If you’ve ever given a thought to starting your business on Amazon, you probably come across the term “Retail Arbitrage”.
It is a reselling model, widely growing in popularity as the seller base of Amazon grows.
Arbitraging is the smart practice of identifying products with great potential to sell in different eCommerce websites and capitalizing on the profits because of price variations in different geographic locations.
As a seller, you can find retail stores or online commerce sites selling the product cheaper than Amazon.
When it comes to Amazon Arbitrage, there are two broad arbitrage models of selling, let’s find more about them:
What is Retail Arbitrage on Amazon?
Retail arbitrage refers to the practice of buying items from retail stores and then selling them for higher prices on Amazon. Although it may seem like a conventional form of retailing, it is not.
The fundamental difference is that unlike traditional retailing, a seller who is involved in retail arbitrage does not buy products directly from the manufacturers/wholesale suppliers, rather getting products straight from the sellers or retailers.
For instance, if you step into a local mall, you see certain products at discounted prices, a good ongoing sale, or a store cleaning. You may see the product’s price for $30, and on Amazon, it is listed for $50. So, invest a little bit of cash and get about 10-50 units and sell it on Amazon for $20.
So, by listing this product for sale on Amazon, you can make a $15 profit on each product. Check the Amazon seller fees to determine how much you can make selling on Amazon.
What is Online Arbitrage on Amazon?
Online arbitrage enables you to buy a product from a local/global marketplace and then sell it at a higher price on Amazon. The difference between buying and selling price is your profit (after deducing the Amazon fees).
In a nutshell, you shop for products on your computer, and send it to the Amazon FBA warehouses, and make a decent profit with minimal investment. You can use an FBA calculator tool to know the extra costs. It is a popular, rewarding, and 100% legitimate way of selling on Amazon.
Pros of Online Arbitrage
Here are a couple of reasons that suggest online arbitrage is an undisputed choice:
- There is no roaming around the streets searching for inventory, which is tough for someone who has the platter full with a job or kids.
- No transportation cost or hassles for shipping to far off areas.
- Products are delivered to your doorstep..
- You can order goods in higher quantities that you might not find at retail stores.
- Business is open 24*7.
What do I need To Get Started with Online Arbitrage in 2020?
If you don’t have an Amazon seller account, then first you’ve to create one. It is easy to become a seller of Amazon. Amazon will walk you through the process step-by-step, but first, you need to decide between individual and professional seller accounts.
For an individual seller account, you won’t have to pay any monthly subscription fees; for every sale, you’ve to pay Amazon a fee of $0.99 per item along with the percentage commission. With an individual Amazon seller account, you won’t have access to all your orders and inventory management tools.
If you want to sell a good amount of products on Amazon, at least above the 40 mark, opt for the professional seller account. The professional seller account on Amazon lets you effectively manage the online store with the right arsenal of Amazon seller tools.
Once you’ve created your seller account on Amazon, and it’s up and running, all you have to do is to build your inventory and start selling on Amazon.
Things To Look for When Calculating Online Arbitrage Profits
Here, are a couple of things to consider when calculating the profits from online arbitrage:
- Purchase Price (Including the Shipping Costs & Sales Tax )
- Amazon’s Selling Fees
- Inbound Shipping Costs
- The Selling Price on Amazon
In simple words, take the selling price on Amazon and subtract it from all other costs; if the number is positive, congratulations, you’ll be earning profits.
How to Find Items to Sell?
When your source is online, then there is unlimited inventory. Add to that, you shop anytime, anywhere, at your convenience.
You can also find a local marketplace to minimize shipping costs or even utilize online coupons to reduce purchase value and maximize profits.
How To Tell Whether The Product is Worth Selling on Amazon?
So, you’ve come across a good inventory; then, you need to decide whether that specific item is right to sell on Amazon. You’ve to evaluate a couple of things:
- Is the product already available on Amazon?
- Is this product likely to sell on Amazon?
- Are you allowed to sell this item on Amazon?
Or, if it doesn’t make a good profit, then no further research is needed.
How Much Investment is Needed?
One of the biggest attractions for online arbitrage is the low cost to set up. You don’t need to have a big inventory stored as you can scale up in accordance with the sales figure.
Let’s Wrap Up
Yes, online arbitrage has its set of pros; there are certain shortcomings too. These include
- lower profit margins than retail arbitrage
- challenging to tell whether the product you are ordering online matched with Amazon listing
- prices decrease on Amazon before the products are listed
- High competition with multiple players selling the same products.
If you are keen to make the most of online arbitrage on Amazon, you must have a set of Amazon seller software that can give you crucial data for making informed decisions. Fill the contact us form in case you need assistance from TURBO PIRANHA.
Happy Selling on Amazon!