Retail arbitrage is a common business model for a lot of people starting out on Amazon. It doesn’t matter where you are located, you will be able to leverage arbitrage from locally sourced goods in order to make a profit. Amazon’s total overall profit has skyrocketed over the last decade compared to when it started out in the 90s as a bookstore, by taking advantage of the explosive growth of online shopping; especially during the pandemic era. So, what is retail arbitrage and how can you start a business using this technique?
What is Retail Arbitrage?
The basic concept is that you purchase a product from a local retail outlet (generally on a sale), and then you sell that product online at a higher price, making a profit.
How to Start Your Retail Arbitrage Business on Amazon
The following is a step-by-step guide on how to set up an Amazon seller account so that you can start your retail arbitrage business.
Step 1: Create an Amazon Seller Account
In order to sell anything on Amazon you need a seller account. You can choose to either create an individual seller account or a professional account on sell.Amazon.com. If you are planning on only selling a small amount of products (up to 40), then you can choose an individual seller account and make one for free, and you only have to pay a $0.99 commission on each sale, plus your sales also incur an additional 15% consolidation fee.
You cannot sell items from the restricted categories outlined on the seller central website. A professional account costs $39.99/month, but you’ll have more freedom of how much you can sell, and there isn’t a fee per sale attached either. Also, as a professional account, you can select to use Fulfilled by Amazon and take advantage of their warehouse for a small fee to handle your logistics, such as shipping and packaging.
Step 2: Get the Amazon Sellers App
The Amazon sellers app is a convenience that will allow you to easily figure out which products would work best for your arbitrage by using the app’s camera option to scan barcodes to show listings of them on Amazon. It also helps by calculating fees.
Step 3: Go to Local Retail Stores and Scan Products
You need to head to your local stores, hunt down some sales, then use your Amazon sellers app to determine whether those products would sell well on Amazon. Remember that retailers like Walmart will have different clearances at different stores, even in neighbouring towns. The best items you should invest in are products where the app shows you getting the largest return on investment. Scan everything; you may find a surprising product you hadn’t considered.
Step 4: Source High ROI Products
Next, it’s time to purchase some products. Aim for products with a high ROI, that you are eligible to sell based on your account type, and other restrictions on Amazon. The better your ROI percentage, preferably above 50%, the easier it will be for you to make a profit to purchase more products to sell.
Step 5: List Your Products on Amazon
Finally, once you have your products, either in your home, or already in the Amazon warehouse, it’s time to make product listings. It’s best to follow a guide on how to craft eye-catching and informative product listing pages to give you the best chance of selling the product.
If you are interested in more tips and tricks to boost your profit in the world on online ecommerce, visit our Wizards of Ecom website for more information.
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