Retail arbitrage is buying a product in one place and then selling it in another, usually at a higher price. It is an old-fashioned way of making money, although it has been updated in the digital age.
In this article, we will explain retail arbitration and discuss its pros and cons. From there, we will walk you through the entire process and introduce some popular tools and software for retail arbitrage.
What is Retail Arbitrage?
Retail arbitrage is buying products from traditional stores, like outlet stores and retailers, and reselling them on a marketplace, like Amazon, for more money than paid. Retail arbitrage is about finding a deal on an item and selling it for more than you paid, then profiting from the difference.
Retail arbitrage is similar but not the same as commercial arbitrage. Commercial arbitrage means buying and selling two related stocks or other types of assets in different markets at two prices to benefit from different costs.
Retail arbitrage requires you to look at many different markets and compare the cost of a particular product. If you find a great sale in an unknown place, such as a local wholesaler, you can buy a product in bulk and resell each item for a higher price online.
Amazon is not the only platform where you can engage in retail arbitrage. You can shop at wholesalers, outlet stores, retailers, and anywhere else that sells products and then profit by selling them on websites like Craigslist and eBay.
Will Retail Arbitrage Be Still Profitable in 2023?
Since many retailers only sell a certain amount of each product, many buyers miss out on the deeply discounted items they were hoping for. Disappointed, they head to other websites on the Internet to find their missing items, which often happens during the holiday season, only to find out they are heavily marked. If they want an item, like a new toy or electronic device, they can buy it for a higher price. That’s when you make a big profit from retail arbitrage.
Retail arbitrage is a way for markets to become more efficient. It is a profitable business model because of market inefficiency. Despite the technological advances, including new algorithms and computers that are helping markets become more efficient, retail arbitrage continues to be profitable, especially in the future.
There are still a lot of benefits to becoming a retail arbitrage seller, even in 2023. Although technology might hurt some businesses, intelligent sellers can use this powerful tool to their advantage. Many great tools and software can aid sellers in scaling their business faster.
Pros And Cons of Doing Retail Arbitrage
Many people are professional referees, but that does not mean that it is the right decision for everyone. Before you start reselling as a side business or turning it into a full-time business, you need to consider everything.
Easy money: A quick way to earn a few bucks is to sell products. Selling new stuff can help you cover relatively direct costs
Little starting capital: You don’t need significant capital to start your own retail arbitrage business. The products you buy need to be relatively cheap. You only need to buy one product and resell it for more than you put into it.
Easy additional income: You don’t have to leave your main job or other side business for retail arbitrage. Use Fulfillment by Amazon, for example, to monitor sales and inventory on your own time at minimal additional cost to Amazon.
You are in constant competition: Thousands of other people do the same thing as you, which means it’s not necessarily an extraordinary job. Unless you find a stronghold in a particular niche or market, many sellers try to sell the same products as you, creating constant competition.
Not everything is for sale: What happens if you bet on a product that doesn’t sell fast enough? You will need to hold onto it until the price rises again, or you will need to sell it without much profit.
It can take a long time: There’s still a lot of work involved, including sourcing products, finding the best deals, packaging, and selling your items to customers. Don’t set high expectations for this job. Do it with plenty of security and backup plans if it doesn’t work out.
How Much Does It Cost to Start Retail Arbitrage?
You don’t need a huge capital to start doing retail arbitrage. There are two types of seller accounts on Amazon: Individual and Professional. If you choose the Individual plan, it’ll cost you $0.99 per item sold if you sell fewer than 40 items per month. The Professional plan costs $39.99 if you want to sell more than 40 items per month and want to sell restricted (gated) products. There are also fulfillment fees that you should take into consideration, but they don’t cost that much.
According to Jungle Scout’s survey of over 1,000 Amazon sellers, 49% of retail arbitrage sellers spend less than $1,000 to get started. So, with about $1,000, you can cover the cost of inventory (approx. $500), stock and products ($250-$500), and other expenses that might come up.
How to Start Doing Retail Arbitrage on Amazon?
Finding a profitable niche to start retail arbitrage on Amazon would be best. To have a viable business, you first need to do market research and find profitable products in high demand and low competition.
It is recommended to make decisions based on objective data. Let the data guide you instead of choosing a product to sell because you like it.
1) Choose the Ideal Product to Sell
The Amazon catalog has millions of products listed. To investigate which ones are succeeding, you must simplify the search. Suppose you want to find profitable products in high demand and low competition. In that case, there are some key elements that you must take into account. Below are some criteria you should look at when choosing a product.
Dimensions and weight
Easy to ship
2) List Your Products on Amazon
Your product listing is essential for customers to find you and buy your product on Amazon. Here we will review the key steps to successfully setting up your listing:
Amazon Seller Account: If you have not already done so, you must create an Amazon seller account at sell.amazon.com. If you are sure, you will sell more than 40 items per month, opt for a professional seller account. Fill in the required information following the steps that Amazon will show you.
Launch your Products on Amazon: If you’ve made it this far, you’ve come a long way. However, now things have to be done right on the Amazon platform. Here you must have your product listed. It would be best if you worked very well on the following aspects:
Optimize your product description
Create good SEO titles for your product
Highlight the strengths of your product
Include high-quality images and videos
Best Tools & Software for Doing Retail Arbitrage
Using specific tools and software is essential to start and sustain your business in the best conditions. These tools will help sellers properly list, promote or manage the profitability of their products.
Versatility is an asset that Helium 10 has. For Amazon FBA affiliate sellers, this is one of the best tools to consider. It provides about twenty different modules to develop your e-commerce business. Its main advantage is its database of successful products. It provides access to thousands of references that sell very well on marketplaces.
In the category of financial management tools, Shopkeeper stands out the most. It provides a monitoring program that tracks the slightest sale and allows you to keep a history. The platform will also assimilate shipping costs, customs, or rent for storage. Shopkeeper will then use this information to calculate users’ net profits.
It is imperative to use a tool like Sellics when sales on Amazon start to grow. It is a platform with multiple assets that offers complete management functionalities for its online business. It stands out in particular for its ease of use and allows novices to master their business entirely.
In addition to these tools, an excellent method for increasing profitability in retail arbitrage is using the services provided by sourcing list companies. Click here to learn more about retail arbitrage leads and other related information.
What Are the Alternatives for Retail Arbitrage?
Retail arbitrage is not the only business model you can use for selling on Amazon. There are six different business models, including:
Private label or private brand
Retail arbitrage is when you buy a discounted or on-sale item and sell it at a higher price, taking advantage of the markup. It’s an excellent way to earn some extra money but not a great option for everyone, especially people who can’t afford to take a loss.