{"id":2680,"date":"2020-06-11T21:58:00","date_gmt":"2020-06-11T21:58:00","guid":{"rendered":"https:\/\/landingpagepromoter.com\/?p=2680"},"modified":"2020-06-15T19:58:16","modified_gmt":"2020-06-15T19:58:16","slug":"amazon-arbitrage-explained","status":"publish","type":"post","link":"https:\/\/landingpagepromoter.com\/blog\/amazon-arbitrage-explained\/","title":{"rendered":"Amazon Arbitrage: Is it right for you?"},"content":{"rendered":"
Is retail Amazon arbitrage still viable in 2020? Or should you be pursuing online arbitrage? Let’s unpack Amazon Arbitrage.<\/span><\/p>\n In 2017, over 300,000 third party sellers began their journey on Amazon, and nearly half of those sellers <\/span>exceeded $100,000<\/span><\/a> in annual sales. Since then, the number of sellers has only continued to grow\u2014and so have the profits.\u00a0<\/span><\/p>\n Third-party sellers are independent shop owners who sell a variety of merchandise. One common model on Amazon is retail arbitrage (RA). Amazon Market arbitrage is a method of selling items on Amazon that you\u2019ve bought at a lower price elsewhere.\u00a0<\/span><\/p>\n What you’ll learn in this article<\/strong><\/p>\n Retail Arbitrage\u2014what exactly does it entail? Technically, arbitrage is when you buy or sell assets with a price difference to turn a profit. In the context of eCommerce, this means you\u2019re purchasing your inventory from the clearance sections of big box stores and then reselling them for a higher price on Amazon.\u00a0<\/span><\/p>\n For example, let\u2019s say you find a stuffed animal on sale for $3 at Walmart. When you look up the same item on Amazon, it\u2019s retailing for $21. You could easily price yours at $18 and earn a hefty profit despite the <\/span>Amazon fees<\/span><\/a>.<\/span><\/p>\n This business model is a low-cost startup operation, but it lacks the ability to scale. However, for those sellers looking to increase their revenue or aspiring sellers looking to make some side-income, it can be quite lucrative.\u00a0<\/span><\/p>\n Online arbitrage follows the same principles\u2014except instead of sourcing your Amazon inventory from retail shops, you will get your stock from online vendors. In fact, it\u2019s common to source items from Amazon\u2019s competitors, like Alibaba, which traditionally sell items for a fraction of the cost you\u2019d find elsewhere. But many of the brick-and-mortar stores you would use for retail arbitrage, such as Target or Walmart, also offer online ordering, so you can easily tap their inventory in the same way you would if you were physically going to the store.<\/span><\/p>\n <\/p>\n Both RA and online arbitrage are 100% legal\u2014although, like any type of commerce, there are some rules. On Amazon specifically, it\u2019s important to consider that you can\u2019t sell items that fall under the following categories:<\/span><\/p>\n <\/p>\n Amazon lists its broader policies clearly on their program <\/span>policies page<\/span><\/a>. It\u2019s also important to notice that if you plan to use Fulfillment by Amazon (FBA) to process and deliver your products, they have their <\/span>own set of rules<\/span><\/a>. For example, there is an <\/span>entire list <\/span><\/a>of items that require approval, some of which include:<\/span><\/p>\n <\/p>\n In the early days of the coronavirus lockdown, some sellers began <\/span>hoarding PPE essentials<\/span><\/a> like facemasks and hand sanitizer and charging exorbitant rates. Amazon countered by removing 530,000 listings and suspending over 2,500 seller accounts.\u00a0\u00a0<\/span><\/p>\n While it\u2019s possible to make serious dough from reselling items online, taking advantage of a community panic will never be profitable. Regardless of what you sell and when\u2014you should always consider what the market can support. Even if you price the product at the same point as the original brand, if it\u2019s in demand, it\u2019ll still fly off the shelves, and you\u2019ll still make some money.\u00a0<\/span><\/p>\n While Amazon Arbitrage is legal and can be ethical, is it right for your business?<\/span><\/p>\n The primary appeal of this method is the extremely low bar to entry. You can easily start a store with a couple of hundred dollars worth of inventory. You can even sign up for Fulfillment by Amazon (FBA) so you don\u2019t have to worry about processing and shipping.<\/span><\/p>\n But you might also want to consider what items you would be allowed to sell in and whether you ever desire to have a personal, branded store. Toys, home and kitchen, sports and outdoors, baby items, and books are all great categories to get started in. They are open\u2014meaning you don\u2019t need the same approval Amazon requires for grocery and clothing items.\u00a0<\/span><\/p>\n Finally, some may wonder if it\u2019s worth it. If a buyer can find these items cheaper on a clearance rack, why would they spend more on Amazon? Many shoppers on Amazon aren\u2019t always looking for the best deal. They are more interested in convenience and item availability.\u00a0\u00a0<\/span><\/p>\n To succeed in Amazon arbitrage, you\u2019ll need to know the best practices.\u00a0<\/span><\/p>\n There are some complaints that this business model is falling out of favor with Amazon. While it is not illegal and is not against Amazon\u2019s policies, sellers are more susceptible to suspensions if they don\u2019t do their homework.<\/span><\/p>\n One major issue stems from Amazon\u2019s <\/span>anti-counterfeiting policy<\/span><\/a>. According to Amazon, sellers must be able to offer proof of an item\u2019s authenticity if asked. While receipts should technically count as proof in the same dimensions as an invoice, the company does not always accept these receipts as valid.\u00a0<\/span><\/p>\n To avoid this, some sellers suggest it\u2019s better to list the items you buy under the \u201clike new\u201d category.\u00a0<\/span><\/p>\n Another common stumbling block for retail arbitrage vendors has been the increase of restricted brands. A manufacturer may request that Amazon prevent third-party sellers from selling their wares without prior approval. While some vendors suggest that you can buy your approval depending on the brand (with the common fee being $1,000), most are completely off-limits.<\/span><\/p>\n So what brands should you avoid? Big-name brands like Uggs or Rayban, items that may require a warranty like Wacom or Samsung, or brands that suffer from counterfeits like Nike and Gucci are off the table.\u00a0<\/span><\/p>\n The good news is that the Amazon Seller app or other pricing apps like Scoutify (<\/span>Android<\/span><\/a>\/<\/span>iOS<\/span><\/a>) can often tell you which items are restricted.<\/span><\/p>\n Keeping Amazon\u2019s policies and fees in mind are key to success on the platform. Ryan Grant, the founder of <\/span>Online Selling Experiment<\/span><\/a>, has moved millions of dollars worth of product\u2014$950k just in December 2019. \u201cIt\u2019s essential that new sellers start by understanding the fee structure,\u201d says Grant. \u201cIt\u2019s a common mistake to believe the fees are the same on every item. But that\u2019s something you should never guess at.\u201d<\/span><\/p>\n For those looking to scale their already growing arbitrage business, Grant suggests testing your successes in other categories as well as expanding your operations. Bringing on a new team member or personal assistant can help you evaluate more inventory and make more money.<\/span><\/p>\n Beyond the policies, being successful on Amazon depends on how much time and effort you put into understanding your customers and fees. <\/span>Dakota Dieumegarde<\/span><\/a> has been a retail arbitrage and wholesale vendor on Amazon for over a decade and has earned a 92% positive <\/span>seller reputation<\/span><\/a> rating from his customers.\u00a0<\/span><\/p>\n \u201cNew sellers should find products that are light, shippable, and in demand,\u201d says Diemegarde. \u201cIn reality, finding a product shouldn\u2019t be a problem. But you need to be able to store and ship it competitively.\u201d\u00a0<\/span><\/p>\n He\u2019s also paid close attention to how the platform\u2019s shipping fees affect his customers. Regardless of whether the buyer purchases one or twenty items, Amazon charges them the same shipping price per item. When this happens, Diemegarde refunds the customer the excess amount charged for shipping.<\/span><\/p>\n <\/p>\n While there are many reasons to dive into RA on Amazon, it\u2019s important to have a roadmap to avoid pitfalls and streamline your process. After all, indirect costs like fuel can add up.<\/span><\/p>\n <\/p>\n To become an Amazon seller, you\u2019ll need a valid form of ID\u2014such as your driver\u2019s license or credit card. In addition, Amazon has <\/span>two seller plans<\/span><\/a> you can choose from. The first is the Individual plan, in which you pay Amazon $0.99 per unit, and the Professional or Pro plan, where you pay a flat fee of $39.99 per month. Once you start selling more than 40 units a month, it\u2019s usually better to switch over to the monthly fee. <\/span><\/p>\n <\/p>\n Will you be purchasing from Walmart, Target, or another big box store? How can you save on fuel and inventory? What is your budget? Are you a member of any of these stores and can you get any cashback benefits or coupons? These are some crucial questions to get you started.<\/span><\/p>\n <\/p>\n <\/p>\n You can use this to scan barcodes as stores and get an idea if certain items are profitable or not\u2014or whether you can sell them at all. This mobile app will even take FBA fees into its calculations, so you can really understand whether the item will be worth the work. <\/span> When it comes to sourcing online, you\u2019re going to want to look at the Universal Product Code (UPC) for an item. While not every item will have its UPC code listed, it is the most accurate way to verify that the product you are purchasing will match its listing on Amazon. Software like <\/span>Tactical Arbitrage<\/span><\/a> or <\/span>BuyBotPro<\/span><\/a> are designed for online arbitrage and can better help you research, source, and verify your products.<\/span><\/p>\n <\/p>\n Customer reviews<\/span><\/a> heavily impact whether or not a seller stays in business\u2014but they can also provide good feedback as to whether the items will be worth selling rather than become a liability. It can also be useful to look and see if customers are complaining about the price point\u2014as you may be able to offer them a lower-priced item.<\/span><\/b><\/p>\n <\/p>\n Who else is selling the product? One of the biggest competitors for Amazon sellers is Amazon itself. While there is little data to suggest buyers prefer Amazon\u2019s original products over others, they are able to reduce the price point.<\/span><\/b><\/p>\n <\/p>\n As a rule, most resellers suggest you should at least be able to charge 3x what you paid for the item in order to make a profit.\u00a0<\/span><\/b><\/span><\/b>\u201cTripling the price is fine, but you\u2019re more likely to be leaving money on the table, especially for higher-priced items,\u201d says Grant. Instead, he suggests that new sellers look for a 50% ROI.<\/span><\/p>\n <\/p>\n You may or may not save money using FBA, but you will probably save time. That said, the <\/span>fees <\/span><\/a>for shifting the processing and delivery to Amazon range from 8-15% and are based on the size and weight of the product. However, there are many other kinds of fees associated with different FBA services and you could very well end up paying more than you bargained for.<\/span><\/p>\n <\/p>\n\n
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<\/a>Retail Arbitrage vs Online Arbitrage on Amazon:
\n<\/span>What is the difference?<\/span><\/h2>\n<\/a>Is it legal?<\/span><\/h2>\n
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\n<\/span><\/li>\n\n
<\/h2>\n
<\/a>Okay, but is it ethical?<\/span><\/h2>\n
<\/h2>\n
<\/a>But is it right for you?<\/span><\/h2>\n
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<\/a>Successful Amazon Arbitrage in 2020 and beyond<\/span><\/h1>\n
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<\/a>Expert Arbitrage Advice<\/span><\/h1>\n
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<\/a>Your 9-Step Amazon Arbitrage Roadmap<\/span><\/h1>\n
1. Sign up for Amazon and register as a seller<\/b><\/h3>\n
2. Decide your stores and route<\/b><\/h3>\n
\n<\/span>The most popular sources are:<\/span><\/p>\n\n
\n<\/span>If you\u2019re interested in online arbitrage, many of the big-box stores have online equivalents. But for sourcing online, you\u2019ll also want to look at accumulating coupons, cashback offers, and discounted gift cards. Websites like <\/span>Rakuten<\/span><\/a>, <\/span>Giftcards.com<\/span><\/a>, <\/span>Cardpool<\/span><\/a>, and <\/span>RetailMeNot<\/span><\/a> are great resources for those starting out.<\/span><\/p>\n3. Download the Amazon Seller app (<\/b>Android<\/b><\/a>\/<\/b>iOS<\/b><\/a>)<\/b><\/h3>\n
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\n<\/span>Another thing the Amazon Seller app offers is the ability to check the <\/span>sales rank<\/span><\/a>. A lower sales rank lets you know that an item is popular and selling faster\u2014so it\u2019s likely a good choice.<\/span><\/p>\n4. Check customer reviews<\/b><\/h3>\n
5. Review your competition<\/b><\/h3>\n
6. Understand your profit point<\/strong><\/h3>\n
7. Decide whether you want to store and ship yourself or sign up for FBA<\/h3>\n
8. Decide on your products and list your items on Amazon<\/h3>\n