If you’ve been trying to up your Amazon game, you need to understand retail arbitrage.
Maybe you’ve been using Amazon as your side hustle and want to go pro. Or perhaps you just need a refresher to get motivated and light it up. Whatever your situation, Amazon retail arbitrage is your ticket to success when done right.
What is Retail Arbitrage?
- 1 What is Retail Arbitrage?
- 2 Why use Amazon for Retail Arbitrage?
- 3 Amazon FBA: The Ultimate Storage and Shipping Service
- 4 Seller Scanner Apps: Essential Tools for Profitable Retail Arbitrage
- 5 Tips for Profitable Amazon Retail Arbitrage
- 6 Pros and Cons of Amazon Retail Arbitrage
- 7 Frequently asked questions about Amazon retail arbitrage
- 8 Conclusion
Good question. Glad you asked. If you already know, this will be a brief review. Retail arbitrage occurs when you buy something from one store at a low price and sell it somewhere else online at a higher price.
People develop an eye for pricing. Others use price scanning apps. Bargain hunters scour clearance and sale isles looking for products they can resell. The idea is to get as many of a low-priced item as possible and then quickly sell it in your brick and mortar store or online, such as on Amazon or eBay, for a higher price.
For example, say you find a dog toy that is on clearance at Walmart for three dollars. You look it up, and sure enough, it’s selling online for 15 dollars. So you buy all the toys at this and surrounding Walmart stores giving you a total inventory of 50 dog toys for one hundred and fifty dollars. You will now sell them online at Amazon for 13 dollars, giving you a profit of five hundred dollars. There are some costs of doing business mixed in there, such as shipping and listing fees, but you get the picture.
Why use Amazon for Retail Arbitrage?
Amazon has over 2.5 million active sellers. Even though they aren’t selling the same products, they are all fighting for attention on the platform. That’s a lot of competition.
You need an edge wherever you can find it. Using arbitrage tactics is a useful way to get ahead. Most people shop clearance, liquidations, sales, reduced stock anywhere they can discover sellable items.
Since there is a steep cost to time invested in shopping for inventory, many people turn to online sources. You don’t have to travel anywhere, and you can source from anywhere in the world as long as the prices make sense. It can also be easier to buy in bulk because you don’t need to go from store to store looking for more of the same items.
Using arbitrage tactics as a seller on Amazon is useful because even though you pay listing fees and have to understand how to properly list your items, the process of setting up and maintaining your shop is straightforward and easy compared to opening your online store.
To maintain an online store, you need to have a website. That can get expensive when you add the cost of security and maintenance. You also need to market your site and drive traffic to your product pages. Why compete with Amazon when you can set up shop and start selling without the added headache of recreating the wheel?
Amazon FBA: The Ultimate Storage and Shipping Service
One of the most overlooked benefits of becoming an Amazon seller, particularly if you are going to join the ranks of highly successful retail arbitrage pros, is Fulfillment by Amazon (FBA).
If you are still learning how arbitrage works and testing your pricing IQ, this won’t be a good option because you’re still picking through clearance shelves for relatively small inventories. And you are likely still holding that inventory in the trunk of your car, garage, hall closet – wherever it will fit.
If you are ready to go big and can source in bulk, then you’re ready for the big leagues. That means you need a warehouse, warehouse workers, efficient shipping experts, and more.
That’s where FBA comes in. You can use Amazon warehouses, also called fulfillment centers, to store your inventory. Amazon workers will pick your items when an order is placed, pack it, ship it, and even offer basic customer service, including handling returns.
How Amazon FBA Works
Start by shopping for low-priced items you can sell at a mark-up, just like you’ve been doing. However, now that you’ve got the hang of it, buy in bulk. You can also use private labeling, which is placing your company branded label on a product that is manufactured to be sold to sellers instead of directly to consumers.
Once you’ve got your inventory, you’ll place your label on each item and package it properly, according to Amazon guidelines. If you’re private labeling, many manufacturers will do this for you.
Then ship your inventory to one of Amazon’s fulfillment centers. They’ll add your products, and when orders come in, they’ll pack them, ship them, and handle the rest of the process.
Your job is to monitor the success of your sales and make adjustments to continue to improve your sales strategies. This might look like adjusting prices a little, changing product descriptions, bundling products to help them sell, and other common sales tactics.
Fees to Consider with Amazon FBA
There are fulfillment fees and inventory storage fees.
Fulfillment fees cover order handling, pick and pack charges, and weight handling. These are the fees associated with admin warehouse workers.
Inventory fees are just storage fees, which are typical whether you use Amazon fulfillment centers co-op with other warehouses. Inventories kept in storage for more than a year have higher fees, so it’s motivating to choose items that will sell and keep them moving.
Trying to sell seasonal products means making sure your timing is thoughtful and a little more precise, so you aren’t paying to store holiday products year-round.
This isn’t a free service, but it’s worth noting that millions of sales are successfully carried out with this service helping sellers scale and grow their online business into more than a side-hustle.
The Benefits of Amazon FBA
There are several benefits of Amazon FBA, but let’s just cover the ones that matter most to sellers who are using Amazon retail arbitrage.
Amazon has a seller dashboard that allows you to track your inventory and orders. It shares statistics and diagnostics to help you track specifics like the profitability of individual products. When profitability is lower on an item, you can pivot your business as needed.
The dashboard even does the math and offers recommendations on how to improve your sell-through rate, making it an indispensable resource for newbies and long-time professionals alike.
Amazon also does what it can to make your job easy. If you find products you want to resell that require special packaging, they can handle that for a small additional fee.
Since much of our digital life is spent on our mobile devices, more so than on our computers, Amazon has made sure to create a user-friendly app so you can access the dashboard and manage your sales and inventory from your mobile device.
As an Amazon seller who uses FBA, you also get to tap into Prime two-day shipping. Shoppers will often filter their searches by this feature, only ordering from sellers who can offer free two-day shipping. When you use FBA, Amazon includes you in this filter to boost your sales and give you access to thousands more shoppers.
Seller Scanner Apps: Essential Tools for Profitable Retail Arbitrage
Retail arbitrage traders on Amazon will need seller scanner apps. These apps provide information about specific products that would help your arbitrage journey. To use them, you simply scan the product’s barcode to see various metrics on its sales performances.
Some of the information available to you with these apps include price data, possible profits, and the eligibility to sell the product. If you plan to run a data-driven retail arbitrage business, you will find these tools to be indispensable.
Here are some of the popular choices:
Amazon Seller App
Amazon has provided the Amazon Seller App to all its users. You can find it on the Apple and Google Play stores, although non-Amazon users will have to sign up on it with seller accounts. The Amazon Seller App provides information about products:
- Product price
- Approximate profits
- FBA fees
- Bestseller rank
- Total number of sellers on Amazon
- Amazon category
Helium 10 was initially designed as a set of 10 tools essential for Amazon sellers to up their game. In four years, the platform has grown into a powerful all-in-one tool to manage all areas of eCommerce effectively. From doing product research to email analytics, Helium 10 now provides 20 integrated tools that seamlessly blend in with Amazon’s workflow.
Read our full review of Helium 10 here.
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Scoutify is an app from InventoryLabs. It is also available for Android and iOS users,
although unlike the Amazon Seller App, it charges a fee.
You can access Scoutify’s free trial version, which lasts for 30 days. However, its paid subscription costs $49 monthly on its Monthly Plan and $40 monthly with the Annual Plan. You get the following features on Scoutify:
- Integration for third-party apps
- Tax inclusion, so you get an even closer number for the final price
- Bluetooth scanning
- A shopping list that tracks your purchases
- InventoryLab integration, which provides sourcing, reporting, and bookkeeping tools
ProfitBandit was developed by SellerEngine Software Inc. Android and iOS users can access it, and it goes for just $9.99 per month.
With ProfitBandit, you can check product prices in real-time. You also have access to optimal research capabilities and integration with Amazon’s Application Program Interface (API) for more accurate results. Some of the platform’s other premium features include:
- Highlights products that Amazon itself sells
- Calculates your profit considering 15 factors — including shipping fees, weight, cost of goods, Amazon fees, etc.
- Sales ranks will show whether you just scanned a high-traffic item
Tips for Profitable Amazon Retail Arbitrage
Look for Clearance Sales
Cheap prices are the focal point of retail arbitrage. At some point, you will find certain
items going on sale at stores. When you find these products, use any of the seller scanner apps to determine their current price on Amazon. This way, you can easily decide which products to buy and those to neglect.
If you keep missing the clearance sales at your favorite store, you can build relationships with store managers and workers. These guys usually know when products are to go on discounts beforehand, and having one of them share real-time updates with you could be a game-changer.
Sell Quality Products
There’s no point in getting an item that’s defective just because it’s cheaper. Make sure
You inspect the products before buying them. Selling a substandard product will only affect your reputation on Amazon.
Amazon also has a way of marking items that are old or defective. Damaged products will get flagged, and the company could issue a penalty because of this. So, don’t hurt your sales and review chances because you want to make profits.
Pros and Cons of Amazon Retail Arbitrage
These are the advantages and drawbacks of running a retail arbitrage operation on Amazon.
Pros of Amazon Retail Arbitrage
- Low barrier to entry
- Easy and quick setup
- Quick for passive income
Cons of Amazon Retail Arbitrage
- Hard to scale
- Some items need permission to resell
- Competition could be intense
Frequently asked questions about Amazon retail arbitrage
How do I decide what products to buy?
Product selection takes research. Check out stores close to you and the products that they have on clearance sales. You can then use seller scanner apps to look them up and determine how profitable they will be for you.
How much money can I make with Amazon Retail arbitrage?
Your profits depend on your product selection. If it is in high demand, then you can sell more and earn more.
Retail arbitrage is the process of finding items at a below-market rate, buying an inventory stock, and selling them elsewhere for market value. Amazon retail arbitrage is an opportunity to skip costly website and marketing expenses by selling on Amazon, where millions of customers already do the bulk of their year-round shopping. The best benefit of all?
Using FBA could increase a seller’s sales more thanks to the Amazon Prime program. That’s a pretty significant statistic and proves that Amazon retail arbitrage, when combined with FBA, is a robust opportunity to scale your side-hustle and go from dabbler to pro.