What Is Retail Arbitrage?
Retail arbitrage simply means to buy something low and sell it high. In the case of retail arbitrage for FBA (Fulfillment by Amazon, which is Amazon’s amazing service where they will hold your inventory, market it, take the customer’s payments, and pack and ship it for you), you’ll buy retail items, either online or offline, and sell them for more money on Amazon. It really is as simple as that.
Retail arbitrage is a lot of fun because you can do it in your spare time. Let’s say you’re shopping at Target or Walmart. You can simply head over to the clearance area, scan some of the items using one of the tools you’ve downloaded to your smartphone (such as ScanPower or ProfitBandit) and buy the items you know will be profitable.
Once you really start to get into this, you’ll be amazed at how many opportunities there are out there to profit in everyday stores, even in your local grocery store.
Some people who really get into this won’t let themselves leave a retail store until they know they will have profited enough to take care of all of their purchases – even the ones they are making for their household! That’s a really fun way to think about this business. It can pay for minor expenses and even build up into a full-time income.
You might be wondering if there really is that much profit potential out there. There definitely is. You can shop for a day and come away with thousands of dollars in profits, if you know what you’re doing.
Why don’t Amazon shoppers just shop these clearance isles or visit the stores you’re visiting? The fact is that what’s on clearance or available for a low price in your local area does not match up elsewhere. Amazon caters to people from all over the country and all over the world. People are willing to pay for the convenience of having Amazon ship items to them. You may have bought that toy for $5 on clearance at Target, but that person across the country is thrilled to pay $60 on Amazon for an in-demand toy that’s sold out in their area.
Products are marked down on clearance every day. Local stores price items differently every day. Many of these same items are highly in demand on Amazon.
Why not buy them low and sell them higher on Amazon for great profits? You’re helping people find items they can’t get, or don’t feel like finding, in their local area. They might live in an isolated location where there isn’t a Target or Walmart or Trader Joe’s or any number of other stores.
Yes, they could go online to the web sites, but often it’s the local stores that have clearance racks with inventory, not the online sites.
So you’re profiting handsomely by sending these items into FBA. It’s a great, exciting business.
Restricted Categories
Before you get too excited about finding products to sell, you should know that there are restricted categories. For instance, you can’t head out to the latest clothing basement sale in your local area, ship all those clothes to Amazon, and profit. Clothing is a restricted category and certain restricted categories are available only by application. Even if you submit an application, it can take a while to be approved. Just be aware of this and check with Amazon.
Amazon restricts hazardous materials, dangerous units, and other FBA prohibited products. Examples include vehicle batteries, anything that requires a prescription, anything that has been recalled, anything alive, tobacco products, alcohol, guns, and floating lanterns.
Note that some products are okay to merchant fulfill (this is where you pack and ship the products to the customer by yourself, rather than sending them to Amazon to do the packing and shipping), but are not okay to send to Amazon’s warehouses via FBA. Some products require approval and others are outright banned.
Sales Rank Breakdown
One of the most important things that go into your buying decision is the sales rank of the product. You don’t want to try to sell something that just won’t sell. The lower the sales rank, the better. For instance, if a product has a sales rank of 2,500 in its category, that’s much better than a sales rank of 2,500,000. That product selling in the millions is probably not even worth it.
But one thing people tend not to understand is that sales rank can mean different things in different categories. For instance, there are many more books listed on Amazon than there are just about anything else. So, a book with a relatively high sales rank could still be a safe bet even if a toy with the same high sales rank is not profitable in its category.
The sales rank indicates popularity of a product. If it hasn’t sold in a long time, then its sales rank number will go up. Always look at the data to get a feel for if it’s still worth it to purchase that item, particularly if it’s a profitable, long-tail item. Some people prefer to make a little less money on items that sell all the time while others prefer to make more money on items that sell much less frequently.
More about Retail Arbitrage
Now, it’s time to talk more specifically about retail arbitrage. This is a very exciting business model for FBA. You are going to buy products for low prices in your local area or online and then resell them on Amazon for a higher price. You’re taking advantage of the low supply on Amazon and the high demand for certain products.
There are certain tools we’ll talk about again that will really help you when it comes to profiting with retail arbitrage. Note that this can take a lot of legwork. You aren’t going to be able to walk into a store and come out with thousands of dollars worth of profitable items in 10 minutes as a newbie. You will need to diligently scan items for profitability and make intelligent decisions based on the available data. That will help you determine if a product is a good purchase or not.
Ideally, you’ll eventually find products that are in high demand on Amazon but in low supply, and that you can readily get for low prices in your area so you can replenish your stock.
This can be a very profitable and fun business model, especially if you are of the personality that loves to find a great deal, loves to hit the clearance sections of your local stores, and takes joy in trying and testing many different products to see how much you can profit.
What Is Retail Arbitrage, Exactly?
To understand what retail arbitrage is, it can help to think about the day in the life of someone who takes advantage of this business model. They get up, check the sales listed in the newspaper, grab their coupons, and have a fully charged smartphone or dedicated scanner. They are ready to hit several stores, scanning items that have a good chance of profitability.
They might head to stores like Tuesday Morning, Big Lots, Walgreens, Target, Walmart, and more. They might even head to consignment shops and thrift stores. The point is to be able to scan as many items as possible, using your tools, to determine if they will be profitable for you to purchase and send into Amazon.
You are going to buy low and sell high, and profit handsomely from it. It’s not at all out of the question to earn several hundred dollars or more per shopping trip, especially as you start to develop an eye for what’s going to sell and what’s going to be a good purchase.
Free Tools to Use for Retail Arbitrage
There are some great free tools that can help you get started with retail arbitrage. There are certain apps you can download on your phone that don’t give you as much data as the paid tools, but can still help you make buying decisions on the road.
Here are some examples of these:
Pic2Shop—Pic2Shop is a barcode scanner. It can be really useful and is totally free.
Red Laser– This app will show price comparisons and allows you to scan items.
Amazon Price Check– This is Amazon’s app and it can give you great information on the go that can help you make your buying decision.
There are certain sites you’ll want to check out when it comes to finding deals. These sites often have apps that you can regularly check, or even be alerted by, on your Smartphone or tablet.
For example:
• Slickdeals.net
• Amazon’s Deal Of The Day
• Dealcatcher.com
• eBay
• Craigslist
You may want to have all or just some of these free tools, sites, and apps in your arsenal. You can find great deals, compare prices, and determine the worth of the product you’re interested in.
Paid Tools to Use for Retail Arbitrage
There are also some fantastic paid tools that will really help you. I recommend you take advantage of these paid tools so you can profit more quickly. These paid tools often offer free trials that can help you decide what’s right for you. Note that there are new tools popping up all the time, especially since so many marketers are interested in FBA these days.
I’ve mentioned ScanPower already. To use the app, you need a Smartphone or tablet. Then, you’ll need to scan items when you’re in the store. ScanPower connects to the available information on Amazon to quickly help you make a buying decision. Essentially, you get to see how profitable you can be before you even get started.
ScanPower will then help you list your items once you’re home so you’re ready to ship them to Amazon. The ScanPower suite can save you hours of time over doing it all manually, and it can prevent you from making bad buying decisions.
The Profit Bandit app is a good one, though it tends to be slightly less accurate. It’s a one-off payment so I recommend you get this if nothing else. It’s an app similar to the one ScanPower provides. It even links you to CamelCamelCamel.com data so you can check the price history of an item over time. Both services allow you to check the sales rank and competition data of each item.
There are other devices, such as the Scanfob that can help you scan items more quickly via Bluetooth. There are even devices that allow you to download Amazon’s product catalog so you can scan items even when you don’t have Internet or cell service. However, this can be more complicated and less up to date than devices that connect wirelessly.
Getting Started With What You Have
Again, I’m going to urge you to get started with what you have if you’re going to go the retail arbitrage route and are short on funds. You have books and other media items and electronics just collecting dust. Scan those items or manually type them into Amazon to see what kind of cash you can get for them. Create a shipment to go into FBA and watch your “trash” turn into real cash.
Set this guide aside and just go get started with this. The best way to understand the process is to just go ahead and do it, especially since you’ll soon be buying items to send in to Amazon. This will give you some capital so you can buy more items and it will give you the confidence you need to keep going.
In the next installment of this 2-part episode, we’ll talk about some great places to do some shopping.