Amazon Retail Arbitrage: Beginner’s Guide To Retail Arbitrage on Amazon
Online selling can be quite confusing for some entrepreneurs, especially those new to the digital landscape.
If you wish to start online selling, retail arbitrage is a convenient option to begin your eCommerce business journey. You can start with retail arbitrage on Amazon with as little or as much capital as you are comfortable with. There is less pressure regarding the amount of money you will shell out to start retail arbitrage.
We have prepared a guide on retail arbitrage, which is ideal for sellers without experience or basic knowledge about Amazon arbitrage.
What is Retail Arbitrage?
Since this guide primarily benefits newbie online sellers, it is best to answer the question: what is retail arbitrage?
In its general sense, retail arbitrage means purchasing an item from one market and then reselling the purchased items for a higher price in another marketplace. To be more specific, these items are purchased from retail stores.
To put it into perspective, the best example would be buying clearance items at a local outlet store that are sold for $10 and reselling them on other marketplaces for $25. Thus, implying that retail arbitrage is simply buying low and selling high.
What is Retail Arbitrage on Amazon?
Another term that confuses some sellers is Amazon retail arbitrage. Others might confuse such a method thinking that they will buy things from Amazon and sell it on other marketplaces for a higher price.
Amazon retail arbitrage applies the concept of retail arbitrage in its general sense. However, it has Amazon as the end marketplace of the products instead of selling them on other eCommerce sites like eBay or Shopify. With Amazon retail arbitrage, you have the option to sell your products either on Amazon.com or other Amazon Global marketplaces.
Retail Arbitrage Legal Concerns – Is Arbitrage Legal?
Now that you have understood the basic concept of retail arbitrage on Amazon, you might think such a method is illegal. Taking advantage of the price difference between online marketplaces and retail stores begs the question: is arbitrage legal?
First and foremost, retail arbitrage is an accepted industry practice. Arbitrage is not only practiced on Amazon; other sellers likewise practice retail arbitrage on other platforms such as eBay and Walmart.com.
In countries like the United States, a legal concept exists that makes retail arbitrage an acceptable method for selling online. This legal concept, known as the “first sale doctrine,” allows legitimate buyers of a product to resell authentic items produced by manufacturers.
However, there are some instances where the first sale doctrine will not apply. For you to avoid legal disputes, it is best to consult a legal expert when planning to introduce alterations to the products you will resell online.
Retail Arbitrage vs Other Business Models
To fully understand retail arbitrage as a business model, it is best to distinguish it from other Amazon business models. Here are some popular business models sellers use for their online ventures.
Private Label
Private Label is a popular business model used by online sellers when selling on Amazon. Sellers who are engaged in private labeling on Amazon create their own product label or brand by modifying an existing product in the market.
Wholesale
Wholesale involves purchasing inventory items in bulk directly from the manufacturer or supplier, then reselling them on Amazon. It differs from arbitrage, for the items are purchased in large quantities.
Dropshipping
Dropshipping on Amazon means buying items directly from manufacturers to fulfill a customer’s order.
Handmade
Amazon Handmade is an avenue for artisans and crafters to sell their products. This particular marketplace is intended only to showcase handcrafted goods.
Why You Should Start Retail Arbitrage Today?
Retail arbitrage is an enticing business model for potential Amazon sellers. It has been a tested and proven approach to reselling on Amazon and online selling in general. To give you an idea of why you should try retail arbitrage, here are some reasons why Amazon retail arbitrage remains popular among sellers.
Low Risk Involved
Retail arbitrage on Amazon is a straightforward business model. You simply buy low and sell high. It is a perfect model for resellers with a low-risk appetite since the business involves lower risk than other business models.
Low-Cost Startup
As mentioned above, you can start retail arbitrage for as low as $100. Since you are not required to purchase items in bulk or strictly follow minimum order quantity (MOQ), you can purchase multiple products for inventory variations at a relatively low price.
Flexible Schedule
With retail arbitrage, you can either choose to make it a full-time gig or a side hustle. You can decide when and where to look for inventory items.
Simplistic Approach
Unlike other Amazon business models, retail arbitrage is simple and easy to do. You do not need any specialized knowledge or connection with manufacturers or distributors to start this business.
Good Starting Point
Retail arbitrage is a newbie-friendly business model that can serve as a springboard toward other business models on Amazon. It requires low investment and is quite simple to manage, making it a good starting point for newbie entrepreneurs.
How to Start Retail Arbitrage on Amazon?
If you wish to start your own retail arbitrage business today, here are some essential steps and tips that can help you successfully launch your Amazon business.
Step 1: Create an Amazon Seller Account
The first requirement to start Amazon retail arbitrage is to have a verified seller account. You must sign up online for an Amazon seller account.
You can choose from the two popular Amazon seller plans: Individual or Professional Selling Plan.
Step 2: Searching for Inventory Items
After creating an Amazon seller account and deciding whether to become an Amazon FBA or FBM seller, you will need to find products to sell on Amazon. The product sourcing method makes retail arbitrage on Amazon advantageous for newbie sellers.
Step 3: Product Listing
Once you have found a product with a promising profit margin, you can start listing the products on Amazon. You can start listing your product via Amazon Dashboard. The most uncomplicated process of listing a product on Amazon is to copy the ASIN of an existing listing.
Step 4: Manage Shipping
Identifying the necessary preparation required to ship the product safely is the sellers’ responsibility, especially when it is yet to be delivered to the Amazon fulfillment centers.
Amazon Restricted Products – What to Do When a Product Is Restricted
Amazon has a stringent rule when it comes to product restrictions. Sellers participating must adhere to these policies. Some of these policies include prohibiting the sale of unsafe and illegal products.
What To Do About Amazon Product Restrictions?
In general, restricted products are items Amazon does not allow on its platform. To avoid product restriction issues, it is best first to know the rules and regulations highlighted by Amazon in relation to your prospective inventory item.