21/03/2023
Amazon Retail Arbitrage 2023 Guide
Have you been wanting to sell on Amazon but don’t know how to get started or don’t yet have the budget to launch a private label product? One great method to get started is through retail arbitrage. You can start with as little or as much money as you’re comfortable with — you can even do it without stepping foot inside a store!
Keep reading to learn about retail arbitrage, or check out this video for a step-by-step overview of how to get started.
What is retail arbitrage?
Arbitrage is the practice of taking advantage of a price difference between two or more markets, or, in other words, reselling.
In this case, retail arbitrage is the process of buying discounted products through retailers (including online retailers) to sell on Amazon.
An example of this would be finding a product at Walmart that sells for $5, purchasing that product, and then reselling it on Amazon for $20. Pretty cool, right?
Some sellers also buy products they find online, which is known as online arbitrage, and the process is the same: buy low, sell high (on Amazon).
You may be asking yourself, “is retail arbitrage legal?” Fortunately, it is. According to the first-sale doctrine, once you purchase a product legally, you then have the right to resell that product, as long as it is sold in an unchanged condition. So if you buy and sell it as new, the product must be sold in new condition.
How does retail arbitrage compare to other business models on Amazon?
• Private label is when you create your own product label/brand, generally by modifying an existing product in the market. For example, you can create a higher quality garlic press than one already selling on Amazon, reproduce it from a manufacturer, and add your logo to it. It’s the most common method of selling on Amazon and can be incredibly profitable, but most sellers need some capital to get started.
• Wholesale is when you buy products in bulk directly from a brand or from distributors with extra stock to sell on Amazon, which also requires start-up money. This does not involve ordering products from retail stores. Wholesale is a more sustainable business model as you can replace orders every month and you are an authorized reseller, meaning you don’t have to worry so much about inauthentic claims.
• Dropshipping is when you buy products directly from a manufacturer who fulfills the order and ships directly to the customer.
• Handmade is the process by which you create or craft your own products to sell on Amazon.
Why would you choose arbitrage over other models of selling on Amazon?
• Lower cost to start: According to Jungle Scout’s study of more than 1,000 Amazon sellers, 12% of those doing arbitrage were able to launch Amazon businesses with less than $500, and about 32% did so for less than $1,000. By contrast, 80% of private label sellers spent $1,000 or more to launch.
• Faster to start: Two in five (33%) retail arbitrate sellers said they were able to launch Amazon businesses in less than one month. Only a 14% of private label sellers said the same.
Essentially, if you don’t already have a product to sell or have money to buy products at scale, arbitrage is a great, low-risk method of selling on Amazon.
On the other hand, if you start selling arbitrage, you can expand your strategy to other sales methods:
• 38% of retail arbitrage sellers also run a wholesale business
• 24% also sell private label
• 17% also have a dropshipping business
• 11% also sell handmade products
So how does it all work?
How to get started with retail arbitrage
In order to start selling retail arbitrage on Amazon, you need to find products to sell and you need to create an Amazon seller account. Ultimately, you’ll also want to decide whether to fulfill your products yourself (Amazon’s Fulfillment by Merchant or FBM program) or have Amazon handle the packing, shipping, and customer service (Fulfillment by Amazon or FBA). Hint: you can do both! See more on FBA vs. FBM here.
While different tools and software are available that will help you find products to resell, the only thing you really need is the Amazon seller app, which is free to use with your Amazon seller account.
This is the app you will use to scan products when in retail stores. Scanning products with the Amazon seller app will show you various listings, the sales rank, whether you are allowed to sell that certain product, and allow you to enter your buy cost to determine profitability. You can even list products for sale directly from the app.
If you don’t currently have this app on your phone, go to the app store and search “Amazon seller.” Once you have the app downloaded, sign in to your Amazon seller account and you’re ready to go!
If you are not familiar with the Amazon seller app, unfamiliar with the Amazon seller app, take some time to review the various features.
