If you're looking for a way to make some extra money on the side, arbitrage with Amazon FBA is one of the best ways to start.
There's two different ways you can arbitrage goods on Amazon FBA and I previously wrote about my favorite way, online arbitrage, but today we're going to talk about retail arbitrage.
Retail arbitrage is the process of buying products at a low price and selling them for a higher price online, so the principles are the same as online arbitrage except with retail arbitrage you're buying from physical retail stores.
There's no reason you can't do both. In fact I recommend you do both online and retail arbitrage. If you're out doing buying gifts or just cruising the mall, why not keep your eye out for any bargains and pick up some stock?
Of course you'll need to know how retail arbitrage works and you'll have to do some quick due diligence if you stumble across a potential product out in the wild!
By the end of this article you'll be armed with plenty of info to get started with retail arbitrage and Amazon FBA, so let's get started.
What is Retail Arbitrage?
You may have seen the "picker" craze on social media over the past few years, which involves going to garage sales and thrift stores to find hidden gems to re-sell on platforms like eBay. Whilst the concept and strategies are similar, retail arbitrage has greater potential when it comes to sales volume and consistent, predictable revenue.
When sourcing products for retail arbitrage we're looking for brand new, unused items from retail stores, rather than sifting through other people's junk at garage sales or thrift shops.
Purchasing goods from retail stores to flip on Amazon might be a spontaneous purchase, or we may also strategically target stores that are having advertised sales or closing down clearances.
There's a lot of different ways to source goods and with the tips and tricks Im going to share with you, you'll be able to source products with confidence and start making money with retail arbitrage very soon!
How Does Amazon Retail Arbitrage Work?
The process of Amazon retail arbitrage is simple. First, find a low-priced product that you think you can sell for a profit. Next, list the item on Amazon at a higher price. When someone buys the item from you, Amazon will send you the difference between the two prices.
For example, if you sell an item $60 that you bought for $20, Amazon will pay you the difference after they take their fees. We'll discuss fees later in this article.
It's important to keep in mind that there's some costs associated with selling on Amazon, especially with FBA. There's also specific requirements you need to adhere to when selling products with Amazon FBA.
What is Amazon FBA?
This is an entire learning experience in itself, which I've actually written about in this Amazon FBA guide.
But to describe Fulfilment by Amazon (FBA) in a nutshell, this handy graphic explains it perfectly!
When you first find your products in a retail store, you'll need to prepare then before sending them to an Amazon warehouse. You can either do this yourself or use an Amazon prep center.
You'll need to have an Amazon seller account with FBA setup, and once you have your products prepped you can send them to Amazon and create your listings.
Then once you start making sales, Amazon will pick, pack and ship your items from their warehouse directly to your customer.
Not having to do all of these menial tasks yourself is what makes Amazon FBA great. You can focus your efforts on finding hot products and growing your business.
How Do I Find Products to Sell on Amazon with Retail Arbitrage?
This is really where the magic happens in your business. It takes skill to source the right products to sell, but it's something that anyone can do.
There's several ways to find products to sell on Amazon with retail arbitrage. The easiest way is to keep a list of popular retail stores that are likely to have clearances and sales.
Some of these retail stores include:
- Bass Pro
- Barnes & Noble
- Bed Bath & Beyond
- Best Buy
- Big Lots
- Hobby Lobby
- Home Depot
- Office Depot
- REI Co-op
- Rite Aid
- Sam's Club
- TJ Maxx Home Goods
- Tuesday Morning
Finding Good Products to Sell with Retail Arbitrage
As you become more experience as an Amazon FBA retail arbitrage seller, you will start to pick up do's and don'ts along the way. To help save you some time, here's some handy tips that could save you a fortune.
Use the Amazon Seller Scanner App
The Amazon Seller Scanner app is free and it connects to your seller account. What's great is that you can use it to scan items you find in stores and see what they are currently selling for on Amazon. This a great little free research tool.
Check Amazon Movers and Shakers
Amazon Movers and Shakers is a list of all the biggest sales rank movers on Amazon, updated every 24 hours. It's a great tool to check often so you can get an "eye" for trends and products that sell well.
Look Closer at Variants
Not all product variants are good sellers. For example, a particular shoe might sell well but the green version of it might be a dud. Before you make a big purchase of goods you've sourced, ensure that you dig a little deeper into the variants.
Use Software Like Keepa
Keepa is a fantastic piece of software that allows you to track millions of products on Amazon. You can do things like track price movements and Amazon sales rank which helps give you a great overview of potential products that are worth arbitraging.
Check Amazon's Product Compliance
Make sure you are well versed in Amazon's category, product and listing restrictions so you don't end up buying bulk of a product that is going to cause you headaches due to restrictions.
How Much Does it Cost to Sell on Amazon FBA with Retail Arbitrage?
There is no one, fixed-fee when it comes to selling on Amazon FBA, but rather a range of different costs that retail arbitrage sellers need to take into account.
Here's a list of costs that you will need to take into account:
Amazon FBA Warehousing Costs
Amazon charges you to store your products in their warehouse. This table of fees is current at the time of writing this article, but I always recommend checking the Amazon Seller Central help docs.
The storage fees are quite transparent and they vary depending on the type of the product, the time of year, the amount of actual space your products are taking up and the length of time that they have been stored.
Amazon FBA Fulfilment Costs
Fulfilment costs include picking, packing and shipping your products to your customers when you make a sale. The Amazon Revenue Calculator is a great way to estimate fees.
Amazon Selling Fees
When you sell an item, you are charged whats called a referral fee by Amazon. This fee depends greatly on the category of your products and it can range from 8% to 17% of the sale price.
Amazon Monthly Fee
In order to maintain a professional selling account with Amazon, you need to pay $39.99 per month.
Amazon Prep Center Costs
If you choose to engage and Amazon FBA Prep Center to prepare your goods then you will need to take into account their fees.
Cost of Goods
This one's pretty obvious, but you need to keep an account of how much you actually spend on products that you source. You also need to consider the cost of shipping the goods to your prep center or to Amazon directly.
Taxes and the Legal Stuff
I'm not an accountant but make sure you engage the services of one when the time is right. You may also need a legal professional when it comes to incorporating your business. I don't give advice on any of these matters because everyone's situation is different, so make sure you get the right professional help for your own scenario.
What The Difference Between Retail Arbitrage and Online Arbitrage?
This one is quite simple. Retail arbitrage involves sourcing products from brick and mortar retail stores whereas Online Arbitrage involves sourcing products online. Both methods of arbitrage involve selling the products on Amazon FBA so most of the principles are really the same. In fact there's no reason you can't do both.
I prefer to spend my time researching and sourcing online so I love the online arbitrage model, which is why I hold a regular OA Challenge for those wanting to do the same.
Retail Arbitrage Frequently Asked Questions
Is It Legal to Resell Products on Amazon?
Yes, it is legal to resell products on Amazon. However, there are some restrictions that you should be aware of. For example, you cannot sell counterfeit items or items that are subject to a recall. Additionally, you must disclose if an item is used or refurbished. It's generally always best to focus on new items.
What Are the Benefits of Retail Arbitrage?
There are several benefits of retail arbitrage. First, it is a quick and easy way to make money once understand how it works. You can find products to sell in your local area, and you don't need any special skills or knowledge to get started. Additionally, there are very minimal startup costs associated with retail arbitrage because you can start small. Finally, it is a great way to learn about online selling and ecommerce businesses in general.
How Much Money Can You Make Doing Retail Arbitrage?
There's no set limit to how much you can make, but the one "secret to success" that I can give you is don't give up too soon. This is why most people fail. You do need some capital to start, but you don't need a huge amount, and you need to spend some time on this if you truly want to master it.
Stay consistent in your daily sourcing efforts and keep at it for the long term. I know people that have become millionaires from this business model, so it is definitely possible to achieve amazing success for those that stay at it and don't quit.
The Final Word on Retail Arbitrage with Amazon FBA
There you have it! That's everything you need to know about retail arbitrage with Amazon FBA right here in one easy to understand article!
I hope this article has given you a better understanding of how the process works and what you need to do to get started.
If you're ready to start your own retail arbitrage business, then head on over to my free Amazon FBA group on Facebook, or consider taking a look at the OA Challenge where we cover everything about Online Arbitrage with Amazon FBA.