If you’re looking for new methods to make money as a solopreneur, retail arbitrage on Amazon is a great option.
Retail arbitrage simply means buying products at a discount from retail outlets and selling them for a higher price through different eCommerce platforms such as Amazon.
With retail arbitrage (as opposed to online arbitrage), you need to physically step out and visit retail stores to look for great deals on products. Once you find discounted items, you can buy them and sell them on Amazon at a higher price to make a profit.
While it sounds simple, making money with retail arbitrage on Amazon has a few technicalities you’ll need to follow to be successful. But when done right, retail arbitrage can be a very lucrative businessn and serve as a way to generate funds to move into the even more profitable world of private labeling and Amazon FBA.
If retail Amazon arbitrage piques your interest, continue reading to learn more about this Amazon business opportunity.
What is Retail Arbitrage?
Retail arbitrage is the practice of purchasing products at a lower price from one marketplace and selling them at a higher price on a different marketplace to make profits.
Sellers will usually buy discounted products at clearance sales from different retailers and sell the products for a higher price on Amazon or similar online marketplaces.
If sellers buy products they find online, the process is known as online arbitrage. Unlike retail arbitrage sellers, online arbitrage sellers do not need to physically visit a retail store to find products.
If you’re concerned whether retail arbitrage is legal; as per the First-Sale Doctrine, if you are legally purchasing a product, you can resell it as long as it is in an unchanged condition.
How Does Retail Arbitrage Work?
Here is an overview of how retail arbitrage on Amazon works:
Step 1: Search for discounted products at retail stores
Start by looking for discounted items at brick-and-mortar stores. The best time to find discounted products is to visit the stores during clearance sales because that’s when you get the best deals.
However, just because a product is on sale doesn’t mean it’s a popular product. You’ll need to check whether the product sells well on Amazon.
Step 2: Find the same products on Amazon
Once you find heavily discounted items at retail stores, check whether the product is available on Amazon using the Amazon Seller App on your phone.
Use the app to scan the barcodes of the products you find at stores. If the products are available on Amazon, the app will show you the details.
Step 3: Look for products that sell for a higher price
To make profits as a retail arbitrage seller, you’ll want to select only those products which sell for a higher price on Amazon. Remember there will also be Amazon fees and selling fees that you’ll need to account for while zeroing in on a product.
Step 4: Buy products and relist via FBM or FBA
Once you have identified the products that can generate a good profit margin, buy them and then relist them through FBM (Fulfilled by Merchant) or FBA (Fulfilled by Amazon).
How to Make Money with Retail Arbitrage on Amazon?
To be successful with the retail arbitrage business model it’s important you resell products that people want to buy instead of products you like the look of.
The most logical way for retail arbitrage sellers to achieve this is to choose products in popular niches.
Selecting the right niches before hitting a retail outlet will help you to identify the in-demand products, and remove the guesswork.
Here is how you make money with retail arbitrage on Amazon:
Step 1: Choose Popular Niches
Successful retail arbitrage sellers start by selecting the most popular niches on Amazon that include home & kitchen, toys & games, books, beauty & personal care, grocery & gourmet food, etc.
You could choose to take the hit-or-miss approach by selecting something completely new, which means customers won’t have a comparative price meaning you can likely charge a bit more. However, I wouldn’t risk this approach until you’re more experienced and have some solid sales under your belt.
Step 2: Use Tools to Find the Best Deals
Unlike online arbitrage where you can find multiple websites to find the best deals, retail arbitrage will not give you that advantage. You have to manually visit a retail outlet to look for deals.
Remember that certain retailers with an online presence ensure that a few deals are exclusively available through their physical stores. Also, the retail price at physical stores can be different from their online stores.
You can use the Amazon Seller App to scan product barcodes at retail stores. This will show you the listings for a product, its sales rank, its current selling price, and whether you can resell the product.
The app will also allow you to enter the buy cost so that you can easily determine the profit margin.
If you wish, you can even list the products and sell them directly from the app.
Step 3: Calculate Profitability Using FBA Calculator
Once you have found profitable products at retail stores and have compared the Amazon listing prices, you’ll need to calculate the profitability. Amazon Seller Central has an Amazon FBA Revenue Calculator for that.
To use it, enter the ASIN number (that you can find on Amazon listing’s product information page) into the Amazon ranking sales calculator and then enter the product price and the product cost to calculate the net profit and profit margin.
This post walks you through how to use the Amazon Rank Sales Calculator in detail.
Step 4: Assess Demand Using BSR & JungleScout Sales Estimator Tool
Before you start retail arbitrage sourcing, you must assess the product demand. For this, you will need the Best Sellers Rank from the Amazon product listing page.
Grab the rank and feed it into the JungleScout Sales Estimator tool. Then provide the Amazon Marketplace (that is, the country) and the product category.
The tool will give you the estimated number of sales per month. You can then purchase inventory accordingly.
Step 5: Sell High!
Once you assess the profit margins and the estimated sales per month, you can start listing the products for Amazon retail arbitrage!
How to Get Started with Retail Arbitrage?
To participate in Amazon retail arbitrage, you must have an Amazon seller account. What’s interesting is that even to use the FBA Revenue Calculator, you must have an Amazon seller account to conduct your online business.
Here are the steps to follow to get started with retail arbitrage on Amazon:
Step 1: Sign Up for an Amazon Seller Account
Visit Amazon Seller Central and click on the “Sign up” button. On the next page, you will see the list of documents and details you will need to register as a seller on Amazon’s online marketplace.
Proceed to create an account. You will have two options – Individual and Professional. For the Individual plan, you don’t need to pay any monthly charge, but pay a charge for every item you sell.
For the Professional account, you need to pay $39.99 a month, but there will be no charge for each item you sell.
For the Individual seller account, Amazon will charge you $0.99. So, when your Amazon sales exceed 40 a month, it makes sense to switch to the Professional plan.
You can also select FBM or Amazon FBA. Signing up for Amazon FBA will mean that you don’t have to worry about fulfilling the orders yourself. You just need to create a profitable inventory and ship the products to Amazon’s warehouse to start selling online.
Step 2: Check Which Products are Allowed / Prohibited
Before you start product research, it’s vital that you know which products you can’t sell.
Amazon has something called Brand Registry Protection. This program allows brands and private labels to have greater control over their product listings.
For an Amazon arbitrage seller, it simply means that if there is a product that is part of the Brand Registry, the seller cannot resell that product. Amazon will immediately flag those products when someone tries to relist them.
Using the seller app to scan a product’s barcode at a retail store will show whether it is a brand-restricted product or not.
Step 3: Head to Brick-and-Mortar Stores
Once you have an idea of the products that you can’t resell, you’ll need to start finding the products you can sell!
The best places are thrift stores, discount stores, and large retailers.
When you’re just getting started with your retail arbitrage side hustle, you’ll most likely source singular products from a local retailer, which is the most popular option for solopreneurs building a lifestyle income.
However, as your sales grow, you gather more experience, and get to know which products sell well and are more popular, you’ll be able to increase your profit margins by adopting the wholesale business model.
This means bypassing the discount stores altogether and contacting the product manufacturers directly to show interest in buying products in bulk.
Not hundreds or thousands of products like FBA, but maybe ten or twenty at a time. However, buying products in bulk only makes sense if you know there will be a consistent demand for them, so you may want to only consider this option when you’ve been selling a while.
Step 4: Use the Amazon Seller App to Scan Products
Once you find heavily discounted products in a retail store, use the seller app to scan the product barcodes to get a wealth of information that includes:
- Whether you can resell the product on Amazon or not.
- The sales rank for each product. A decent sales rank (usually below 100,000) will indicate that a product has a good sales volume, and it is in demand.
- It will also show you whether other sellers have listed the same product or not.
- The price difference between the retail platform and Amazon. This will give you an idea of whether the product will be profitable or not.
- You can enter the current ‘buy price’ of the product to check the profitability.
Step 5: Find the Products on Amazon and Calculate the Profitability
Even though you will use the seller app to scan products at a retail outlet, I recommend not buying the products immediately, especially if you’re fairly sure the discounted prices will remain as such for a while.
Instead, go home (or to a local coffee shop) and do some research.
Go to Amazon and find the products one by one. For each product, check the selling price. The selling price on Amazon must be significantly higher than the discounted price.
Now use the Amazon FBA Revenue Calculator to calculate the exact profit you will earn and the profit margin you will enjoy.
I also recommend that you check the sales rank for each product and use the Amazon sales estimator by JungleScout. This will give you a fair idea of whether the product is in demand or not.
Remember that if other Amazon sellers are selling the same product, they will be on the same product listing page.
Assuming that there are two other arbitrage sellers, then you must divide the estimated number of sales by 3 (two other sellers and you) to get a more realistic estimate of the number of sales you can expect per month. This is, however, based on the assumption that all three of you win the Buy Box.
But remember, the sales estimator tool will not give you the full scenario. To be a successful FBA seller and make a healthy profit, it’s important that you learn about the price history and the historical sales volume of an existing product on Amazon.
JungleScout can help you perform detailed research so that you don’t end up buying products that won’t sell easily or you don’t build an excess inventory, and help to streamline the selling process.
Once you conduct thorough research and calculate potential profits after taking into account storage fees, shipping costs, etc., you can head back to the store and buy the products you want to sell on Amazon.
Step 6: If all checks out, list & ship to Amazon
After you have found the profitable products, buy them, choose your selling price, and list them on Amazon.
Ideally, you want to select products that provide 40% to 50% ROI. If you choose Amazon FBA, ship them to Amazon’s warehouse.
Remember that FBA sellers must pay for the following:
- Amazon FBA fee
- Shipping costs to the Amazon fulfillment center
- Storage fees at Amazon’s warehouse
The benefit of FBA vs FBM, is that you don’t need to hold or ship your products, Amazon will do that for you, (FBA – fulfilled by Amazon.)
However, when you’re just getting started you may want to go the FBM (fulfilled by merchant) route to get your head around how it all works. Just remember if you go FBM, your products do not qualify for Prime sales.
Where to Source Products for Retail Arbitrage?
Some of the popular stores and retail giants where you can find items at a competitive price are:
- CVS, Rite Aid, Walgreens, or other convenience stores
- Dick’s Sporting Goods
- Dollar General or other dollar stores
- Grocery stores
- TJ Maxx
Retail Arbitrage vs Other Business Models on Amazon
Private Label vs Amazon Retail Arbitrage
Private labeling is where you source an existing product produced by a manufacturer and brand it as your own. You may choose to modify the product or create a better version to make it more unique, but typically you’ll start by branding something that’s proven and popular.
For example we made 7 figures inside of 12 months with a digital cooking thermometer.
This is an extremely profitable business model. Far more so than retail arbitrage, however you’ll need a significant amount of startup capital to invest in inventory, as the profits are based on you buying thousands of units at a time.
Retail arbitrage is a great route to generating the funds needed to move into the profitable private label/FBA model.
Dropshipping vs Amazon Retail Arbitrage
Dropshipping is an online business model in which you don’t buy any products.
You simply find products produced by manufacturers that you want to sell, and list them on Amazon. When someone orders the product from your listing, you essentially purchase the product on their behalf from the manufacturer, who ships the product directly to the customer.
Your profit is based on the difference in price between what you charged the customer and what you paid for the product. Due to the low barrier to entry, this is an extremely competitive business model.
Handmade vs Amazon Retail Arbitrage
Amazon Handmade is a business model in which you craft or create your own products from scratch and sell them through Amazon. There are limited categories in which you can sell, and the products must be strictly handmade.
The benefit of this business model is that you can also sell your craft products via Etsy.
Online Arbitrage vs Amazon Retail Arbitrage
The only difference between Amazon online arbitrage and Amazon retail arbitrage is that in retail arbitrage you source products from your local Walmart store or other physical retailers, while in online arbitrage you use other eCommerce platforms to find discounted items and order them online.
Online Amazon arbitrage eliminates the need to physically visit the retail stores of third-party sellers. You can save time, gas, mileage, and frustration.
Retail Arbitrage: FAQs
Is retail arbitrage worth it in 2023?
Yes, retail arbitrage is worth your time and money in 2023. While you’ll need to physically shop at stores (a shoppers dream), there are certain deals and products that are exclusively sold through physical retail outlets.
Plus, it requires very little startup costs, is a low-risk method to sell products and is a high-ROI business venture.
How much can you make from Amazon Arbitrage?
It all depends on two factors – the selling velocity of the products you want to sell and the product procurement price. Typically, you will make more money when the selling velocity is high and the procurement price is low.
The first few months might be slow because it takes time to understand the supply chain and put all the systems in place.
Once you master everything and have more control, the earning potential through Amazon arbitrage will only be restricted by your time and capital investments.
What is the difference between retail arbitrage and dropshipping?
In retail arbitrage, you need to buy the products you want to sell and then, either store them and fulfill them by yourself, or you can participate in the Amazon FBA program and let Amazon handle the storage and shipping.
In dropshipping, you don’t need to buy anything. You just need to find products and list them.
When someone buys the product you listed, you will send the order to the supplier and inform the customer that the product is on its way. The supplier then ships the product directly to the customer.
Retail arbitrage gives you more control but for extra overhead costs. Dropshipping is cheaper to start, but you will be dependent on the supplier for fulfillment. This can lead to problems.
How to Make Money with Retail Arbitrage: Summary
Retail arbitrage on Amazon is a great business model for solopreneurs with small budgets.
While a fully-fledged FBA private label business takes a lot of investment or startup costs, retail arbitrage gives an advantage of starting small.
Even if you are cash-strapped, you can always start with a few products and test the market. So, even if it doesn’t work, you won’t lose too much and you will have gained experience as to how Amazon works.
If you want to start retail arbitrage on Amazon, you don’t even need to have a professional seller account. An individual account will suffice for up to 40 sales a month. For sales beyond that, you will need a professional account.
But before you take the plunge and start selling, make sure that you spend enough time on product research. Well-researched data can give you an advantage over other FBA sellers.
Here are some more articles to help you navigate the Amazon landscape and other ways to make money on this behemoth ecommerce site!
How to Sell on Amazon Without Inventory; 18 Alternative Selling Models
How To Make Money As An Amazon Influencer
22 Fantastic Ways to Make Money on Amazon in 2023
How We Built a 7 Figure Amazon FBA Business in 12 Months