Why is Amazon the most popular ecommerce marketplace for sellers of every industry, category, brand, and size? Besides consumer trust, Amazon is relatively easy to start on, can be done with minimal capital, and offers several selling models of varying popularity. Today, we’ll be going over Amazon retail arbitrage, what it is, and everything you need to know to maximize your performance if you’re adding it to your ecommerce strategy.
What is Amazon retail arbitrage?
Retail arbitrage, otherwise called online arbitrage, is a sales technique when a seller purchases products from retail stores or online marketplaces at a low price and then sells them at a higher price to make a profit. This specific term refers to purchasing products from Amazon and reselling them at a higher price on the same platform.
Benefits of Retail Arbitrage on Amazon
Sellers would not turn to online arbitrage as a sales strategy if it lacked benefits proportional to the effort involved. These are the main reason we have seen Amazon leaders adopt the tactic:
- Low start-up costs: One of the biggest advantages of Amazon retail arbitrage is that it requires minimal start-up costs. All you need is a computer, an Amazon seller account, and some capital to purchase products. Unlike other methods of making money on Amazon, such as private label or wholesale, you don’t need to invest a large amount of money to get started.
- Access to a large customer base: As with any other selling method that capitalizes on Amazon, sellers can access over 300 million active customers worldwide, providing you with a vast audience. Additionally, Amazon’s fulfillment service, FBA (Fulfillment by Amazon), means that you can take advantage of Amazon’s Prime shipping, making your products more attractive to customers.
- Scalability: Amazon retail arbitrage is a scalable business model, meaning that you can increase your profits by buying and selling more products. As you become more experienced, you can expand your product range and increase your profits.
- Flexibility: Another advantage of Amazon retail arbitrage is that it provides you with flexibility in terms of the products you sell and the hours you work. You can choose which products to sell and when to work, giving you the freedom to create your own schedule.
As with any other approach, there are pros and cons. We’ve noticed the major reasons sellers choose to avoid Amazon retail arbitrage.
With the popularity of the technique, competition is notably high. Sellers can face challenges in finding profitable products, and it may require more effort to stand out from other sellers.
Along similar lines, profit margins may be tight. While the profit margins for products sourced through retail arbitrage can be high, they are often limited by the selling price of the product on Amazon. This means that you may need to sell a large number of products to make a substantial profit.
Most importantly, there may be a risk of Amazon account suspension. While they do allow arbitrage, it is critical to remember Amazon has strict policies regarding seller behavior, and if you violate these policies, your account may be suspended or even permanently banned. Be smart, follow the rules, and you won’t have to worry.
How to Get Started with Amazon Retail Arbitrage
Ready to use this technique to capture new sales? Here’s a helpful process to get you up and running:
- Research profitable products: The first step is to research profitable products. Look for products that have a high demand but are sold at a lower price elsewhere. Use tools to analyze product prices and sales history on Amazon.
- Purchase products: Once you have identified profitable products, you can purchase them from retail stores or online marketplaces. Look for products that are new, in demand, and have a good profit margin (most sellers look for a ~30% profit margin).
- List products on Amazon: After purchasing products, list them on Amazon. You can use Amazon’s Seller Central platform to create listings and set prices for your products. Make sure to follow Amazon’s guidelines when creating listings to avoid any potential issues.
- Fulfill orders: When a customer orders one of your listed products, it’s time to get the item to them as quickly as possible, whether that is by you or using a service like Amazon’s FBA.
- Monitor sales and adjust prices: It is essential to monitor your sales regularly and adjust your prices as needed to remain competitive.
- Scale your business: As you become more experienced, you can expand your product range and increase your profits. Consider outsourcing tasks such as product sourcing or listing creation to free up your time and grow your business.
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