You can buy items at a discount and sell them online at a higher price? Yes you can, and it’s called retail arbitrage. In this article you’ll learn a bit about retail arbitrage, the pros and cons, as well as some tips towards success with it.
What is Retail Arbitrage?
Retail arbitrage is a business method in which you purchase products from retailers at a lower price and then sell them for a higher price on another platform, such as Amazon. A simple example of this is going to a store, buying an item from the discount aisle, and then listing it for sale on eBay. For some this might be a profitable business, but it requires a lot of work and research.
How Does Retail Arbitrage Work?
Now that you have an inkling of what retail arbitrage is, you may wonder how it actually works. In fact, the very first step in retail arbitrage is to find products that are selling for a much lower price at one retailer than they are at another retailer. Now, the retailers could be stores like Dollar Tree, Goodwill, or any retailer that often has discounted prices. You can even find products at a low cost at places like Alibaba.com or AliExpress.
While searching for what to sell, you can use a variety of online tools to find these products, such as price comparison websites and apps. While doing your price comparison, make sure to think of shipping costs, in case you are sending your products to Amazon to handle shipping, especially if you’re selling on that particular platform. Once you’ve found a product that is selling for a lower price, it’s time to buy it.
Now that you’ve bought your products, you’ll need to figure out a cost that is higher than the one you found online. The next step is to sell the product for a higher price on the same platform or another. Aside from Amazon and eBay, Craigslist can also be a good place to sell your products.
Just make sure that when you’re selling the product, make sure that you’re charging a price that is high enough to cover your costs, but also leave you with a profit. Additionally, you should make sure that you’re pricing the product competitively in order to sell it quickly.
Is Retail Arbitrage Legal?
If you’re wondering whether or not retail arbitrage is legal, for the most part, it is legal, especially in the US and UK. The biggest issue you need to steer clear of when doing retail arbitrage, is to avoid possibly violating any copyright, licensing, or trademark issues. This will prevent you from being sued by the original owner of the product.
The Pros and Cons of Retail Arbitrage
There are a number of pros and cons to retail arbitrage.
Pros
It can be a potentially lucrative business model
It can be a somewhat easy business to start
You can work from home
Cons
It might take a bit of time to find products that are selling for a lower price
It can be difficult to find products that are in high demand
You may have to deal with returns and refunds
Pros of Retail Arbitrage
It can be a potentially lucrative business model
In order to be profitable, it comes down to the products you choose to sell. While the sale price is important, make sure each product has good reviews. If your product has poor reviews and a track record of being of low quality, then you won’t sell or. However, if you sell those same products, you may get poor reviews. So, make sure your items, even if they were bought at a discount, are solid and of good quality.
It can be a somewhat easy business to start
It doesn’t take a ton of money to start a business that focuses on retail arbitrage. In some cases, some Amazon sellers, at least 12%, started their retail arbitrage business as low as $500, and another 32% did it under $1000. That’s really affordable, which means, in some cases, you don’t need to go out and get a small business loan.
You can work from home
With retail arbitrage, you are your own boss. You can work from home or wherever you want. You can even set your own work schedule.
Cons of Retail Arbitrage
It might take a bit of time to find products that are selling for a lower price
A big part of retail arbitrage is the actual finding of the products you’ll want to sell. The price must be low enough from the original, that you can sell it at a higher price, while also making a profit.
It can be difficult to find products that are in high demand
If you just pick any product, you might run into growing an inventory that won’t sell. However, a lot of products that are in high demand, might not even be discounted. Or, they have a discount, but it’s not good enough to profit off of.
You may have to deal with returns and refunds
In retail, overall average online returns and refunds are around 20-30%. It is possible that you might have some returns, and need to issue refunds. You may even need to create a return and refund policy for your business, as well as make sure that platforms like Amazon and eBay are aware of that, and there are no conflicts in seller terms.
Tips for Success with Retail Arbitrage
If you want to be successful at retail arbitrage, there are a few things you need to do:
Do your research
Be patient
Be organized
Be willing to work hard
Focus on high-margin products
Buy in bulk
Sell on multiple platforms
Market your products
Provide excellent customer service
Do your research
Don’t just grab anything off the shelf or online store! Do your research first! Price comparison will help you see how that same product is selling in multiple places, and allow you to determine if you’re buying it at the best price possible.
Be patient
No matter if you’re visiting the discount aisles of stores,or buying online, it’s going to take time to find the right products at the lowest cost. You may have days where you don’t find any deals.
Be organized
Any retail store has a list of their inventory. This also means that as you build your own store, you need to start an inventory list and keep track of everything. This will also help you keep track of how much money you’re making.
Be willing to work hard
Retail arbitrage, while you may be your own boss, it will require you to work, and sometimes work hard. It is a business that takes time, so you need to put in the muscle work to find good deals that you can turn around and sell for a profit.
Focus on high-margin products
Just because you see a bunch of discounts sitting in front of your eyeballs, that you grab everything up. Look for products that are in high-demand and also ones that will yield a high margin. High-margin is when a product has a high price difference between the wholesale price and the retail price.
Buy in bulk
If your product can be found in bulk, more than likely you can save some money and help increase your profit margins.
Sell on multiple platforms
There’s a proverb that says “Don’t put all your eggs in one basket”. With retail arbitrage, you should sell on more than one platform. When doing this, you can potentially reach a wider audience of buyers.
Market your products
Just because you’ve started an Amazon store, doesn’t mean you just sit back and relax. It’s time to market your products. You should try doing so on social network platforms, an email newsletter, your own website, and do some paid advertisements.
Provide excellent customer service
Aside from selling, you’re going to need to answer questions from the customers. Be prepared to have well written FAQs for your products, and know them well enough so your customers will find you trustworthy enough to buy from. Also, if there are any issues with the product, responding to them in a timely fashion will ensure customers that you care about what you’re selling.
