If you’ve done research about being successful selling on Amazon, you’ve no doubt heard people talk about retail arbitrage. Retail arbitrage is used by many sellers as a way to make money reselling products on Amazon for a higher price than they originally purchased it for. Retail arbitrage requires keen eyes and knowledge of the market. You could get into serious trouble if you start buying lots of products that you think will resell for a higher price, but actually don’t. This is why it’s important to do diligent research about how products are selling so you don’t end up losing money.
But How Does Retail Arbitrage Actually Work?
Here’s an example:
You go to a store, like Wal-Mart or Target, and peruse the clearance section. You find a children’s toy on sale for $10. You buy a few to resell on Amazon for $30.
This is retail arbitrage. But you may be thinking, “why would anyone pay more for something they can get somewhere else cheaper?” This is a great question. There are several reasons why people pay more for products on Amazon. One reason is that prices vary depending where the customer lives. An item may be slow selling in part of the country, but sell like hot cakes in other parts. Customers also are willing to pay for convenience. People buy from Amazon because it’s quick and convenient. They don’t want to have to drive to the store when they can get what they want in a couple of days. Plus, some items may not even be sold in certain areas. Customers may like a certain brand of products that are only sold in certain stores that aren’t in their area. So, they’re willing to spend extra money in order to get what they want.
So now you’re probably thinking, “how do I know if something I find on clearance will be a good thing to sell on Amazon for retail arbitrage?” Luckily, there are apps and tricks you can use to make an educated guess about whether an item will be a good selling product on Amazon, but remember there are no guarantees.
Your first stop when researching a product should be Amazon itself. Simply open the Amazon shopping app on your phone and either search for the product in the search bar or scan the barcode. This will let you see possible competition for that product. You can also open the Amazon Seller app and perform the search as well in order to see if the item is eligible to be sold on Amazon (obviously important, you don’t want to buy a bunch of items you can’t sell), and the sales rank. The sales rank will tell you how quickly the item is selling in relation to other items in the category. If the sales rank is 1,346 for an item, then that means there are 1,345 items in that category that have sold since this item sold last. Obviously, the lower the sales rank, the more recently that item has been sold. So, the lower the sales rank, the better! When you are first starting out with retail arbitrage, it’s best to aim for products that are obviously eligible to be sold and have a sales rank of less than 250,000.
After checking those boxes, now you should look at how profitable it would be to sell that item on Amazon. For this post, we’re going to focus on how to estimate profitability when using Fulfillment by Amazon (FBA). You’ll want to use the Amazon FBA Calculator to take into account FBA fees, selling fees, shipping to Amazon, etc. All of these numbers are important to take into consideration.
You can also use apps like Scoutify when looking at products for retail arbitrage. This app will help you see potential profit and make buying decisions. You can also see rank, category, offers, buy box, etc. All of these details at your fingertips when in a retail store can really speed up your decision-making time. You can even try it free for 30 days.
If you want to check out even more tools that can help, we’ve put together a huge list of FREE tools for Amazon Sellers.
If you have questions about retail arbitrage, we’d love to chat. You can schedule a time that works best for you here.
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