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Wondering how retail arbitrage works? This article will show you exactly how to start with retail arbitrage to start making money with low start-up cost and the potential for high profits.
The work from home movement has taken hold and people are always looking for ways to earn money from home. After all, any time you can add extra money to your household income, it’s a good feeling.
But, when you can make extra money without having to add more hours to a weekly commute, that’s even better.
One unique way to add money to the monthly budget is through selling on Amazon. We all know that Amazon is one of the world’s largest retailers – in fact, it is now larger than Walmart – so why not be a part of it?
There are several ways to make money on Amazon, it’s just up to you and how much of an investment you want to make. But if you are looking for a low start-up investment, then retail arbitrage is where you should start.
What is Retail Arbitrage?
Arbitrage is the act of buying items for less than they are worth and reselling them for a profit on the Amazon platform.
Retail arbitrage is appealing because it allows regular consumers to find items at stores they already frequent. You then make a profit by selling those items on Amazon from the comfort of your own home.
An example of this would be if you saw that Walmart was selling Nike running shorts for 50% off. If you see the price of the shorts on Amazon is more than the price at Walmart, you can buy the shorts and resell them for a profit.
Why Sell on Amazon?
Selling on Amazon is simple, you do not need any prior experience to get started. You’ll reach hundreds of millions of potential customers worldwide.
You also do not need your own website to sell using Amazon. You do not need to pay to promote your products because Amazon does this for you.
There are different ways to sell physical and digital products on Amazon, so you are not limited to just one option when it comes to selling on Amazon.
One of the biggest benefits of selling on Amazon is the exposure your products will get. Amazon is one of the most trusted online retailers due to their superb customer service and benefits Prime members receive.
Their reputation is one of the biggest reasons people shop on Amazon and why they are willing to pay more for products.
If you want to get into the meat and potatoes on Why Selling On Amazon Works so well, check out this free eBook.
The Power of Amazon FBA
If you’ve never heard of Amazon FBA, it stands for “Fulfilled By Amazon”. Basically, you are able to send you products to Amazon warehouses which means you don’t need to keep inventory in your home.
Amazon takes care of storing your retail arbitrage items and they ship the items to your customers when you make a sale. Amazon also takes care of customer service issues, answers questions and deals with returns.
Of course, the selling fees are higher then if you’d sell using merchant fulfilled, but with all the benefits and time savings, it’s worth it.
Your products also have a greater reach to customers because they are listed as “Prime”. I don’t know about you, but every time I shop on Amazon, I look for that little prime logo because of the free two-day shipping.
How to Get Started with Retail Arbitrage
While retail arbitrage might seem like an easy way to make money, it does require planning and effort to do it consistently.
In addition, you just need to be willing to make the initial investments in time to shop, money to buy products and learning how the retail arbitrage process works.
Want to see how retail arbitrage works in real time? Check out this awsome video to see how.
Retail Arbitrage for Beginners: Here’s how to get started:
- Before spending a single dollar, take time to sign up for an Amazon seller account. This is paramount if you want to be able to list the items you find on the Amazon platform.
- Download the Amazon Seller App which is a retail arbitrage app that will help you as you begin to shop by allowing you to scan items and learn what they are selling for on Amazon.
- Take time to identify places where goods are often on sale or sold in bulk. Some places to check out include GameStop, Walmart, Target, Kmart, CVS, Walgreens, Craigslist, Discount bookstores, classified ads, toy stores, outlet malls, auctions and going out of business stores.
- Use the Amazon Seller App to scan items as you shop and only buy the ones that will yield a positive ROI (you’re not trying to lose money, right?).
- List the items on Amazon making sure to include detailed images and descriptions – make sure to take your time on this step – you want your listings to be appealing to online shoppers.
- Decide whether or not you want to ship the items yourself after a purchase is made or have Amazon do it. If you choose the latter, investigate how to set up Amazon FBA where you will send the items to Amazon and they will fulfill them for you.
- Monitor your account for sales and payments!
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Tips for Improving Retail Arbitrage Success
While making money through retail arbitrage is easy, there are few things to keep in mind to be a success. Here are a few tips from pros around the web.
- Create bundles. Think about items that go together – i.e., a toy plus the batteries, candles plus a diffuser or candle holder (or perhaps all 3), a set of kitchen tools plus a tool crock – and sell them as one item. This can not only make your item more unique but can create a greater profit.
- Think big. When you first start doing arbitrage it makes sense, to begin with just a few items just so you can get the hang of it. But as you begin turning a profit, ignore the urge to just buy 1 or 2 of a product, buy in bulk whenever possible. The more you sell the more you make.
- Watch the competition. Don’t buy products that are overly competitive as profits margins will be lower. This is where using the various retail arbitrage apps will be helpful.
- Size matters. Since you’ll either be shipping to Amazon (if you choose FBA) or to the buyer (if you choose to do it yourself) – you will be paying for shipping. Keep that in mind when browsing products as the larger ones obviously cost more to send.
Funding Your Amazon Business
Starting an Amazon business can be done with very little start-up capital. The key to growing this way is to reinvest all profits back into your business until it grows large enough to fund itself. Then you can start taking a cut of the profits for yourself.
If you are looking to grow your business faster, then having some capital to work with would certainly be helpful. Of course, you can go to a bank to request a small business loan to get going. The problem is when you are just starting out, it might be really difficult to convince a bank to give you a business loan for this type of non-traditional business model.
Another great option and one that I have personally used is getting funding from Kabbage. Kabbage is a small business lender that helps businesses of all sizes with funding. The loans offered are short-term from (6 to 12 months) and are generally approved in a short period of time.
Once you do get approved, you basically have a revolving line of credit. So when the busy Christmas season rolls around, this comes in very handy. Like I said earlier, I have used Kabbage in my own Amazon business three or four times and it has helped me grow quickly. I am very pleased with the service provided, so this is a great option when first starting out.
Making money on Amazon is totally doable. You don’t have to have years of marketing experience or a degree in business. You just need to have an eye for good deals, know how to price them for a profit, and be willing to do some homework about what is likely to sell. So, set up an account, become familiar with the right tools, and get ready to start earning money with retail arbitrage.
Thank you, Josh, for this great and informative article! Josh lives in Atlanta with his dogs and is working to grow his Amazon business, Wild Cow.
If you are looking for more great information on selling on Amazon, you need to check out these free resources from The Selling Family who brings in over six figures a year selling on Amazon.
Free ebook Why Selling on Amazon Works
Free email course 7 Day Email Course Everything You Need to Know to Start Selling on Amazon
Do you sell on Amazon to make extra money? Please leave a comment and share your tips.