Amazon retail arbitrage
If you want to learn how to make money selling on Amazon through retail arbitrage, you’ve come to the right place!
Retail arbitrage is buying products from your local stores and then selling those same products on platforms like Amazon or eBay to make a profit. The most reliable source of products is generally the new discount stores and retail shops. However, when engaging in retail arbitrage on Amazon, it's important to consider the associated costs, such as amazon seller fees. These fees vary based on the category of the product and the selling plan chosen by the seller. Understanding and factoring in these fees can help sellers accurately calculate their profit margins and make informed decisions when sourcing products for resale.
You might wonder if it is possible to make money with retail arbitrage. The answer is yes. Hundreds of entrepreneurs live from this business model. Many stories in the USA mention their successes, so why not you?
This article will tell you more about retail arbitrage and how you can start making money using this strategy.
What is Amazon Retail Arbitrage?
Arbitrage is the act of buying a product from a physical store at a discounted purchase price and reselling it at a higher price on marketplaces like Amazon. Retail arbitrage is done with the apparent aim of generating a margin and making a profit on resale.
For example, large brands such as Nike can carry out destocking operations or sales throughout the year (winter and summer sales). You can buy its products on sale and then resell them on Amazon.
You can also look on the internet for wholesalers or sites that offer discounted sales on luxury or electronic products. Then you can easily resell them on Amazon after adding your margin.
The advantage is that you don’t need to create an eCommerce site, look for suppliers, manage logistics, or even look for buyers. Amazon takes care of everything!
Your job is to ship your stock to Amazon and create listings for each item. For example, a buy-back of products at a discounted price could be done if a wholesaler near you wishes to get rid of its stock to make room for its new collection.
If you don’t have the ambition to build a brand, starting an online business through retail arbitrage on Amazon is a great way to earn additional income.
Online Arbitrage or Retail Arbitrage? Which One is Better?By now, you should clearly know what arbitrage means: A way of reselling where you can buy discounted items to sell on marketplaces like Amazon and capitalize on the price differences in different markets. But arbitrage can be done in two ways: online and retail.
Online arbitrage vs retail arbitrage
As we already explained, retail arbitrage requires you to visit retail stores to find lucrative deals and products, purchase them, and sell them at a higher price on a marketplace such as Amazon. A great way to do retail arbitrage is to visit liquidation stores. These stores sell products at a much lower price than Amazon, and since buyers do not have access to such stores, they choose to pay the total price on Amazon.
On the other hand, there is online arbitrage. This method is the same as retail arbitrage; the only difference is that you buy your products online instead of visiting brick-and-mortar stores. It’s easier than retail arbitrage because you can do it in the comfort of your home. One of the most popular sources for buying products in online arbitrage is AliExpress, where you can find many lucrative deals.
So, in a nutshell, online arbitrage requires you to spot pricing differences across various marketplaces or online stores and capitalize on them. This method is recommended because the whole process takes place online, and you don't even have to touch the product.
What Are the Prerequisite for Starting Retail Arbitrage?
The most important thing you need for starting retail arbitrage on Amazon is researching the products and sourcing them, but more on that later because this is not the first step you should take. First, you need to create your Amazon seller account. Amazon provides two plans for seller accounts: the Professional plan for $39.99 per month plus referral fees. This plan gives you access to Amazon's advanced selling tools like reports or APIs. If you are serious about starting an eCommerce business, our advice is to choose the Professional product.
On the other hand, if you are starting and have no experience, the Individual plan might be the better option. You will be charged $0.99 per item sold plus referral fees by choosing this plan. Once you grow your business and sell more than 40 items monthly, you can switch to the Professional plan.
After choosing your plan, you need to provide the below information to create your account successfully:
Your contact information
Government-issued identification A credit card number
Your tax information (your social security number if you choose the Individual plan)
A bank account number so that Amazon can pay you for every sale
Once you set up your account, you need to decide your target categories and the budget you want to spend on every item. You must also consider product size and weight because it will affect your fees. Once you have a general idea of what you will sell on Amazon, you must choose between retail and online arbitrage. Based on your decision, you can start sourcing your products in your local retail stores or online.
How to Do Retail Arbitrage in 2022?
Step by Step guide:
Register on the platform and create your seller account. Choose the business model that meets your needs. If you plan to take care of the shipping of your sold products, opt for FBM (Fulfillment by Merchant). In this case, you need a storage place. Most freelancers choose FBA (Fulfillment by Amazon). With this service, you send your items to Amazon warehouses, and Amazon takes care of their sale, delivery, and warranty.
Install the Amazon Seller app on your smartphone. It's not the only app for retail arbitrage but the most powerful for a beginner seller. It allows you to scan certain products to know their selling price on the platform. You also know that these are niche products on Amazon. This application also facilitates identifying the best products in the market. Go hunting for your items and check if they are profitable on Amazon. So, you will not sell just anything; you will be offering the most profitable products.
When your bulk purchase is signed, you must now list all the products you offer.Open your seller account, enter your items and create your product listings. If you choose Amazon FBA, arrange to send your physical product inventory to the store's warehouse.
Once that's done, all you have to do is wait for orders and renew your offers.
If you need more information about starting retail arbitrage on Amazon, check out this article: How to start doing retail arbitrage.
Is Retail Arbitrage Allowed in US & CA?
A significant concern is whether the arbitration technique is legal in the US/CA or not. In short, the practice is perfectly legal. A professional seller has every right to sell products if the merchandise was acquired legally. However, remember to declare any dollar generated by your sales.
Retail arbitrage in US & CA
To practice arbitration on Amazon with complete peace of mind, remember to keep the invoice from the store where you purchased your products. Some brands may try to talk you out if you decide to sell branded items. They do this because they may claim that you must be an authorized reseller to resell their products.
Although retail arbitrage is entirely legal, there are some challenges involved that you should be aware of. There are certain things you need to keep in mind when starting your arbitration business on Amazon:
Keep the receipts of your sourced items so you can present them to prove credibility at the time of need. But be aware that the receipts won't always be enough to solve a product authenticity issue.
Avoid dropshipping by particular manufacturers and companies on Amazon.
Avoid selling branded items.
Do not sell items from brands that allow their products to be sold through authorized distributors.
You might be surprised to know that the legality of retail arbitrage was tried in the US Supreme Court, and it was ultimately ruled that retailers cannot stop anyone from reselling their products if these products we acquired legally. So, we could say with certainty that you are allowed to sell any legally acquired items online, but you need to read and obey Amazon's rules and policies carefully.
Retail arbitrage is the ideal business model if you want passive income or are getting into e-commerce sales. You will generate your margins by buying products at low prices in stores to offer them on Amazon. You have to create your seller account on the sales site and find and buy the products that work on the platform.
In addition, you can choose between two fulfillment models, the FBA or the FBM. The latter leaves you the management of your stocks and their delivery. In the quest for the perfect product for online sale, you have quick and practical applications to browse the corner stores. So don't wait any longer to register to become the best seller on Amazon.