What is retail arbitrage?
Retail arbitrage is a kind of business that has to do with buying retail items at a discounted price from one seller and reselling to others at a higher price.
In this process you make money from the price difference between what you bought the discounted item for and what you sold it for.
This model of business can be done entirely online (also called online arbitrage) where you get to buy at a discounted price from one online store and sell it through another online store.
Or you could buy the item from a physical store and then proceed to list it online.
For instance you can purchase a product at a discount from a retailer like Best Buy and List it on Amazon.
Is retail arbitrage legal?
In case you are wondering if this business model of buying at a discount and selling at a higher price is legal, the answer is yes.
As long as you bought an item legally and you did not tamper with the quality of the item, you have the right to resell the item and even at a profit.
And because you did not actually produce these items yourself, if you decide that you want to change the condition of the item in any way shape or form, you must state it specifically that you have altered the condition.
Retail arbitrage Vs other business models
The major difference between retail arbitrage and other models of selling like Dropshipping, Private label, and wholesalers is in the way the transactions are done. For example;
Dropshipping has to do with listing a product online without having the inventory in your warehouse.
Upon receiving orders, you will proceed to purchasing the product directly from the manufacturer and have them ship it to the buyer directly.
Private labelling: this has to do with a kind of product that is already in the market, you directly ask the manufacturers to replace their own label with your own custom label before shipping.
With this method you have to make some upfront capital spending to buy the products, unlike dropshipping where you don’t have to pay for anything until you have sold it first.
More so, you might be wondering how this method is different from the conventional retail business?
The difference is that for normal retailers they typically buy products at the price it is sold either in bulk (wholesale) or as single items.
Then proceed to sell at a marked up price and they are not bothered by time and any discounts.
While for arbitrage, the profit model is based on the timing and discounts.
They typically look for where to get a product at a discounted price so that they sell it at even the normal price on a different platform or market.
What are the benefits of retail arbitrage?
Some of the benefits that come with doing a retail arbitrage kind of business is the fact that it has a low barrier to entry for beginners.
It will typically cost less money for anyone to get started in the arbitrage business than it will cost to go into wholesaling.
If you are listing on popular platforms, you will only have to worry about your listing fees and money for the first product. And after you make a sale you will re-use the money for your next purchase.
Is arbitrage allowed on Amazon?
Like I have stated before, the business model is perfectly legal and does not violate any laws.
So, yes it is allowed on amazon and ebay and even other marketplaces.
But, just to ensure you are not caught unawares, you have to keep an eye on the terms of service of these platforms because changes can be made at any time.
However, if your items were not obtained in an illegal way, maybe through bootlegging or through other questionable methods.
Please don’t even try to list on any marketplace, because you could land in big trouble.
Can you make money off arbitrage?
The answer is yes, you can make a lot of money using the retail arbitrage business model.
However, because this model is dependent of buying items at a discount price, it means that you will have to develop patience and persistence because some things are going to be out of your control, like;
The fact that you can not determine the exact time an item will be going on sale, nor can you decide on the particular item that will be on sale.
Essentially, your business is really dependent on the decisions of the big corporations that make these decisions.
As long as you understand these facts and are able to work around them, by making sure that you are not relying on one product or seller alone, then there is money to be made.
What are the best retail arbitrage products?
The best products are products that are always in demand and you are sure that people will always want to purchase regardless of the market.
Examples of these items could be clothing , shoes, sporting accessories, home improvement items, toys, health and beauty products.
Think about it, even when there is recession, people will still buy clothes and take care of their health, try to look good and all of that.
So focus on items that are evergreen, of course the margins can sometimes be small when compared to high ticket products.
However, if you have enough resources you can also go into selling high ticket products, but the downside is that you will likely not have as many sales as you would for low ticket regular items.
Best retail arbitrage sourcing avenues
The best places to source for retail arbitrage items are places where discounts are always given.
This could also be stores where they usually have clearance sales or auctions.
Examples of this in the US could be Walmart, Target or Home Depot and if you live outside the US you can easily google for discount stores in your location.
A good place to also go to are Dollar stores and Thrift stores, you can get good items from these locations, especially for the clothes at the thrift stores.
But you really have to have an eye for quality items that will sell fast and that are not gated or forbidden on whatever platform where you intend to sell them on.
If you intend to sell on a platform like Amazon, it will be advisable to have your scanner app with you.
This is so that you can scan every item before buying to know what the price margin is and if it is worth your time and effort.
More so, some people have also experimented with the idea of buying from a marketplace like Ebay and then reselling on Amazon.
Although it is a great concept, it will require you to do a lot more research on the platform to be able to find products that you can buy at a discounted rate.
So, the best and easiest method is still to buy from big retail stores offline or some other ecommerce stores that are not a marketplace and then list the product online for a good margin.
NB: If you have any question you will like to be answered, please ask them on the forum I and others will try to help you.