Are you interested in learning how to make money selling on Amazon? Welcome to the world of retail arbitrage for beginners.
Whether you’re looking to increase your income with an easy side hustle or you’re a small business hoping to expand without going deep into debt, buying and selling on Amazon is a great way to reach your goals.
This buying and selling process is also known as arbitrage. In simple terms, retail arbitrage is when you buy a good in one market and sell it for profit in another.
Retail arbitrage is the practice of taking advantage of price differences between retail stores.
It can be done in a variety of ways, such as shopping at multiple stores in the same area, buying items at lower prices online, or clipping coupons.
In this beginner’s guide to retail arbitrage, we’ll give you tips on how to find potential deals and what to watch for when conducting arbitrage transactions.
Here’s what we will look at:
- We’ll get into what retail arbitrage on Amazon looks like,
- Why it’s a great option for anyone looking to jump into the “be your own boss” movement
- How you can start buying and selling on Amazon today!
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The Beginners Guide To Retail Arbitrage
Retail arbitrage can be a lucrative business and an excellent way to make quick cash. There are a few things you need to know in order to get started, including how to find stores that are selling items at a discount and how to negotiate the best prices. With a little practice, you’ll be able to make money quickly and efficiently!
What exactly is retail arbitrage?
Arbitrage is the practice of taking advantage of a price difference between two markets.
In the retail arbitrage market, this means taking advantage of prices at different stores.
There are a few things you need to know before starting out in this market: the types of arbitrage opportunities and how to identify them.
Let’s start with the difference between being a regular retailer versus being an arbitrage retailer:
A regular retailer sells goods that they either get from a supplier or have produced by a manufacturer.
An arbitrage retailer sells goods that they buy from another retailer at a discount and resell at a higher price that’s still competitive in the market for that item.
Retail Arbitrage In Practice
Let’s use a made-up candle company as an example:
A conventional candle company contracts with a wholesale supplier or uses a manufacturer to make their products.
They price the product so they earn back the money spent on those services and turn a profit.
For simple numbers, let’s say the candle costs $5.
An arbitrage candle company goes to a retail location and buys candles at a discount (let’s say there’s a $5 candle on clearance for $3).
For our Amazon-focused purposes, that arbitrage retailer then sells that candle on Amazon for $4.
They’d turn a profit because they made more money selling the candle than what they paid to get it, and their Amazon price was competitive because they sold the candle for less than the original $5 pre-clearance price.
Advantages of Doing Retail Arbitrage On Amazon
You might be wondering why you should be interested in getting into buying and selling on Amazon.
Here are the main reasons to consider it as your next side hustle:
Extra Income on Your Terms
Doing retail arbitrage on Amazon is a great way to make some extra cash.
Some Amazon storefronts are full-time jobs. Others are less involved: sellers might just pick up clearance items on their bi-weekly Target runs and add them to their storefronts that night before they go to bed.
The beauty is that you get to be your own boss when you buy and sell on Amazon! Of course, there’s some strategy and planning involved to ensure the success of your business (and we’ll get to that below). But, for the most part, the experience is whatever you make it.
Low Cost of Entry
Since stores like Walmart, Target, and Costco are where you source your products, you don’t have to go into debt by contracting with manufacturers or suppliers. Instead of paying for those services, that part of your business process is 100% in your control. Product sourcing becomes as convenient and cheap as you want or need it to be.
Scale Your Small Business
Let’s circle back to our candle company example. If you want to start a small business outside of Amazon, selling through an Amazon storefront is a great way to help you get your dream off the ground. Here’s how it works:
Eventually, you want to create Carmen’s Candles and have a storefront on Amazon to sell your branded products.
Right now, you’re in the early stages and need some extra money to develop your brand so you have a business to scale.
So, you do retail arbitrage on Amazon by buying tea-light candles and generic candle accessories from local retailers and sell them at a competitive price on Amazon. The profit you turn feeds your small business, and since you’re already selling within your niche, your Amazon storefront is established as an authority/resource within the candle community!
By the time you’re ready to launch your brand, you can either add to what you already sell or replace it with Carmen’s Candles’ products exclusively. Buyers who are already familiar with your small business’ Amazon storefront will be excited to learn more about your brand.
Why You Should Do Retail Arbitrage on Amazon Specifically
When buying and selling any product, the goal is to find a competitive edge. If you can find an item on sale in stores but sell it at a competitive-yet-profitable price online, then you’ve moved that item from one market to another in a strategic way.
Amazon itself is one of the most competitive e-commerce marketplaces. What feeds that success is the vast shift to convenient online shopping. Amazon takes this highly valued, highly demanded convenience to the next level by offering an unparalleled variety of goods through one platform and including the option for two-day shipping.
That’s why buying and selling on Amazon is a level up from retail arbitrage anywhere else!
(If you are in Canada, make sure to read my guide on How To Make Money Selling On Amazon FBA Canada)
How to Start Buying and Selling on Amazon
What to Sell
The answer is actually quite simple: sell whatever you want!
Okay, and be smart about it.
Going back to our previous example, Carmen’s Candles created an Amazon storefront and specifically sold products within their niche because that served their end goal (of funding and launching their own brand) best.
So, start by considering your goals and interests. Maybe you’re not a small business. If you’re just an independent industrious worker looking to make some extra cash, your next move is to figure out what items are popular, profitable, and accessible.
I personally recommend picking an industry or niche to focus on a) because that streamlines the search-and-purchase process for you and b) by staying consistent, customers will get to know you as the store you go to for x. And “x” will make it easier for customers to describe your store to friends or post about it online and help organically grow your clientele.
“Okay, But What Should I Sell?”
With all the above, if you’re still wondering where to start, Amazon has a “best sellers” page that updates hourly. It’s organized by department, so once you choose a market to cater to, you can research what people are buying online right now and strategize your product purchasing from there.
What Not to Sell
Even though you can buy and sell pretty much anything (as long as it was legally obtained), you’ll want to make sure you follow the rules. The Amazon seller platform itself is a great resource.
One of the first articles you’ll want to read is about restricted products. These aren’t necessarily products you can’t sell, but if you don’t follow the guidelines or get approval, selling these products could get your Amazon storefront flagged.
Something else you might consider is avoiding popular brands. Bigger companies can afford to contract with Amazon and enforce restrictions on how their products are sold. Larger brands are also more competitive about their marketing and you might have a harder time selling their products when they’re at the top of their market.
Can You Make Money With Retail Arbitrage?
Yes, there are people who make a full-time income buying and selling on Amazon.
How much money can you make buying and selling on Amazon?
Once again, the answer is simple: You can make as much or as little as you want.
And yes, you just have to be smart about it.
Amazon has kindly created a tool called the Fulfillment by Amazon (or FBA) calculator. This allows you to scan or look up items and see how they’re selling on Amazon in real time. The FBA calculator also estimates possible profits on a single product by letting you play around with price ranges and shipping costs.
How much you make from doing retail arbitrage on Amazon will depend on factors like what market you’re in (luxury makeup vs. drugstore makeup for example) and your target profit (i.e. you don’t purchase products unless you check your FBA calculator and project to earn a certain amount or more on your investment).
For the numerically inclined, I got you:
In the early months, you’ll might make less than $1000 because you’re learning. This learning period means you’re moving slower and therefore selling less. As you get better and develop a system that best fits how you operate, you’ll increase your efficiency and be able to sell more.
Ultimately, how much you make is based on your goal. If you want to make $2000-$5000 per month, you should be able to do so before the end of your first year as an Amazon seller.
How Do I Get Started With Arbitrage?
Choose Your Niche & Find Products
Get specific! Having a clear focus makes it easier for you to run your Amazon storefront efficiently and establish yourself as an authority within the market you’re catering to.
There are a few different ways to find products to sell. One way is to look on online marketplaces like Amazon and eBay.
You can also look on websites that sell products in bulk, like Alibaba. You can also search for manufacturers who are looking for distributors or retailers.
Things To Consider When Choosing Pr0ducts
When evaluating products, there are a few key factors you should consider. The first is the price. Is the product affordable?
You don’t want to overspend on something that you won’t use often or that you can find elsewhere for a lower price.
The second factor is quality. How well does the product work? Is it durable?
Third is demand. Do people want to buy this product? Are they actively searching for it? There’s no point in buying something that no one will buy.
Buy Like Crazy
Scout potential products on your next Target or Walmart run.
Remember, just because you see one of your products on sale doesn’t mean you have to buy it.
Check and see what the product is selling for on Amazon right then so you know whether or not it would a) actually turn a profit and b) be worth your valuable time and effort.
How To Start Selling On Amazon
Most people who use retail arbitrage on Amazon do it through the Amazon FBA program.
Amazon FBA: what is it and should you use it?
Amazon FBA (Fulfillment by Amazon) is a service offered by Amazon that allows sellers to send their products to an Amazon warehouse where they will be stored and then shipped out to customers when orders are placed.
Sellers who use the Amazon FBA service enjoy many benefits, including the ability to track their inventory levels on Amazon.
In addition, using the Amazon FBA service can help sellers increase their visibility on Amazon, as products that are stored in an Amazon warehouse are more likely to show up in search results.
Whether or not you should use the Amazon FBA service depends on a variety of factors, including how much inventory you have and how much time you want to spend managing your orders.
Create an Amazon Seller account
Creating an Amazon Seller account is pretty straightforward. The biggest decision you’ll have to make in this step is what plan best fits your business goals.
There are two to choose from: Individual and Professional.
Each plan has its respective benefits and restrictions, so you’ll want to make sure you read through the comprehensive comparison before you put any money down!
This couple managed to leave their corporate jobs and make a full-time living out of retail flipping, even selling groceries on Amazon!
If you want to know more about how they got started and get tips for success, you can check out their Amazon FBA bootcamp.
Click through to read all about their inspiring story and to find out more about the bootcamp which will show you:
- How to find profitable products in local retail stores (or even online) that can easily be flipped on Amazon
- How to set up your business foundation so you don’t have to worry about Uncle Sam coming for you in April!
- Tips for using the right tools to save you money and time in your new business
- How to price your products just right so they fly off the shelves (so you get money in your bank account faster!)
- Help with managing the day-to-day of your business without spending hours looking at reports or Googling how-to-xyz
Check out The Selling Family’s Success Story here.
Retail Arbitrage For Beginners – FAQs
Is Retail Arbitrage Legal?
Retail arbitrage is 100% legal. Although some people think that it is no “fair” or right to buy something then resell it for a profit, in most countries it is completely legal.
The US Supreme Court has stated that a retailer cannot stop someone from reselling their products if the merchandise has been legally acquired.
That being said, Retail Arbitrage does have some challenges. First of all, if you are selling something that is new then you should be able to provide the warranty or guarantee to the purchaser.
Secondly, you need to be careful not to price gouge customers.
The third issue that some resellers run into is that brands themselves do not appreciate retail arbitrage and can try and make life difficult for people who are reselling their items.
How Much Does It Cost To Start Arbitrage?
There are a few costs that are associated with starting up a retail arbitrage business but in general you can get started with just a couple of hundred dollars.
The first is inventory – you’ll need to buy products to sell, and this can add up quickly if you’re not careful.
You’ll also need to pay for shipping costs, as well as any fees associated with selling products online (such as eBay or Amazon fees).
Overall, it’s relatively inexpensive to get started in retail arbitrage. The biggest expense is typically inventory, but there are many ways to keep this cost down.
Is Retail Arbitrage Worth It?
Retail flipping can be highly profitable if you are willing to put in the work to source good products that sell for a profit.
This is not a way to make a passive income and it does take an initial investment but once you get the hang of it, this is a great way to make money without doing too much work yourself.
If you want to read about someone who has had a lot of success with Amazon FBA, I highly recommend checking out The Selling Family.
Retail Arbitrage For Beginners: Final Thoughts
Retail arbitrage is the process of finding products at a lower price from one retailer and then reselling that product to another retailer for a higher price.
You can do this by buying products in bulk from a discount retailer and then selling them individually at a higher price or by buying products from online retailers and reselling them through brick-and-mortar stores.
Retail arbitrage can be a lucrative business, but it is important to do your research before you start to make sure you are making a profit.
