What is Retail Arbitrage?
The most common definition you will find in the internet is that retail arbitrage is the act of buying products from one retailer and re-selling them, often on another marketplace like eBay, Amazon, etc.
Unlike regular retailing, a seller who is conducting Retail Arbitrage does not purchase their products and stock from wholesale suppliers or manufacturers, but rather, buys the products from other retailers or sellers.
The idea is pretty straightforward. You purchase items at a lower price from retail stores and sell them on another marketplace for a higher price. The difference goes straight to your pocket. It’s really simple right?
If it was that easy everybody should be doing it, but why won’t they?
It is because even though the concepts are easy to understand and it has a potential to make significant profits, it takes some not so easy practical application to make it a profitable enterprise.
How does it work?
You might think “How is it possible to purchase items from big retail stores for a lower price?” so that we can sell it on other marketplaces online at a higher price? The answer lies in how retail stores actually operate.
They are focused on keeping high selling products on the shelves at all time and getting rid of items that aren’t selling.
A good example would be the holiday sections of a store. During holiday seasons selling seasonal items can make some serious money; however, the moment the holiday is over, the products are now useless to the store.
If there is something that a retail store hates, that would be non-moving products. These are products living on shelves and end up not being purchased.
So if a retailer needs to get something off the shelf, they lower the price. Because of this strategy there will be more people who are willing to buy an item. It’s essentially playing with an economic principle taught in school, -- supply and demand, but with prices.
So ideally when prices becomes lower, that’s where we, people who are doing retail arbitrage, comes in.
After purchasing a product at a discounted price from retailers, another thing that makes retail arbitrage possible is that Amazon allows you to do something called “FBA” or “Fulfilled by Amazon”.
It is a great program because it allows you to purchase products and then send them directly to Amazon for fulfillment. This means no need to handle emails, calls, or even returns from customers. That is why Amazon is one of the best places to sell for those who are just getting started with this business model.
How can it help me or anyone?
Retail arbitrage is a viable business model for all types of people. It doesn’t matter if you’re in a major city, or in a rural area, anyone can leverage the power of retail arbitrage to create a great source of income.
So if you are someone who have been thinking of having an online selling business but don’t know how to begin, retail arbitrage can be a good start for you.
In retail arbitrage you can start with as little or as much money as you’re comfortable with. So it is a great way to get started with very little risk.
What are the steps in doing Retail Arbitrage?
So what do you actually do when you decided to start with retail arbitrage?
Well, it’s simple. Once you figure out how much you want to invest in your retail arbitrage adventure, you can now proceed with doing the following.
1. You Choose a Product to Buy.
With some tools you can choose a product that you’re interested in, you can pick the ones with the highest volume sales on Amazon, or the one with the highest profit margin. This is the key!
2. The product is delivered; you send it on to Amazon.
Of course, you need to create an Amazon seller account. Then when you receive your products, you sell via Amazon “FBA”. Amazon will send you a mailing label to send the products onto Amazon’s fulfillment centers.
3. Amazon sells the item, you get paid!
Your products are sold via Amazon, and are sent to the customer by Amazon. And you get paid! Any customer questions and returns are also dealt with directly by Amazon. How cool is that?
4. Take your profit, and grow your arbitrage business.
Once you’ve been paid, you can reinvest your profits into buying the next product that meets your criteria and expand your retail arbitrage adventure.