Understanding Retail Arbitrage on Amazon
Retail Arbitrage on Amazon is the act itself of buying any product in local stores and selling the same via different marketplaces online to earn a profit. It offers a quite simple concept where you will buy a product at a slightly discounted or lower price. You then sell the same item at an increased price.
Items that you have purchased using Retail Arbitrage on Amazon can be sold in different marketplaces over the e-commerce world, including Amazon, eBay, Walmart.com, Facebook Marketplace, Etsy, Craiglist, OfferUp. Let Go and more.
How Retail Arbitrage on Amazon Works?
You can make money using Retail Arbitrage if you buy items at lower prices and sell them at a higher price on a particular marketplace. Make sure to account for shipping costs and marketplace fees.
For example, you can buy a specific item for $10 on the shelves at your local Walmart. Then, you can sell it for $24 on Amazon. Amazon will pay you 16 US Dollars later on once a customer purchases an item, after accounting the fees as well as shipping costs. This makes you a profit of $7 on your initial $10 investment.
In other words, Retail Arbitrage is buying item s in a physical store of retailer and selling them online at a higher price to gain profit.
Why is Retail Arbitrage Attractive for Starting a Business?
If you are just about to start a business, Retail Arbitrage is an excellent way, to begin with.
Conjunction with Amazon. There are still products that are not available on Amazon. If you will source products from elsewhere and sell them on Amazon, both product range and product base widens.
Quality control of the goods. When you buy something for resale, you can monitor the quality of workmanship, evaluate the usability of the product and find out many other things. This will help to avoid complaints about the product from dissatisfied customers, because you know for sure that your product is of high quality.
Lower Threshold. Becoming a Retail Arbitrage seller has a lower threshold when compared to other business models. You can start with $100 to $200 as your capital and Amazon will not charge you a subscription fee if you are only making extra cash through a few sales a month. On the other hand, the commission for each unit sold will still be. It is $0.99, and you should remember this.
Private Labelling Accessibility. If you are a Retail Arbitrage seller, you can take advantage of Amazon’s FBA services as well as Amazon Seller Central Dashboard. Once you become familiar with how the system works, you will be able to create a brand selling under the private label. This way, you can have a more scalable and stable way to create an online business.
Through Retail Arbitrage on Amazon, you can have more confidence in allocating money over something which you deem will bring you higher returns in the long run.
What to Fear on Retail Arbitrage on Amazon?
Although Retail Arbitrage is a low-risk business model, there are still some risks you may encounter once you scale up and sell more.
No Product Ownership. You do not have any claim on the good you will sell. As a result, it hampers the profit margins since you have limitations. Other costs are also applied like traveling to different retailers in purchasing stocks will eat up your time, effort, or fuel.
Brand Gated Products. Some products from online marketplaces might be brand gated. Meaning, you will need a permit to sell them and could narrow down both your customer base and revenue.
Low ROI or Return of Investment. With Retail Arbitrage, you can get low ROI since margins are lower. On the other hand, you are free to get a fixed cut on whatever profit so you have a relatively higher ROI.
Risk of Money. Retail Arbitrage increases your chance to lose money when for having a bad inventory. Other products may be on sale due to the recall of issues or some defects, and sometimes stores put products to clear their stock because of the product’s newer version. When you buy these products, you may face a huge loss.
In reality, there is significant hard work that you need to work at for you to succeed using Retail Arbitrage on Amazon.
How and Where to Find Suitable Goods for Resale?
If you want to start a business through Retail Arbitrage on Amazon, you can decide which store can help you grow your business. There are plenty of stores you can choose from.
For best results, you can start with the store closest store so that you can access it anytime you need to. Below is the list of stores you can choose from.
- Walmart;
- Target;
- Home Depot;
- Kmart;
- Lowes;
- Big Lots;
- CVS;
- Walgreens;
- Menards;
- Toys R Us;
- Office Depot;
- Rite Aid;
- Bed Bath & Beyond.
After selecting a store and setting up your seller account, the next thing you will do is to download the Amazon Seller App. The App is free and available through Amazon.
Amazon Seller App Android and iOs can help you obtain details on the latest selling prices, fees as well as products available on the website. Thus, using the camera of your phone, you will be able to scan the bar code of the products.
Amazon Seller App iPad and iPhone will show you both pricing and fee information for any product you want to sell on Amazon. Also, you will receive Amazon Seller App Android Notifications for better seller experience.
Step by step use of Amazon Seller App
For you to get started with Amazon Seller App iPhone and make more profits, below is the step-by-step use of the app.
- Click the Amazon Seller App to open.
- Use the camera of the phone to scan the bar code of any product found in the clearance aisle.
- After scanning the product, the product details will show up on the screen along with the low price, fees, gross proceeds, Amazon price, FBA offers, and New Offers.
- On the screen, two things can be checked right away - the eligibility to sell the product and sales rank.
The sales rank provided by the Amazon Seller App gives you essential information about how fast a product is currently selling on Amazon. This way, you can improve your sales and marketing strategy.
How to Choose the Right Product Using the Amazon Seller App?
After installing your Amazon Seller App on your iOs or Android device, it is time for you to find the right products to sell on Amazon.
You need to look for items that can be sold fast at a good return of investment. To start, you need to scan the items using the app to help you determine the exact fees. Then, you need to check if you are eligible to sell the product on Amazon and look at the sales rank. If the Amazon Seller App shows your eligibility to sell, and a sale rank of the item is lesser than 250,000, you need to progress to the succeeding evaluation step.
Next, you need to check the ROI of the item. You can enter the selling price, cost per pound to ship on Amazon, and the cost to purchase the product.
To sum up, on how you can find the right product using Amazon Seller App, you need to ensure that you are eligible to sell the item, the sale rank should be under 250,000, the profit needs to be higher than $3 per unit, and the ROI has to be over 50%.
How to Start Selling
Before start selling using Retail Arbitrage on Amazon, you need to set up your Amazon Seller Account. After signing up for seller account, you need to decide between a free plan (an individual seller) and paid plan (professional seller). If you choose an individual plan, you will pay a commission of $ 0.99 for each item sold. A Professional Plan assumes that you will pay a monthly fee of $ 39.99.
When you already have your seller account, you can now access several helpful tools like free Amazon Seller app and FBA Revenue Calculator. You need to have at least one free tools to help you decide which items are right to buy at the store.
Thus, you will require some necessary supplies before the first FBA shipment. However, you do not need to buy items before getting started with Retail Arbitrage. You can try sourcing in stores before purchasing any supply.
After that, you can start your business on Amazon. Here is your step by step plan.
- Purchase of selected products. Once you have selected an item for resale using the Amazon Seller App, you must arrange for the purchase of the item and its delivery to you.
- Labeling. You can independently stick labels on each of your goods or let Amazon do this work. For this they will charge you $ 0.20 per unit.
- Send your goods to Amazon. You will need to fill out several forms on the Amazon website and print stickers on the boxes in which you send your goods to the warehouse.
- Create a listing of your product and prepare for the start of sales.
How to Reduce the Risks Associated with Retail Arbitrage on Amazon
Despite having some risks, there are still things you can do for you to succeed in using Retail Arbitrage on Amazon.
You can search for clearance. Some stores can have clearance items, and it is essential for you to know where you can find these items. However, you also need to determine whether these items are still in good condition.
Check what days the stores arrange sales and what discounts they offer. If you recognize this, you will have a competitive advantage.
Do not sell heavy and big goods. Avoid products with high competition.
Before selling items on Amazon, see to it that all your items are in the best quality. Thus, you need to be patient in learning the whole process. The more you build experience, the more you become more efficient and eliminate business risks.
To Conclude
Retail Arbitrage stays to be a profitable ways of selling different products online. It serves as a long-term business solution since it can bring a steady income. Thus, it is a stepping stone in creating private label products and label identity.