I’ve said it before: Amazon is my number one supplier. In my last post, I answered HOW to Buy and Resell on Amazon. This time I want to look at WHY I buy and resell using Amazon. I’m going to break this into two sections: 1) Why I prefer Online Arbitrage to Retail Arbitrage and 2) Why specifically a preference for Amazon over other internet retailers.
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[dropcap]W[/dropcap]hy Online Arbitrage?
- Saves me time. I don’t have to wait in line. I don’t have to explain to the person at the register how to do tax-exemption. If I want to go from WalMart to Target, it’s as simple as typing a word in a browser, instead of driving across town.
- Speaking of driving across town, it cuts down on expenses. Always be on the lookout for invisible expenses. Little things like gas add up a lot over time.
- No awkward scanning. Some people have no problem cruising around the store with their scanner in tow. Other people are pretending to send text messages while desperately hoping their phone’s camera will hurry up and capture the UPC. Either way, you don’t have any of this when you’re buying online.
- Research is easier. I have all of the tools I need set up as Chrome Extensions or Favorites on my computer and I can move seamlessly through the various bits of data that I need. I’ve used all of the different options out there, and none of them are as easy/fast/complete as the information I can easily access on my computer.
- No price tags. If this isn’t a huge one for you, then you probably have not done much Retail Arbitrage. Gone are the days of stocking up on Band-Aids and Neosporin for the inevitable slip of the hand with a Scotty Peeler. No more loosening stickers with blow dryers and then eliminating goo with some lighter fluid.
- Free boxes, dunnage, and air pillows. Remember invisible costs. Don’t forget invisible savings.
- It’s just faster. In the time it takes you to even get to the store, I could have looked up dozens of products already.
[dropcap]W[/dropcap]hy Amazon Specifically?
- Great Shipping Rates. I have a free Business Account, so once my cart is above $49 I get free 2-day shipping. This is basically like getting Prime for free AND there is no restriction about buying products for the purpose of resale (as there is with Prime). You aren’t getting free 2-day shipping from most of your other online stores.
- Great Return Policy. Basically return anything for any reason. Even better, some of the items you don’t have to return. 90-95% of the time, the grocery items I buy from Amazon have expiration dates far in the future, but in those rare instances where it is close, I just let Amazon know. I get a full refund and they tell me to enjoy the food myself or donate it to a charity.
- Speaking of which, they’re the most customer-centric company in the world. If you’ve only ever dealt with Seller Support, Customer Service will seem like you’re speaking to a whole new species. They bend over backward to make sure that you are happy. Go ahead and give WalMart.com a call and let me know how that goes. Speaking of WalMart, they only have free refunds if you actually drive your product to the store, wait in line, and wait for them to figure out how to process online returns.
- Amazon has some unbeatable deals. I have no idea why, but Amazon regularly just decides to sell inventory at 70-90% off. Not because it is Black Friday. Not because it is Memorial Day Weekend, they just do it every day. Granted, the trick is finding the deals, but if you get good at it, you’ll find deals that blow Walmart.com, Target.com, Kohls.com, etc. out of the water.
- When I buy from Amazon, I’m decreasing the supply of my competition. Often, the strategy is to buy while Amazon is low priced, and wait for them to sell out, and then sell for higher. When you are buying out their stock, this happens faster and more often. If the timing works out, they’ll come back in stock just as you’re running out, and you can repeat the process.
- I have the exact ASIN I need. I don’t have to figure out whether the listing at HomeDepot.com is exactly the same as the Amazon listing. I know that it is.
- Items come packaged how Amazon wants them. This isn’t always true, because Amazon expects far less of their warehouse workers than they expect of third party sellers, but at least some of the time, products come packaged exactly as they need to be. Poly-bagged, suffocation label, etc. I can’t tell you how many times I’ve received inventory from Amazon and sent it right back to them in the same box, with the same poly bags, to the same warehouse.
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Know the Lingo
Arbitrage (A Technical Definition):
The simultaneous purchase and sale of an asset in order to profit from a difference in the price. It is a trade that profits by exploiting price differences of identical or similar financial instruments, on different markets or in different forms. Arbitrage exists as a result of market inefficiencies; it provides a mechanism to ensure prices do not deviate substantially from fair value for long periods of time. (Investopedia)
Arbitrage (A Mike Definition):
Buy Low, Sell High
So, when you hear people say Online Arbitrage, all they mean is that they’re using on online retailer to buy at a low price that they can profit on when they resell.
A Plug
If you aren’t already, you should join the Godfather Deals group on Facebook. We find a ton of great Amazon deals every day. Nobody, least of all me, can replace your own research and judgment. This is not a group to blindly click and buy. But, if you’re looking for a steady stream of leads that can give you ideas for your business, we’d love to have you. The group is completely free and our Amazon deals that you can’t refuse will stay that way forever.
As Always, Best Wishes
Mike
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I recently read somewhere that Amazon has roughly 80 million price drops daily. That number is astonishing, and means there are up to 80 million potential buy/sell opportunities every single day, I mean, if you buy into the buy low/sell high business model.
And free fun dunnage is such a tremendous perk so often overlooked. I have piles of air cushions (they usually only sit a day or two before being used, but constantly replenished) and they are good for repacking Amazon and distracting one year olds.
When you set up your Amazon business account, do you need to use a separate payment system, e.g. credit card, bank account, etc?
No. In fact, you can convert an existing account to a business account, if you’d like, and it will transfer your payment information over. But, this is not necessarily.
Hi, this a great blog here..
So if I am already a prime member and unable purchase and ship to myself with prime as a reseller due to the restriction. Can I transition my account to the business account to get around this. Or do I have to wait until the term of the prime membership has ended? Or do I need to choose another shipping option for products I plan to resell to get around this? Thanks
What you should do is make a separate buying account that you use for buying items that you resell, because no Prime benefits can be used for the purpose of resale.
Excellent points Mike. What I’ve noticed about these Amazon price drops, the more significant ones happen when they are out of stock. I’m sure you know this. They know most buyers aren’t going to want to wait 2-3 weeks for an item or even longer and pay the typical price. If the history plays out correctly through Keepa, etc, you don’t really have to worry about the product coming late. Amazon is smart to still offer the product for sale at a heavy discount to get extra sales while they wait for more product from their suppliers. Only issue is, sometimes they can’t get the items again from the supplier, discontinued, etc. Amazon will offer to extend the wait again and again but eventually they may independently cancel the order. It’s happened. Right now I’m waiting on this item, B00EDJVP9Y, 10 of them actually. The ones who are savvy with Keepa will see the price I bought it at, hint 3/13/16. It’s been almost 2 months now with no shipment in site. Have to cross my fingers on this one but it could be cancelled. Se la vie.