Are you looking to build a successful online retail arbitrage business? Most people think you need to be a tech/computer wiz to start an online business. The media has made the success stories of tech giants like Facebook, Google and others prominent, and that made many people falsely believe that you need to be the next Mark Zuckerberg to start a profitable internet-based business.
While this might be valid for specific types of business models, it’s not the case with retail arbitrage. Almost anyone with any set of skills can make it work and generate a good side income with it. This post will try to walk you through the whole process of going from zero to hero with retail arbitrage.
What is Retail Arbitrage?
So first things first, what exactly is retail arbitrage? In theory, the concept is very simple. You spot a great deal for an item at your local Walmart, Target, garage sale…etc. You buy it, add a markup then flip it for profit.
You can choose to resell it in a kiosk, out of your car’s trunk, in a Facebook group, on Craigslist, or anywhere else for that matter, online or offline. As long as you’re buying it cheap and selling it at a profit, it’s retail arbitrage.
While you can resell it in a variety of ways “offline”, the scope of this post focuses more on reselling your item online. Think Craigslist, eBay, Amazon…etc (check out the “resell online or offline” section for an explanation on why I prefer going the online route.
I know what you’re thinking. Why would anyone buy something from you at a higher price when they could just find it wherever you originally did, and get the same deal you got? I’ll cover that in a moment.
How Does Retail Arbitrage Work?
I know that it doesn’t sound logical at first. However, think about it for a moment. Most of the stuff we buy off of eBay, Amazon, Walmart and other retailers are available at a third of that price in China (often less). You can even go ahead and buy some of those Chinese items directly online through something like AliExpress.com, and they’ll ship it right to the U.S.
Literally, EXACT replicas of some of the products you find on AliExpress can be found selling for 3 times the price or more on Amazon. Why? If I can summarize it in 3 words, I’d say: Convenience, Accessibility, and Trust “CAT” (I totally just made up this acronym right now, in case you’re wondering).
Let me give you another quick example. Say you’ve found an awesome deal for an item at your local Walmart, and decided to buy it and resell it online. Now, why wouldn’t your potential buyer cut out the middleman and buy directly from your source?
First off, you’re selling it online, so anyone within the states (or even internationally depending on how you choose to sell it) can buy your item. The availability of items in local stores vary greatly, and the prices vary as well.
So to cut out the middleman, your buyer needs to travel potentially thousands of miles to find that same deal in your local store. That’s assuming they even know it’s available cheaper elsewhere.
It’s just a lot more convenient to buy it right off Amazon or eBay and have it shipped to their doorstep. If you’re using Amazon FBA (I’ll talk more about it later in this post), then your buyer could also have it conveniently delivered in a couple of days or even on the same day, for free if they’re Amazon Prime members. People do this with books, and use many different types of software to help assist with the process.
If you’re selling on Amazon, you also have the factor of trust on your side. People rarely think twice before buying on Amazon when they find something they want at a reasonable price.
So as you can see, there are very logical and very valid reasons for people deciding to buy your products at a higher price than what you had actually paid for. When you think about it, you’ve probably done it yourself more times than you’d care to admit.
Before delving into this topic, it’s important to understand that we’re not attorneys and this section does not constitute legal advice. Please seek the professional help of an attorney if you’re unsure about your specific situation.
In theory, there’s nothing illegal about reselling an item you’ve lawfully acquired or bought. Once you purchase the item, it’s yours to do with it as you please. In fact, this is exactly what the first sale doctrine is about. Check out this U.S Supreme Court ruling for more information.
If you intend to pursue retail arbitrage as a long-term business, though, there will be a few things you need to consider:
- Depending on how you use trademarks to advertise and sell your products, original manufacturers can come after you for trademark infringement, this is much less likely to happen if you’re just selling a few items here and there, but it’s a very valid concern as your business grows.
- If the item has a warranty and you’re not an official reseller (which you obviously aren’t in this case), then you risk voiding that warranty for the new buyer.
- There’s the issue of sales tax which may require the help of an accountant.
- Even if you’re doing everything legally and by the book, that doesn’t stop malicious sellers on Amazon, eBay, and other platforms from filing claims against you. Many of them would have no issues perjuring themselves because they assume it’s unlikely that you’d go after them in court.
Sounds too depressing? Well, retail arbitrage was definitely easier before when it comes to the legal grey areas. However, there are things you can do to minimize your risk significantly:
- Stay away from trademarked items and counterfeit goods. It’s best to go with generic items that do not come from big name brands like Tommy Hilfiger, Lacoste, Gucci..etc. These big brands are generally more likely to come after you. Also, needless to say, you should steer clear from counterfeit goods.
- Diversify. If you sell a thousand of the same item from the same brand, you’re more likely to get into hot water. Instead, try to vary your arbitrage portfolio so that you don’t attract unwanted attention.
- Beware of retail contracts. Some manufacturers have agreements in place that allow only authorized resellers to resell their products. Reselling their products without authorization is almost guaranteed to get you in trouble once you get noticed.
- “Used” vs. “New” item conditions. When selling through online marketplaces, you’re much safer marking the item as “Used” rather than “New”. Sure, this decreases your potential profit margin but offers additional protection as you’re much less likely to get in legal trouble selling the item as “Used” because you’re protected under the first sale doctrine.
- Don’t stand out. Try not to frequent the exact same local store and buy thousands of dollars in merchandise of the same item. While they can’t usually do much about it legally, a store can refuse to sell to you because of agreements with their suppliers/manufacturers prohibiting wholesale/bulk purchases. Try to vary the stores at which you purchase the goods you’re acquiring for arbitrage.
- Consider private labeling once you start growing. You’re less likely to face problems when you’re doing retail arbitrage as a side hustle for a few hundred or thousand bucks of additional monthly income. However, when things start growing and you starting thinking about turning this into a full-time gig, you might want to consider going the private labeling route. This basically means you contact suppliers and manufacturers directly, and have them create your own product. It’s not as intimidating as it sounds, trust me.
In summary, there’s definitely a legal risk with retail arbitrage. However, I like to think of it as a stepping stone to creating a more stable and long-term business. Sure, some people make “full-time, job replacing” money with this model but for newcomers just starting out, my recommendation is to think of it as a stepping stone.
Let’s start with the good things. The biggest advantage to the retail arbitrage model is that it’s low barrier to entry. Find a product you think you can sell at a higher price, list it online, offline or even sell it to your neighbor. Done.
You can start with $50-$100, even less. Buy 1 item at $10 and flip it at $30. Then use that $30 to buy 3 more and sell them at $90. Then, use that $90 to buy 9 items, or a different set of items for $20-$30 each, then repeat. You can see where this is going. With careful research, some luck and persistence, you can make a nice additional side income.
You also don’t need your own website and don’t need to buy anything in bulk. You don’t even have to keep any inventory if you’re using something like Amazon FBA. Sometimes you can even take advantage of the retail stores’ return policy so that if you’re unsuccessful at selling the items during their return time frame, you can just return the item for a refund.
I talked about one of the issues extensively above: the legal issues and grey areas. With retail arbitrage, your income could also be highly volatile. Say a super sale on an item you were sourcing and selling ended, or the item went out of stock.
Now you have to start hunting for a new “winning item” from scratch, which may not always be an easy process as you’ll find out in the “Where to Find Products” section. Because of this, you might also find yourself constantly jumping from product to product. Some will have great profit margins, some won’t, some will sell like hot cakes, others won’t..etc.
That’s very different from private labeling when you have your own suppliers and manufacturers that are providing you with a constant and stable supply of inventory for products that sell well. Because of this, it’s also harder to scale this business model.
When you’re working with a manufacturer and you have a booming product, scaling is relatively straightforward. Just buy more of the same item in bulk! (That will even work to your advantage because your supplier will most likely be able to offer you a better deal for ordering bigger quantities).
With arbitrage, however, it’s unlikely you’d be able to go to the same local store, find the same deal, and buy a thousand units instead of a hundred of the same item so you can scale. It’s certainly not impossible but it’s undoubtedly harder than the private labeling scenario.
Finally, and I’ll also talk more about this in the product research section, online marketplaces are highly competitive. It’s no easy task to find an item, add reasonable margins and still be able to list it and sell it at a competitive price simply because tens of thousands or even hundreds of thousands could be trying to do the exact same thing.
A How-To Guide: Process Overview
As outlined earlier, the process is relatively simple. It can be broken down into these steps.
- Product Research. Probably the most critical part of the process. Pick the wrong product and everything else falls apart. The product you choose needs to have a high selling potential after you add your margins to it.
- Finding Customers. Are you going the online or offline route? Either choice opens a ton of other options. For instance, if you choose online, you have to decide between Amazon, eBay, Craigslist, Facebook Groups (and Marketplace) among many other options, each with their own pros and cons.
- Marketing, Fulfilment, and Logistics. How are you going to get noticed and get people to buy? If you’re selling online, how will you handle packaging, shipping, returns…etc?
How/Where to Find Products?
I’ve talked about looking for and finding the best items for retail arbitrage that you can resell. The question here is, how and where can you find good deals for those items? This brings us to “sourcing“. You can either source online or offline, both routes with obvious advantages and disadvantages.
The main advantage of sourcing online is that you can jump between dozens of websites and online marketplaces in a matter of hours. You can quickly review products in hundreds of categories and use tools that aggregate data and create reports such as OAXray. The tool fully supports over 250 websites and partially supports over 750 more, bringing the total to over 1,000.
It costs a steep $99/month but they do have a 7-day trial available. One ninja tip here would be to take advantage of their huge database of websites, even if you do not intend on using the tool. Simply browse their supported sites list and start scrolling down. You’re likely to find a lot of ideas that way.
The main issue with online sourcing is accessibility. Anyone, anywhere in the world has access to the exact same sources. Additionally, you can’t inspect the condition of the item before ordering it which complicates the process if you discover issues with the item after delivery.
The offline methods often reward your extra efforts with some real gems. For this to work, you may have to drive around quite a bit and keep your eyes peeled for opportunities when entering every store. You’re less likely to compete with other sellers when finding a gem though, because they’d have to have found that deal physically as well (when it isn’t available online, of course). Let’s explore some options for both venues.
- Familiar giants like Amazon and eBay are good places to start.
- The 250+ websites on OAXray’s aforementioned list.
- Facebook’s Marketplace and Buy/Sell groups. FB’s marketplace has garnered massive traction thus far, you can find practically anything on there.
- Online auctions, check out sites like eBid, AuctionZip, and uBid.
- Online Flea markets like vFlea, Bonanza, FleaBay, DaWanda, and others.
- Big sale days like Black Friday, Cyber Monday, and Christmas.
- Classified ads from local newspapers, Craigslist, LetGo, Backpage, GumTree, and others.
- Deals blogs like Hip2Save.
These options alone will have you drowning in a sea of potential items to sell. If that’s not enough, we’ve written a whole post about product sourcing.
- Thrift stores.
- Church Bazaars.
- Liquidation stores.
- Clearance racks.
- Yard and garage sales.
- Flea markets.
- Local libraries.
When sourcing through these methods, make sure you thoroughly inspect your items for condition and expiry date. They must have resale value otherwise they’re obviously useless. A lot of times there will be very good reasons why an item is heavily discounted and end up being sold at any of the venues above, and these good reasons typically aren’t good for you. This is why it’s a major advantage to actually be able to inspect your items in person.
What Makes a Good Product?
Fair question. With all the options above for sourcing products, you might be asking yourself how will you be able to distinguish potentially profitable products from non-profitable ones. The answer here is simple. There needs to be demand for the product, and people should be willing to pay your marked up price for it. That’s what matters the most.
How you go about finding that out will depend on your chosen reselling outlet. For instance, if you choose to resell your product on Amazon then you’ll need to find out who else sells it at Amazon and at what price points. You can do this manually, or use a tool like Jungle Scout” draggable=”false” href=”https://entreresource.com/jungle-scout-alternatives/” data-wpil-keyword-link=”linked”>Jungle Scout for research.
Another very helpful tool is Profit Bandit, it’s especially helpful when you’re out and about looking for good deals in your local stores. Simply use the app to scan your desired item’s barcode, and it’ll automatically pull all sorts of information about the item from Amazon. You’ll see who else is selling it and at what price points instantly.
You can also use keyword research tools like Keywords Everywhere, it will show you approximately how many people search for your keywords/product on Google, Amazon, and other popular websites. If a lot of people are searching for your product, it only makes sense that this product would likely be in demand.
Here’s an example from Google:
For the keyword search “Dog Collar”, the “Keywords Everywhere” extension estimated 135,000 monthly searches. This obviously means that there is a good demand for this type of product.
When analyzing the popularity of products, a good approach is to use Google Trends too. Google Trends is a tool that analyzes the popularity of keywords over time. This allows you to spot products that were once popular but later died out.
It also helps alert you if a certain product is seasonal, because “what sells when” isn’t always obvious. The tool uses Google’s proprietary data, so it’s safe to say that it’s fairly reliable. Here’s an example with “fidget spinner”, for instance:
Fidget spinners are a great example here because you can see from the graph that compared to today, they were extremely popular back in Summer 2017. From that point onwards, the interest keeps dwindling until it reaches 8% of what it originally was, one year later.
Goes without saying that it would be a bad idea to start selling fidget spinners right now, unless you heavily niche it down, and even then, there would be no guarantee it’d actually work due to the sharp downward curve fidget spinners’ popularity took.
Here’s another example for an upward curve:
And another for a “constant” popularity curve:
As you may have noticed, all examples analyzed popularity in the last 12 months. The upward curve, “ketogenic diet” makes complete sense as this diet has been rapidly growing in popularity during the past year. “Dog collar” is our “constant popularity” example. People will always have dogs and will always want to buy collars for them, regardless of the season and period in time.
It’s important to note that you don’t need to use all of the above tools and tactics to determine whether or not a product has potential. Don’t overdo this because no product will be 100% perfect and pass all types of scrutiny with flying colors.
Just keep the basics in check and start listing and selling. Overcomplicating the process could lead to you getting cold feet and that is definitely something you do NOT want to happen. Just get started and improve as you go!
Resell Online or Offline?
Once you’ve sourced a product, you now need to decide on where you’re going to sell it. While our main focus is on online venues, you can also sell your product offline. But, which is better?
Offline is good when you’ve sourced a product and you know that you can resell it at a profit in another local area. So for instance, snorkeling masks were widely popular in summer. If you manage to get a good deal on them somewhere, you can try selling them at a local beach where snorkeling is popular.
In this case, the offline route could be lucrative as you don’t have to spend any money on online exposure and you don’t need to wait for someone to search for your product on Amazon. Instead, you’re approaching potential clients right when and where they need your product.
The con here is that you need some “physical” sales skills to sell your product to customers face to face. In some situations, you may also need to have permits issued for you to sell in certain areas or establishments. Scalability is also an issue as you’re only limited to customers who engage with you within this area.
Offline is a pretty good and straightforward way to get started though, because you don’t have to worry about shipping, product descriptions, and images or marketplace listing fees. You simply grab a bunch of items at a great deal, stuff them into the trunk of your car and go sell them where people are most likely to buy them. That’s it!
The Online Advantage
Now let’s talk about online. The most prominent feature here is obviously the exposure. The whole world (or at least the whole U.S) can search and order your product. You can sell a product while you sleep, no need to be physically present.
The problem there, though, is that you’re competing with tens of thousands of if not hundreds of thousands of sellers. If you’re selling on Amazon or eBay, you also pay fees to list on those marketplaces and have to follow -often strict- guidelines.
To maximize your chances of selling the items, you also need to carefully evaluate competing sellers. Look at their price points, ratings, item images and descriptions. These are all factors that will affect your sales potential immensely.
How to Sell Online
We’ll cover marketplaces like Amazon and eBay in a moment, but there are some prerequisites you need to keep in mind before jumping in and selling on those marketplaces. To maximize your chances of selling your item, you need to pay attention to:
- Product Photos.
- Product Descriptions.
- Marketplace Policies.
- Customer Support.
The first thing you need to do is to search for your product as if you were a potential buyer. See which listings stand out and why. Is it the price? High ratings and reviews? Attractive product images? Exciting descriptions? Free shipping?
Just ask yourself a simple question: There are 10 people selling this, which one would I buy from and WHY? Chances are, your potential buyers will go through the same thought process and likely end up with the same conclusion and choice.
Create a simple spreadsheet in Microsoft Excel or Google Spreadsheets with links to competing items and a comment on what makes them stand out. This will help you greatly when you start working on your own product listing.
You need to make sure your pricing is competitive. You don’t need to be the cheapest although it helps. If you decide to go the “cheapest” route, make sure you don’t undercut your closest competitor by a huge amount.
This could start pricing wars where eventually no one wins. Simply try pricing your item a few bucks less than your competitor. Again, sometimes this isn’t necessary, you can try selling at the same price or even higher, especially when there aren’t that many competitors selling your item.
Pricing should not be problematic because if you’ve done your research before purchasing the item like we’ve outlined above, you’d already know that it has potential and that there’s room for selling it at a good profit.
Product Photos and Videos
How you approach this is hugely dependent on the item you’re trying to sell. You do not really need a professional camera and lighting equipment, you just need the images to “look” professional and appealing. Your first stop for inspiration should be your competitors.
Product photos of items in their “natural environment” tend to perform the best because they help your buyer visualize using the item. For instance, if it’s clothing, it’d be great if you take photos of someone wearing them, and others without. If it’s home decoration, take a photo of the item on the wall or on a shelf where it will likely be placed in the buyer’s home.
This “natural environment” approach really helps sell the product. Similarly, if it’s a kitchen gadget, you can even record a video of the gadget in action. I’m sure you’ve seen a ton of Facebook videos using a similar approach to this. And no, you don’t need to be a professional photographer or videographer. All you need to do is to sell the VALUE of the item.
Think about it. You see this video on Facebook that introduces an awesome DIY tool to paint your car. You see it in action and it does an awesome job. Would it really matter to you if the video has awesome effects or not? Exciting music or not? Sure, it’d help, but once you see the value of the item, you’re already sold. This is all you need to do here, and there’s no need to get fancy.
Again, you can easily model after your competitors here. But as a general rule of thumb, your description should provide solutions to your potential buyer’s pain points. Sure, tech specs, weight and all that sort of stuff is standard, but you also need to focus on the benefits.
Similarly to your photos and videos, your description should help your potential buyer visualize their problem getting solved by using this product. You might be thinking “but a shirt doesn’t solve a problem!”.
Well, let’s take a step back here. Why are they buying this shirt? To look good, to look better. When we look good, we’re more confident. We’re happier. So in a way, dressing well does solve a problem, doesn’t it?
Here are some questions that should help you draft up a killer description:
- Why should I buy this product?
- Why should I buy it from YOU?
- Okay, I’m interested but I’m hesitant. Is the material of high quality? Will the item break after a few days of use? Is it safe for the environment? ….etc
Explain how this item solves their pain, why buy it from you rather than others (could be free shipping, a guarantee, more colors, better price….etc). Then, close the sale by addressing concerns. This could be in the form of FAQs, bullet points or whatever else you deem fit.
Of course, these guidelines will not work with every single item out there, but it’s a generally good framework to get you started thinking and writing in the right direction. As long as your description convinces your potential buyer that they need your product, you’re good to go.
For maximum exposure, your title and description need to include words that your potential buyers are actually searching for. How else would people discover your product?
Here’s a good process to find keywords to add to your product titles and descriptions:
- Analyze your top 10 competitors’ titles. Find the most common words they use to describe your item in their titles.
- Plug these keywords in Google and scroll down to the “related searches” section. Here’s an example for “cucumber slicer”:
These are all related keywords that you can use in your description or title. Right next to them, you can also see the estimated search volume pulled right from the Keywords Everywhere Chrome addon. Another approach would be Amazon’s autocomplete:Prioritize keywords with high search volumes + the ones that are being used frequently by your competitors. You should then be good to go!
Each marketplace has its own set of rules and guidelines. For instance, this is Amazon’s and this is eBay’s. You can easily find the rules for your chosen marketplace by Googling “[marketplace name] seller rules/policies/terms..etc”. Make sure you take a quick tour inside this section before you start selling.
We’ve talked about the legal aspects extensively in the “Is it Legal?” section, but to reiterate: one of the most problematic policies with a lot of marketplaces is reselling branded products. You should be careful with this. When in doubt, contact seller support at your chosen marketplace.
People absolutely love free shipping, so if you can factor in shipping cost in the item’s price and still maintain a competitive selling price, definitely do it. This rule isn’t set in stone, though, and it may be a good idea to test this.
Test selling your item at a higher cost with free shipping, and also test selling it at a lower price point with varying shipping cost. Try $2.99, $3.99, $4.99..etc (these are just examples) while adjusting your item’s price accordingly until you reach that sweet spot where people are happy to pay for both your item’s price and its shipping.
Popular digital marketplaces could unleash hell on you just because a few customers complained that your support sucks. Try to respond to all inquiries within a day if you can. Avoid robotic or templated answers. Acknowledge your customer’s problem, apologize and provide an adequate solution.
Never engage in uncivilized back and forth with customers and always think of returns and refunds as a regular business expense. This puts your mind at ease when issuing refunds knowing that it’s a calculated expense like ads, marketplace fees…etc.
A refund saves you an incredible headache because some angry customers will make it their life’s mission to ruin your reputation, post negative reviews everywhere on the planet…etc. Even if they’re in the wrong, just refund them and move on. You’ll be much better off that way, trust me. Of course, I’m not talking here about selling a couple of items on Craigslist, I’m talking about having an Amazon or eBay seller account and selling dozens of items.
So be attentive, compassionate, respond fully, in a friendly manner and solve your customer’s problem in the least number of required interactions.
Selling on Digital Marketplaces
Salehoo has a great article on the best places to sell online in 2018. The top recommendations from the article are:
- Your Own Online Store (Using Shopify, WooCommerce..etc)
- Niche-Specific Websites
Getting started on most sites is pretty self-explanatory. However, to simplify things for you, I’ve included specific steps you can take to start selling on one of the top websites below.
Navigate to the Craigslist homepage and choose your state from the very right column. You’ll then be asked to narrow down the location to city or area, proceed with that.
If you don’t see your state right away, just click on “us states” on the right column then choose your state and city. You can also directly browse to your city’s Craigslist by entering “cityname.craigslist.com”. Not every city has a section so if your city isn’t listed, simply choose the one that’s closest to you.
Since Craigslist is a local classified ads website, its Terms of Service prohibits posting the same ad to multiple cities (which makes sense), so make sure you post your ad to a single city. Next, click “Post to Classifieds” located on the top left corner of the screen. Choose the relevant option to continue.
For recurring sellers that do regular business on Craigslist and stock items, the choice here should be “for sale by dealer”. For private individuals who sell an item here and there every now and then, the right choice is “for sale by owner”. For the purposes of testing out whether Craigslist will work out for you or not, you can simply choose “for sale by owner” for now.
If you later decide that Craigslist will be a regular thing for you, and you start stocking items, then you should choose “for sale by dealer” to avoid getting in trouble.
When you click continue you’ll be asked to choose a category. Choose the closest category to your item. This is important because this is one of the primary ways potential buyers will discover your product. You will then be asked to narrow down your location further, and fill in your posting details:
The fields in green are required and must be filled out for your listing to go through. For the title, description, and price, use the guidelines we covered earlier. When entering your contact information, make sure “CL mail relay” is on unless you have a really good reason not to.
This feature protects your real email address from being publicly visible. This is helpful because if it’s publicly visible, spammers can use it to spam your email inbox to death, even long after your listing has expired. So generally, you won’t have any good reason to turn off this feature.
In the next step, you can upload relevant images to your listing. Again, follow the guidelines we discussed earlier.
In the final step, you will preview your listing and make sure everything looks right. If all is well, click “Publish” and your listing should be live within 15 minutes. If you don’t have an account, you’ll be prompted to confirm your email and create one.
That’s it! Interested buyers will now email you and you can then arrange for payment and delivery.
Listing items to sell on eBay is now easier than ever, simply go to this page and enter a descriptive title for your item. The eBay search engine will then try to find similar items to the one you’re currently selling and display them. If you find an exact match, you can copy the item details with one click to your listing. This is a huge time saver.
If you don’t find anything similar to your item, then you’d simply click the “Create a new listing” link to fill in the listing details from scratch. You will then be asked to log in to your account or create a new one. If it’s your first time with eBay, simply follow the prompts to get your account created and link your PayPal account to simplify the transfer of money when buying or selling.
WikiHow has an article covering the creation of your first eBay listing, step by step.
To sell on Amazon, you need to have an Amazon seller account. There are two types of accounts offered: Individual and Professional. The individual account is free to get up and running but charges you $0.99 per item + other variable costs.
The Professional plan costs $40 per month and waives the flat per item fee. This means that if you plan on selling more than 40 items a month, you should go for the Professional plan.
Another important aspect to consider with Amazon is shipping the items yourself or using the Fulfilment by Amazon (FBA) service. FBA has been rapidly growing in popularity the last few years, mainly because of its convenience and efficiency.
FBA allows you to take advantage of Amazon’s incredible resources to handle your order processing from A-Z. When you get new stock, you simply ship it to Amazon as per their instructions. That’s about it.
Whenever an order comes in, Amazon will handle shipping that order out to the customer. Best of all, your items will automatically qualify for free 2 (and sometimes 1) day shipping for Amazon Prime members. That’s a HUGE advantage.
The drawback is that FBA costs, but that can hardly be considered a drawback because if you choose to do what FBA does yourself, you’ll probably end up paying more. And even if you didn’t, what FBA costs in fees is more than compensated for by the additional sales you get from Prime members and the “Fulfilled by Amazon” branding.
Read more about selling on Amazon.
Read this if you’re interested in learning more about FBA.
Marketing Your Listings
Now that you have your listing up and running, it’s time to get some exposure! If your listing is a good deal in terms of price and you’ve followed all the best practices when creating your descriptions, adding photos and inserting relevant keywords, then there’s a good chance you won’t need to do much more to get traction.
However, more often than not, you’ll need to do more. Your mission is to gather as many reviews as possible, as fast as possible so that your listing will look more trustworthy and buyers will start confidently spending money with you. The folks at AMZFinder have written about 9 different strategies to get more Amazon product reviews.
Short for Search Engine Optimization, and it basically means the practices that help you rank better in the search engines (whether Google, Bing, Amazon…etc) and hence gain more exposure, visitors and eventually sales.
Joshua Hardwick from ahrefs has written a very comprehensive post about e-commerce SEO. Note that this post primarily focuses on SEO for your own online stores (using a platform like Shopify or WooCommerce), but the key takeaways can be applied to any situation.
Amazon, eBay, and Facebook Ads
You may have stumbled upon sponsored listings from Amazon and eBay before. Sellers who use sponsored listings actually pay a fee for additional exposure. Sponsored listings can be super helpful to jumpstart your sales and get reviews, though. In fact, a lot of people consider them to be the “de facto” strategy when launching new products.
Facebook Ads allow you to reach millions of people with freakishly precise targeting capabilities. Interesting new products that go viral are great candidates for this approach.
Some further reading recommendations on these topics:
Facebook Ads Guide for Beginners: How to Rock Your First Campaign by Disruptive Advertising
Complete Beginner’s Guide to Advertising on Amazon by WordStream
The Complete Guide to eBay Promoted Listings (Good, Bad and Ugly) by CrazyLister
This post covered a lot of ground from defining the concept of retail arbitrage, its mechanics, legalities, pros and cons as well as steps on how to get started with it from product selection and sourcing to marketing and selling.
Retail arbitrage is a great, low barrier to entry business model. My recommendation, however, is that once you start making consistent sales, look into moving to dropshipping or better yet, private labeling as mentioned earlier. These models provide better scalability and consistency, especially private labeling. However, they have a higher barrier to entry so it’s harder to start with them right off the bat.
I understand this post might be a little overwhelming, especially if you’ve read it in one or two sitting and clicked the links to do some further reading on the topics that branch out. Don’t let this discourage you. Take small actions every day that drive you towards your goal.
Don’t get stuck planning to plan. Grab Profit Bandit or a similar app, take a tour of your local stores and start scanning items and looking for opportunities. Once you find something, purchase and resell. You don’t need to get this perfect. Just get going and solve problems/tackle issues as you hit them. Don’t let analysis paralysis take over!
Well, that’s it. Have any questions? Post them in the comments section below!
Great tips, Youssef! As crazy as it sounds, there still are opportunities in retail arbitrage in 2018. You just have to know where you to look, and I think you’ve provided some great tips here. Thanks!
I really appreciate how thorough this article is. I’m looking into trying this myself and you provided a lot of good information on how to get started. I’m going to keep it simple and start with items I already have. I’ll refer to this article again.
You give me ideas to kick start my amazon FBA, with your tips, i can be more confident to initiate my project. Thanks for sharing this article.