What is retail arbitrage? I have been asked this question twice in the last week.
Retail Arbitrage is a business model that has taken the online business world by storm in the past couple of years. It is a method I have used myself to make money and has huge potential. However, something a lot of people have been left wondering is, is this potential now over since hundreds of keen business newbies have jumped on the bandwagon?
The truth is, this particular business model is extremely newbie friendly, which is what attracts people who are new to online business, and in my personal opinion, that is great! It’s great to see young entrepreneurs (an old ones!) making a start in the online business world, and in all honesty, if I was just starting out and had no clue about online business, this would be the model I would begin with. That being said, there are a few downsides to it as well.
So in this blog post, I am going to talk you through the ins and outs of retail arbitrage, and then hopefully you will have a better idea as to whether it is something you want to dedicate your precious time and money to.
What is Retail Arbitrage?
Retail Arbitrage is basically the process of buying products cheaply (usually from physical stores based near you) and selling them online for a profit.
This business model has also been adapted to purchasing from online retailers and selling on other online platforms.
Most of the time you are looking for shops or websites that have sales on and purchasing products that are selling more expensively on Amazon or EBay and reselling the products there.
Can you make money with Retail Arbitrage?
Yes, I have personally made money using this business model. Here is a screenshot of one month’s earnings from my UK Amazon account (this screenshot is in GBP)
So, in short, yes money can be made in retail arbitrage, and good money at that. However, since the influx of people jumping on this business model, there is now a bit of a sinkhole you have to be careful of.
Basically, most of the online gurus promoting this business model are talking about selling the products you purchase on Amazon. This makes sense, Amazon is the biggest online retailer, it has HUNDREDS of product listings so you don’t need to spend hours writing listings, however, one thing I noticed during my time working with retail arbitrage was that so many people had jumped onto it, that if I purchased a product on sale for example in Disney Store, as soon as I go to list my item, ten new sellers of the very same item had popped up.
This led to less sales per person and eventually some of the sellers would end up dropping their prices very low in order to get back their investment rather than having money sitting there in stock.
This then meant that the chances of you getting sales at the normal retail price decreased dramatically.
Now, this DOES NOT mean that there is no money to be made in retail arbitrage anymore. What it does mean however, is that you have to be more savvy about your purchases.
It means selling on EBay and other platforms as well as Amazon, it means purchasing stock from shops or online retailers that are a little more obscure, which the masses won’t think of trying, and it means doing your product research quickly.
I Want to Give Retail Arbitrage a Go, How Do I Get Started?
Ok, so here are some basic steps to get started in arbitrage.
Start online, open Amazon.com (or the Amazon that corresponds to your country) in a tab. Then open Google in another tab.
Use Google and start searching. Search ‘Toy Sale’ or ‘electrical sale’ or search for the name of a store like ‘Disney Store’ and click their sale or clearance section.
Look at some of the items they have on, and write down a couple as well as their prices. Some of the websites have a function to sort by biggest discount, I like to do this, as the items with the largest discount will bring you more profit.
Go to Amazon.com and search for the item you have just found, check the price. You want to check the price in main buy box, not the ‘other sellers’ prices. Make sure the item is exactly the same, before looking at profitability. It is a possible product if either a) it is more than double the price on Amazon than it is on the sale website. b) OR it is at least $30 more expensive than the sale item (this usually applies to higher priced items)
You then need to scroll down to the product details section and check the best seller rank on Amazon.com If the item is under best seller rank of 10,000 it’s a winner, but in most categories under 20,000 is still workable.
If your product ticks all of these boxes, you could be onto a winner.
Purchase the product.
It is much more advisable to purchase 10 units of 5 products than 50 units of 1 product. This way, if something happens (such as another seller unexpectedly dropping their price) happens, it’s not the end of the world, you have other products you can work with, and just sit and wait it out.
I would usually look at the websites FREE shipping deal as well, because if you can shave costs off, then you absolutely should be. Check if you spend a certain amount if you will get free delivery.
List on Amazon
Here you have a choice. You can list on Amazon and select the fulfilled by Amazon option. This would mean you would ship your items off to their fulfilment centre and they would deal with the shipping to customers, customer service and everything else. Easy as Pie! Alternatively, you can opt to ship the items yourself, which carries less selling fees.
In my experience, shipping the items yourself only pays of if your items would fit in a ‘letter’ rather than a package, the fulfilment fees tend to balance out on larger items, and you are then effectively getting the customer service free of charge!
List on other platforms.
Whether you choose Amazon Fulfilment or to self ship your items, you can now begin to list on other platforms and grow your income streams. This is because Amazon will ship your items to customers for you even if they have been sold on another platform.
You would obviously need to let them know who to send them to or use a multi channel platform, however, this still has amazing possibilities.
You could literally work from anywhere in the world with a laptop and internet connection!
The great thing about this business model is, you can keep scaling it, start with $200, reinvest your profit into another product and so on to continue to grow your business, and you need no website, no technical experience, no marketing experience or budget, no face to face sales, no customer service if you wish. The benefits are endless.
However, be prepared to have some cash tied up in stock for a while and be disciplined enough not to spend the money as it’s released from Amazon, you want to keep it to reinvest in the beginning.
As with any online business, the marketplace changes. Don’t ever be foolish enough to think that you know it all.
If you are interested in learning some more skills and step by step approach to Retail Arbitrage on Amazon, then I can suggest the selling families course which is available to view by clicking HERE
This course covers every aspect of the process and more in video training, and the selling family always provide good value content in their courses.
I hope that this blog post has been of some help to you!
Keep hustling guys!