You may have heard of retail arbitrage, and you may even be ready to jump right in, but do you know the best strategy?
Retail arbitrage is buying things on discount from big-box stores (such as Walmart) and reselling them online for the online market price.
The best way to get inventory is to buy things off of the clearance racks and resell them on Amazon for a profit.
Retail arbitrage will still be a viable business venture for at least the next 3-5 years. There are more people doing retail arbitrage today than 5 years ago, but Ryan from the Online Selling Experiment thinks this is still one of the best ways to get started on Amazon.
Just because an item is on clearance at your Walmart doesn’t mean that it’s on clearance on the other side of the country. Needless to say, customers will still buy off of Amazon and pay the same price for the item that is full price at their Walmart. The free shipping offered by Amazon Prime is also a convenience that consumers are willing to pay a little more for.
Inventory and Risk
You can buy and ship items in bulk to an FBA (Fulfilled By Amazon) warehouse. You don’t have to carry any inventory in your house. Amazon will send your items to the customers upon their order.
At every step in his growth, Ryan found that he needed more capital and more inventory on hand. Instead of guessing about what to buy, Ryan relies on metrics like customer reviews, the Amazon Sales Rank, and his return on investment for each product. You can find these statistics in the free Amazon Seller app.
Try to go by a three-month inventory rule. Your inventory should go no longer than three months between you buying it and a customer buying it.
Best Selling Products
You can sell all kinds of things, from toys, to apparel, to groceries. Around Christmas, toys sell much better than at other times of the year. In the summer, apparel and things like squirt guns will sell much better. Bestselling items are often seasonal, so be sure to keep an eye on what holidays are coming up!
When trying to decide what to sell online, try to make as few assumptions as possible about what you think is selling. Instead, focus on what’s available to you. Focus on clearance items in your store and evaluate them with the free Amazon Seller app. You can see things like the price on Amazon, customer reviews, and the sales rank.
If you go into the store looking for what’s on clearance, then you’ll almost never come out empty handed.
How Do I Start?
You can get started with very little capital. Sign up for an individual Amazon Seller account, because that account has no monthly fee. You’ll get access to the Amazon Seller app. Use it to scan your items, and see how much that product sells for on Amazon, see its Amazon seller rank, and even see customer reviews.
Look for items that are 50% off or more. The Amazon Seller app will show you how much you’ll receive from the sale of that item after all the fees. Try to look for at least a 50% return on investment.
The lower the sales rank, the better. Shoot for less than 250,000 as the sales rank. If you’re approved to sell that item, you’re good to go!
Should I Sell It? Checklist
- The item is at least 50% off at the store.
- The Amazon Sales Rank is less than 250,000.
- I can make at least a 50% return on investment from Amazon after fees.
- I am approved to sell this item.
If you can say yes to all of those things, you can sell that item for a nice profit.
If you can buy more than 10 items, go ahead and try FBA (sending the merchandise to Amazon’s warehouse). If you can only buy 1 or 2 items, go ahead and ship the item to the customer yourself (called merchant fulfillment).
Try to get into the FBA program as soon as you can.
Amazon or eBay?
Amazon is very strict about the condition of their products. Read through their guidelines on product condition, to make sure that you don’t get your account suspended for violating their terms.
If you don’t feel like an item meets the Amazon product condition standards, go ahead and list it on eBay. Customers on eBay are typically looking to save money more than they are looking to buy something new. Amazon customers are much more likely to buy something that’s in perfect condition at a higher price point.
Will You Be Successful With Retail Arbitrage?
Retail arbitrage is no mystery, and, if you follow these best practices, you should be able to see success with your first sale! If you’d like to listen to a great podcast episode about this, click here.
I challenge you to try retail arbitrage for a month. Let me know your results!