Digging Deeper Into Retail Arbitrage

This sourcing method has been around for ten years or so. For some resellers, it’s all about finding products at liquidator outlets or the clearance shelves of popular retail stores. For others, it’s taking advantage of coupons and discounts, while a few others find buying hard-to-find products at the retail price and selling them for a profit the way to profit.

Retail arbitrage is my primary sourcing method and I use all three of the above techniques. While I can’t always give you the specifics (I’ll tell you why a little later), I can give you examples. ·

This is true… I was browsing through the Clearance section of one of my local Wal-Mart and found a shelf full of cups from a popular coffeehouse. They looked like the real deal and were only a couple dollars apiece. I bought up every cup and sold them fast, making a nice profit. ·

I often watch the sales at my local drugstore chains and take advantage of other discounts offered. Sometimes I bundle products together that buyers often buy together — think toothpaste and dental floss or shampoo and conditioner. ·

Another product I buy at full retail from a regional grocery chain catering to a multicultural market. It’s a product becoming popular with foodies and likely hard to find in the fly over states.

Why Retail Arbitrage Works on Amazon?

You might scratch your head and think, “But Amazon is  about low prices, so how can you make a profit.” Well, it is, and it isn’t. Like many retailers, Amazon buys at wholesale and sells for the best price they can. But they also want to be the biggest retailer on earth. Adding third-party sellers is one way they’re heading to world retail domination.

Lots of products people need and desire are not available at their local stores, so they look to Amazon. For example, if there’s a special tea you want, but your local grocer doesn’t carry it, more than likely you’ll find it sold by Amazon or one of their merchant.   People will pay for convenience, especially if they are Prime members. And that’s big. According to this article on Quartz, over 50% of Amazon customers are Prime subscribers.  This popular premium addition to Amazon has been a game changer for FBA sellers like me.

There’s been much written about why Amazon Prime works so well with retail arbitrage, but it comes down to Prime members trust the giant online retailer and want the free shipping and other benefits that come with the account. In an article on OnlineFanatic, online seller Daniel Johannes puts it this way:

Also, if you’ve sold online before, but you’re new to Amazon, be aware that Amazon prime customers will pay more for something than nearly any other seller platform you can find.  Take advantage of this!  The downside is that customer expectations are WAY up, so be sure to take care of them well!

Things to Think About Before Selling Retail Arbitrage

Several people in the online selling community say retail arbitrage has reached its peak. But they’ll also tell you they don’t see it ending soon. One reason is it still works. Three’s little needed to get started, it’s certainly not as difficult and expensive as finding a product, then a distributor, opening an account, and then coming up with the money to paying for the product.

For a small time seller, it can be as easy as finding a product at a local store and selling it online. More profits equal more products that beget even more profit and soon the small time seller is scaling up her business. That’s why it’s been so popular as a sourcing method for so many new Amazon FBA sellers.

That’s not to say is easy or foolproof. They have to be the right products at the right price for a profit. And things seem to change with Amazon. A lot. In fact, they often prohibit online merchants from selling certain products. More manufacturers are making deals with Amazon for exclusivity, cutting out the RA middleman (or woman).

Yikes, I Don’t Own the Buy Box

Competition is also a negative factor. “Racing to the bottom” is a term that comes up often and describes how sellers keep lowering the price to sell the product, finally making it unprofitable. One thing to keep in mind as an Amazon seller is you don’t own the listing. Even when you are the one to create it.

Unless you have an exclusive agreement with Amazon, any other number of sellers can sell on the same listing. And vice versa. As a seller, that’s a good thing and you won’t have to create new listings for each product, unlike eBay. It means you can have lots competition who undercut you and who “race” the price into unprofitability. I’ve had that happen a few of times, it’s just part of the business and one of the I never overstock in my business model.

That’s also one reason retail arbitrage continues to work. When you find the right product, that people want to buy, and you’re one of a  few sellers, you will make money. So again to answer the original question, can you really make money with retail arbitrage on Amazon? Yes. Yes, yes, yes.

My RA Secret on Amazon

This is an affiliate link, which means I collect a commission if you buy the product. For more information, please check my disclosure policy. Thanks, Kate :-).

I mentioned bundling earlier in this article and that’s that’s my little secret to how I make retail arbitrage work for me. Bundling is putting similar products together. They are products that customers often buy together. Again it the examples I gave earlier, such as toothpaste and dental floss or shampoo and conditioner. Bundling these products is convenient… and wow, so are the sales.

I mentioned bundling earlier in this article and that’s that’s my little secret to how I make retail arbitrage work for me. Bundling is putting similar products together. They are products that customers often buy together. Again it the examples I gave earlier, such as toothpaste and dental floss or shampoo and conditioner. Bundling these products is convenient… and wow, so are the sales.

I learned this not only from the research I did early on but also by buying this book from Deborah Conrad: Bundle Basics and Advanced Strategies-Sell Products On Amazon Without Competition. She teaches how it works and the extra little secrets that make it work even better, from bundling the correct products to adding copyrighted material into the bundle that makes it your own. If you want to learn how to make money with Amazon and retail arbitrage, this is the route I recommend… and use.

If you want to learn how to make money with Amazon and retail arbitrage, this is the route I recommend… and use.

Till later,

-Kate