Retail Arbitrage on Amazon | What Is It and How Does It Work?

Retail arbitrage is a profitable selling model that doesn’t require a major investment.

Many people dream of being their own boss, and taking advantage of the eCommerce boom is one of the most popular ways to start a business. However, not every entrepreneur has the capital or resources to invest in inventory. 

While dropshipping is a good option, there are always sellers who are looking for alternatives. This is where Amazon retail arbitrage comes in. 

With retail arbitrage, you can form an eCommerce business without the hassle of collecting mass inventory, warehousing, shipping, and even trademarking your brand. Plus, businesses can still profit. 62% of Amazon retail arbitrage sellers make nearly $5,000/month.

But is it worth it? New sellers will have many questions, such as how Amazon retail arbitrage works, its benefits, how to get started, and even whether this business model is legal.

What Is Retail Arbitrage?

Before discussing retail arbitrage on Amazon, let’s first cover retail arbitrage. 

Believe it or not, this business model isn’t new. With retail arbitrage, sellers buy products (usually from local retail stores, garage sales, or thrift shops) and resell them. In eCommerce, sellers do the same thing but focus on Amazon and other online marketplaces.

This business model is very common, and most people accept the practice. Retail arbitrage sourcing has especially helped out local businesses since these buyers are a large portion of their customers.

While retail arbitrage seems like a simple way to get started with an eCommerce business, there are many factors to consider. But first, is this business practice even legal?

Amazon Retail Arbitrage Legality

In 2012, the U.S. Supreme Court heard a pivotal case in retail: Kirtsaeng v. Wiley Publishing. Wiley Publishing sued Supap Kirtsaeng for selling copies of their textbooks on eBay. Kirtsaeng is an immigrant from Thailand looking to make extra money while working on his PhD. He shipped textbooks from Thailand to the U.S. and resold them on eBay. 

Wiley Publishing sued Kirtsaeng for copyright infringement. Both argued their defense on different sides of the Copyright Act. The case went through numerous courts until it reached the Supreme Court. In 2013, the Court sided with Kirtsaeng and stated there’s no geographical restriction on the “first sale” copyright doctrine.

What does this have to do with reselling items on Amazon? 

What Kirtsaeng did was a retail online arbitrage tactic. While Wiley Publishing sued Kirtsaeng for importing their copyrighted work, the Court argued that the purchaser has the right to resell the items they bought. This can apply to any seller engaging in retail arbitrage.

That said, there are best practices to consider when engaging in retail arbitrage. All items you’re reselling must be authentic; in other words, they must contain no counterfeit logos or trademarks.

Even though retail arbitrage is legal, brands won’t like how you’re reselling their items–especially if you’re pricing them higher. So, expect to receive complaints from the brands. Plus, Amazon also has limited fulfillment options for arbitrage, as we will discuss later.

Benefits of Amazon Retail Arbitrage

The main benefit of Amazon retail arbitrage is that anyone can get started with this business model. But there are several other advantages to know.

Can Sell Various Products

Think about the times you shopped at your local thrift store. What did you find? Clothing, home decor, furniture, and even automobile accessories. And those items were probably available at a serious deal, right? 

In retail arbitrage, you can sell all these items with no significant investment. You can sell useful items you find at your local thrift store or garage sale or have a specialty, such as vintage clothing.

Flexibility

Since the Individual Seller Account comes with no major fees, you can choose when to sell products and take a break. This makes retail arbitrage a flexible business model for your time and money. 

Many sellers use retail arbitrage as a side hustle or part-time gig, especially for busy university students like Kirtsaeng. That said, you can expand to full-time if you have enough items to sell and customers.

Low Startup Costs

Selling private label and wholesale items requires significant capital to get started. Since you’re selling low-priced items you find around town, you can use your spare change to start your business.

Your investment amount depends on how much you’re willing to devote to your business. If you only want to sell items part-time or as a side hustle, you can budget a small amount of your weekly income and use it to buy resell products. 

Or if you want to be a serious full-time seller, most new businesses can source enough products with only a few hundred dollars. This inventory should last you at least one month or until you make enough capital to expand.

High ROI

You can generate a serious ROI by adopting a retail arbitrage business model. It’s easy to source products at a low price. You’ll easily build inventory; since you’re not making a significant investment, this strategy comes with low risks.

Depending on how much you price your products, you can make serious profits, resulting in an exceptional ROI. However, it’s still best to aim for a 50% ROI to ensure you make all costs back while generating revenue.

Easy to Start

As you will see in the next section, becoming an Amazon retail arbitrage seller is extremely simple. You only need a small amount of inventory and an Amazon Seller account so that you can start up your business in no time at all.

That said, there are some processes you’ll need to figure out, such as storage and shipping. Most new sellers operate their small venture outside their home initially, but if you plan to become a full-time seller, you’ll need to plan a fulfillment strategy.

How to Do Retail Arbitrage on Amazon

You can form an Amazon retail arbitrage business by following three simple steps:

1. Step 1: Create an individual Amazon Seller account
2. Download the Amazon Seller app
3. List products on Amazon

Since you’re not trademarking your brand, Amazon’s Individual Seller Account requires no monthly fees and you only pay 99 cents per item sold. That said, you may eventually want to upgrade to the Professional account, which comes with no per-item sold fees.

While downloading the Seller app isn’t required, it does have a helpful feature: the retail arbitrage scanner. With this tool, you can scan the barcode and see how much the item sells elsewhere.

Amazon Retail Arbitrage Tips

Retail arbitrage is more than reselling cheap products. You’re essentially running a business, and there are tips to follow that will help you succeed.

• Keep your receipts. Your consumers may ask for proof of authenticity, especially if you’re selling name-brand items. The receipt from the store should be enough to confirm this.

• Consider store perks. You don’t always have to buy items from thrift stores. Many sellers buy clearance items from big-box stores and resell them at full price. You can also use store sales and rewards to buy quality items at a bigger discount. 

• Keep packaging in top condition. If you’re selling rare, vintage, or collectible items, keep them in the original packaging and always ensure they’re in mint or pristine condition. Amazon FBA won’t accept damaged boxes, and your customers won’t appreciate them.

• Research sales tax exemption. If you pay sales tax when you originally purchase the items, most states won’t penalize you for not remitting taxes. However, all states have different tax legislation, and it’s best to do your research before selling anything.

• Fulfillment: There are different fulfillment options you can use for retail arbitrage. Many sellers store and ship orders DIY at first. Once you get more customers, you should consider fulfillment by Amazon (FBA) or third-party fulfillment (3PL) options.

Retail Arbitrage Tools to Use

Any business in the modern age should use technology to improve various aspects of how they run their company. The same goes for retail arbitrage, but what are the best tools to use?

• Amazon Seller App. A free tool to create product listings, respond to customers, fulfill orders, and track sales. You can use the Amazon Seller App on Android and Apple devices and tablets.
• Keepa. A price-tracking browser extension for Amazon. You’ll view price drops, pricing history, and daily updates
• Scoutify 2. A mobile app that recommends products for resell.
• Aura. A repricing resource to charge the best prices in real-time.

Get Started With Amazon Retail Arbitrage

Thanks to Amazon and other ecommerce marketplaces, sellers have many options when starting their own business. Even before the eCommerce boom, retail arbitrage was a popular selling model. Sellers could find cheap items from thrift stores and garage sales, reselling them at full price. 

Now, these sellers can access a global consumer base, making this Amazon Business Model a huge opportunity for new eCommerce businesses.

If you’re new to Amazon retail arbitrage, you may need help leveraging the online marketplace. This is where AMZ Advisers come in. We can provide you with an expert team to drive more sales.

Click here to discover more information.

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