sell seasonal products
You can go to the store and find products that would sell. On the other hand, you can also anticipate seasonal sales and purchase this product in advance. For example, toy sales increase during the holiday season. You could do some research to find out which toys are hugely popular. Buy them when the market dies down and get a huge discount.
During the COVID season, products like hand sanitizer and masks were popular. But the demand for video games etc. also rose sharply. Since people were confined to their homes, they spent the time playing video games. Products like street chalk were popular as the children now stayed at home. As home work increased, so did the demand for printers and webcams.
7 Selling discontinued products for maximum profit
Sometimes a company makes a job the production of a range of products, although there is still enough demand for it. You could think about how to get your hands on discontinued products. Go through the retail stores and you will find some of these products on the store shelves. However, there are a few tips you can use to find them:
Shop at local stores. Large retailers like Walmart may not have what you're looking for. Such discontinued items are stored in nearby stores with niche customers. Look for items that look old. When browsing the shelves, look for things that are dusty or have faded labels. This means that the products are mostly discontinued and nobody notices here. Look for items that are labeled "Refills". Some of the cleaning products come with refills. These products are being discontinued, but people still enjoy using the refills for their cleaning. If you can find refills for such products, it is a good idea to save them. Look for discontinued products on eBay. This is a website where you can find such products easily. Search for "discontinued" and then filter for the "sold" offers. All products that are no longer manufactured are then displayed here.
8 Keep in mind that prices are subject to change immediately
If another seller decides to lower the price, the price may be reduced significantly . In other words, the product that was previously profitable is no longer. Keep checking the price history so that the situation remains in your control. If you notice price fluctuations, modulate your price so that the product sells quickly.
9. Be kind to the managers
Be kind to the branch managers, can prove helpful when it comes to future prospects. You can always tell them what you are doing. If there are new products that they'll be starting off, they might just give you a call to check it out. This situation is profitable for them as inventory is flying off the shelves earlier than planned.
Have your business card made and hand it over to your superiors. Let them know they can reach you here if they want to outsource products. Over time, you will build a solid connection base. Your bulk of the sales would then come from those devoted connections that you made.
10. Opt for loyalty cards
Every store offers membership cards that offer an additional bonus. For example, Target has a red card that offers an additional 5% discount. By registering for the card, you ensure that the price at which you buy the product is further reduced.
11. Save Your Receipts
When purchasing high quality items, be sure to keep their store receipts. Sometimes you will be asked for these receipts to see if the product is genuine. This usually happens when you are selling large quantities of a high-priced item.
12. Read the sales tax regulations
Each state has different state regulations. It is better to get an idea of this before moving on. If you follow the process correctly, you may be exempt from paying sales tax when you procure the products. Fortunately, this is 100% legal and increases your ROI and purchasing power.
This is how you can create your Fulfillment by Amazon (FBA) shipment
the last order with the To start selling you need to learn how to create your FBA shipment. To do this, follow the steps below:
1 Search for the product in Manage inventory
On the right you will see the "Edit" and a dropdown Menu. Click on the menu and go to “Send / Refill Inventory”.
2. Select the inventory that you want to send
Here you have to edit the packaging template. It consists of the template name, the number of units per box, the dimensions of the box, the weight, etc. Now enter how many units you will be sending. You can decide based on the amount of loss you can tolerate.
3. Confirm the shipment
Here you have to set the shipping date, the shipping method and then confirm the shipping price. You have already added the other details. So now you don't have much to do. If you choose Amazon's shipping partner, UPS, the shipping costs are significantly reduced. Even a heavy package could be shipped for a moderate price. After you've agreed to these terms, click “Accept Charges and Confirm Shipment.”
4 Print the FBA labels
yours The shipment is now confirmed. All that is left is to print the FBA labels. You will find two barcodes on these labels. Make sure that all labels are visible on the front of the box. The first label is the UPS label. On the other hand, Amazon uses the second label to identify who sent the product.
By now you have a good idea of how the retail arbitrage process works. However, you need to monitor sales to constantly understand your mistakes. The Amazon Seller App allows you to find your sales, manage the orders, and change the price according to your needs. If you find that product sales are high, you should have more inventory in stock.
On the other hand, if sales don't pick up, you could lower the price. You may need to make adjustments like this until you understand the nuances of selling on Amazon. The key to success is always to be on the lookout for new items to sell. Once you have a good idea of what the customer is saying, there's no stopping them. But it definitely takes time to monitor how it works. A product that you consider popular may not be liked by Amazon customers. While this can hurt your prospects, don't delay. Keep looking for the right products until you find one that works best.
Always remember that products must be delivered in perfect condition. If the package is damaged in transit, it will no longer be useful to anyone. Even if it is in a damaged condition on your part, Amazon will never accept it. With everything in place, you are ready to begin your retail arbitrage journey and achieve great results.