Do you want to learn how to make money on Amazon through retail arbitrage? In this article, you’ll learn everything there is to know about retail arbitrage and how to make money with it.
If you ever wanted to start a business on Amazon, you probably have heard about the term retail arbitrage.
While many websites tell you how great retail arbitrage is, there are a couple of things that you need to keep in mind. When you want to make money now with retail arbitrage, but it’s hard work, and there are risks involved.
That’s why we’ll go into how to make money with retail arbitrage, the pros and cons, and tips for retail arbitrage.
What Is Retail Arbitrage?
Retail arbitrage is when you buy a product for a low or discounted price in a retail store, and sell the product for a higher price online. You are flipping items for a profit on marketplaces like Amazon or eBay.
What is the difference between retail arbitrage and regular retailing? With retail arbitrage, you’re not dealing with wholesale. You’re buying the product from another retailer, like Walmart or Target. You can sell the product online on marketplaces like Amazon, eBay, Etsy, Facebook Marketplace, Craigslist, and more.
For example, you walk into a Target, and you see a specific product discounted from $50 to $20. You buy the product for $20 and list it on eBay for $45. Because you sell the product for a lower price than the original price, people are willing to buy it, and you make a nice profit.
Retail arbitrage saves you the pain of dealing with wholesalers or suppliers, and you can make a nice profit.
How Do You Make Money With Retail Arbitrage?
With retail arbitrage, it’s possible to buy items in stores and sell them online. Stores are getting rid of products that aren’t selling as well as they expected, so they sell them with a discounted price. The lower your buying price is, the more profit you can make.
The most important thing with retail arbitrage is to find a product. This will take you the most time, especially in the beginning. You need to figure out where you buy your products, what products you can sell for a profit online, and how to sell them.
How To Start With Retail Arbitrage?
When you’re starting with retail arbitrage, there are a couple of steps you need to take:
- Sign up with a platform like Amazon FBA and eBay.
- Visit local retail stores.
- Check if the products you’ve selected are profitable.
- Sell the product.
Let’s go into them in more detail!
Step 1 – Sign Up With A Platform
First, you need to select a platform. The most popular platforms are Amazon retail arbitrage (FBA) and eBay. With both platforms, you can see when you’re shopping for how much your products sell.
If you didn’t sign up with either of the platforms, create your account. Use your smartphone to check when you’re in a store on which platform the price is the most attractive.
For most products, you’ll find using Amazon FBA to sell your products is the most profitbale. You can sign up as an Amazon FBA seller by heading over to services.amazon.com.
You can either select their Professional or Individual seller account. With the Professional seller account, you pay $39.99 per month regardless of how much you sell. With the Individual account, you pay $0.99 per item sold. If you’re selling more than 40 items per month, you need a Professional account.
Step 2 – Visit Local Retail Stores
Once you have your accounts set up, you can roam around different retail stores. The first couple of trips, it’s more about checking what they have and how much discount different stores offer.
It will take more time in the beginning. Later on, you will get a routine and know exactly where you should go and what you should buy.
Local retail stores where you can find products are:
- Sam’s Club
- Home Depot
- Office Depot
- Toys R Us
- TJ Maxx
- Big Lots
- Outlet Stores
Step 3 – Find Profitable Products
Soon enough, you’ll find discounts that you can analyze using the selling platforms. Amazon has an Amazon Seller App, where you can scan products you potentially want to sell using their barcode. The Amazon app tells you if you can sell a product and how much you can sell the product for, which makes it easier for you to make a decision.
Based on the information on the app, you can calculate whether buying and shipping the product is worth your time. In the beginning, this process will take a lot of time. Over time, however, you will know what products you can sell and for what price.
Pro tip: in the Amazon Seller App, you can also see the sales rank of a product. The sales rank is an indication of how popular the product is. Try to aim for products with a sales rank of 250,000 or higher.
When you’re calculating your profit, you can see exactly how much profit you can get from that specific item after fees. Scan as many products as you can in the beginning, so you can develop a feeling of what’s selling.
If you want to make high returns, a basic rule of thumb is to aim for:
- 50% return on your investment
- Minimum profit of $3.
With a minimum profit of $3 per item, you minimize the risk. When you experience a small price drop at $3 profit, your earnings can be completely gone.
When you’re adding a minimum of 50% return on investment, you’re focusing on products that are worth your while. This combination is golden, especially in the beginning.
If you don’t have an Amazon seller account yet, check out the Amazon Revenue Calculator to get free details on products. Including how much profit you can expect and how much fees to pay.
Step 4 – Sell The Product
When you’ve analyzed and found products that you can sell, it’s time to sell them! You can list the items on platforms and cross-check which platforms will net you the most money. In most cases, you’ll find that Amazon FBA has the highest return on investment.
One advantage of Amazon FBA is that you don’t have to handle shipping. You can ship your items to an Amazon warehouse, where they will handle the shipping to the customers. You don’t have to think about it. Of course, you will pay a percentage of your profits to the shipping process.
How much profit you make depends on the number of products you sell. In the beginning, it will take time to find products that are profitable to sell. The more time you invest in your retail arbitrage business, the quicker your profit will build up.
If you’re dedicating your free time and a weekend day to finding great deals, you can build up your retail arbitrage business quickly. Some people make thousands a month via retail arbitrage!
Pros Of Retail Arbitrage
Retail arbitrage can be a great way to make some extra money. Here are a couple of advantages of retail arbitrage.
Low Barrier To Entry
It’s relatively easy to start with retail arbitrage. You can start by trying to sell one or two products, working your way up. That way, you don’t need much money to start with retail arbitrage.
If you’re reselling through Amazon, you don’t need to pay their monthly fee if you’re selling less than 40 items a month. After you have crossed the 40 sales a month threshold, you can upgrade to a paid account.
This combined makes for a low barrier of entry, low expense, and low risk.
Use Another Platform
When you’re setting up your retail arbitrage business, you can set it up on another platform. A popular platform to start is Amazon. You’re using their platform to sell your products. There will be products that are not available on Amazon, which you can sell as a third party seller.
It’s beneficial for Amazon when people are offering products they can’t get. Because people are offering additional products, people will come to Amazon more often as their product base widens.
The great thing about using another platform is that they already have customers. You don’t need to go out and start your own website and work on people to find it. Using the customer base of another platform is a huge help when you’re starting retail arbitrage.
Stepping Stone To Private Labeling
When you’re making money through retail arbitrage, many people will make the switch to selling through their private label on Amazon’s FBA service.
With retail arbitrage, you learn how to use their platform, how to price products, the best way to ship products, and many more things. When you’ve figured all of that out, you’ve learned some very marketable high income skills.
If you make the step later on to create a private label business, you will find yourself in a scalable business model that can further accommodate your growth.
Cons Of Retail Arbitrage
Of course, there are drawbacks when we compare retail arbitrage with some of the other best side hustle ideas.
There Is Risk Involved
Starting up a retail arbitrage business has low costs to entry, but there is some risk involved when you want to scale. There’s always the possibility of retailers discounting products because of some reasons you aren’t aware of.
The product could have defects, or there could be a new version out soon, which can negatively impact your profit. On the other hand, the item could go out of stock, which may drive up demand and thus price.
There is risk involved when you’re thinking about going into retail arbitrage. The risk can positively or negatively impact your retail arbitrage business. Just be aware before your start!
Brands Are Protected
For some brands, you need permission to sell them. Especially on Amazon, this may be the case. When you try to sell a specific brand, and you can’t sell the product on Amazon, you need to look for other places to sell.
When you’re selling on eBay, Craigslist, or Facebook Marketplace, you may make less profit than calculated.
You Need To Put In Time
Retail arbitrage has a low barrier to entry, and it’s a great side hustle to make some extra cash. However, you do need to put in the time for it to work. You need to find the products, to handle the orders, take care of the shipping, and more.
How To Maximize Your Profits
When you want to try retail arbitrage, there are a couple of tips that can lead to you maximizing your profits. Here are a couple of retail arbitrage tips to begin with:
Check The Numbers
One crucial thing is knowing your numbers. Amazon takes care of everything, so don’t be surprised by the Amazon fees, the price you can ask for the product online, or the shipping costs. You need to crunch the numbers before you’re buying your product.
You can price your items at any price you want. The general rule of thumb is, the higher the price, the longer it will take to sell. You can see the price others are selling on Amazon, and adjust your price to that.
The best practice is to price just a little higher than the current price. If you’re offering the product cheaper than anyone else, you can cause price wars that can destroy your profit. That’s probably not what you want.
Look For Discounts & Clearance
Almost every store has a clearance section, where they sell products with a discount. Some stores will put their clearance items up for display, while you need to search for them throughout the aisles at other stores.
You can also try to get a discount on your purchases through:
- Coupons – many wholesalers offer coupons that you can apply to your purchases. Couponing can save you additional money, which will increase your profit.
- Cashback – earn cashback through Rakuten, Honey, or Swagbucks on your purchases. Shopping with cashback is an easy and convenient way to increase the profit on the products you buy.
A great way to get more items that are on clearance is to ask the employees. The employees are often more than happy to get more discounted items for you from the back, just so they’re rid of them.
Be open to sell any product. ANY product. Don’t assume a product won’t be profitable and isn’t worth scanning. People are willing to pay double the amount for certain items when they’re not available in their area.
While you should be open to any product, it’s good to check the product carefully. What is the condition, are there any damages, or is a new version coming out? Any of this can influence the selling price, and thus your profit.
In the beginning, it will take you a lot of time to know what products are profitable. You will need to build expertise, experience, and patience in the process.
When you start, it’s possible to spend hours in one single store. Scanning their clearance items, checking what you can sell them for, and seeing what fees you pay.
Over time you know what is profitable and what isn’t. It allows you to get more specific and choose a niche. When you get specialized, you know how to spot a good deal, making you more money over time.
Take Your Time
Take your time in every store. It’s efficient to spend a couple of hours in store A, check all their clearance items, and move to store B. When you are not taking your time and need to move stores all the time, you’re not doing it efficiently.
Take your time, learn everything there is about this one store, and only then move on to the next. You may find out where they put the products that have a discount, when to visit these stores, what kind of products they put in clearance, and more.
Frequently Asked Questions
Now we’ve covered the majority of what there is to learn about retail arbitrage, let’s go into a couple of questions.
Is Retail Arbitrage Still Profitable In 2021?
Yes, retail arbitrage is still profitable in 2021. There are thousands of people that are making millions of dollars from retail arbitrage. Because there are so many different stores you can go to and areas where you can sell geographically, you can still make money with retail arbitrage.
Aren’t There Too Many People In The Retail Arbitrage Market?
Nope, luckily there aren’t too many people in the retail arbitrage market yet. While there are many people interested in retail arbitrage, that doesn’t mean that they are taking action. A small percentage of people who read this will start to research products. From those people, even less will push through and build a business around it.
Since retail arbitrage takes a lot of time to set up and learn what products to buy, many people find not find it worth their time or effort. It can be very frustrating in the beginning.
While there are big businesses active in the retail arbitrage market, it’s not too late to take your piece of the pie. There are enough products to sell with decent profit margins.
Why Would Stores Sell Their Products In Clearance?
For the majority of the stores, it’s important to sell their products to make a profit. When items aren’t selling, it’s more profitable for them to replace them with a product that does sell. For these stores, the products aren’t making a profit. That can be because of the right customer base or the right geographical spot, for example.
Why Don’t The Stores Sell Their Items Online?
For the big stores, selling their products online isn’t worth their effort. The products on clearance are such a small part of their profits, so it makes no sense for them to sell online. They have limited space, which means that they need to make choices.
Is Retail Arbitrage For Me?
Retail arbitrage is simple to start, hard to see your first profit, and gets easier over time. It takes a lot of time upfront, which is why many people quit in the beginning. They’re not seeing any profit and decide it’s not for them.
Because of this, the retail arbitrage market is far from saturated. There is enough room for you to jump in!
Retail arbitrage can be very profitable if done right. If you are willing to put in the work and understand the risks, this is for you!
Have you considered starting with retail arbitrage?