September 13, 2018

How to Make a Profit Doing Retail Arbitrage on Amazon

To put it simply, you buy a product that is on clearance sale for cheap then sell it for a profit. As simple as that.

Recently, a friend of mine told me that he started buying and selling wares on Amazon and making a pretty good profit out of it. He told me that he only spent around a hundred dollars for his merchandise and a few more for extra charges from Amazon. But after a while, he was able to get back his ROI with some nice profits.

Of course, hearing this sparked my interest. He told me this was known as retail arbitrage Amazon. It’s very popular because Amazon is a marketplace that has made things easier not just for people to buy but also to sell. As long as you know how to resell on Amazon, you’ll make money quickly and easily.

What Is Retail Arbitrage Anyway?

To put it simply, you buy a product that is on clearance sale for cheap then sell it for a profit. As simple as that. Since Amazon has a ready-made platform, you can do retail arbitrage on Amazon itself. That’s what I like to call Amazon arbitrage.

If you’re curious as to where you’re going to buy your wares, look no further than those big wholesale stores with clearance sections. I suggest that you check out places like Walmart, Home Depot, Target, or Big Lots. All of these places have sections where you can pick up items for very low prices that you can sell on Amazon.

All you need to do is buy your items and ship it using the Amazon resale FBA shipping service (Amazon FBA is specially made for reselling on Amazon). If you know how to sell, you can enjoy a profit.

Other stores that you can check out aside from the ones I’ve mentioned are Craigslist, Gamestop, Ross, Marshall’s, and Model’s Sporting Goods.

How I Made Amazon Clearance Sale Profits

Being the curious person, I decided to try Amazon clearance selling to make a bit of extra cash. I went to Walmart and Target to look for some stuff that may seem like stuff people would buy online. I had quite a tough time searching because I have to determine how people think when they’re looking for what to buy on Amazon. Nevertheless, I got a few interesting things at very cheap prices.

I found a few cool products like bracelets, bags, clothes, accessories, and trinkets all for an extremely cheap price. Basically, these are things that I can easily sell on Amazon.

Now, just a word of caution for those who are going to do this. You will get a lot of stares by hanging around the red tag section for 2 hours. Believe me, I got a lot of people staring me down and probably even judging me. At one point, I could feel that even the employees were staring at me and telling the security. I think they wanted to throw me out because I looked suspicious. Of course, I just kept on telling myself that I wasn’t doing anything illegal so I shouldn’t be scared. The most that people would think is that I was some kind of cheapskate or cheap shopaholic.

So here’s my word of advice: don’t think too much. Even if you do get stared and judged, you’ll be the one laughing your way to the bank after you’ve made some profits. Eventually, they’ll get used to you being there and scouting for items that are on sale.

My First Steps to Reselling on Amazon

The thing that I love about Amazon is that it turns my house into a store. I even had my own barcode scanner because of the retail arbitrage app. I just scanned the items into my account using the app. It was so easy!

Once my items were in, Amazon offered to do all the labeling and organizing for me for a small fee. Since I was thinking long term, I decided to try it out anyway. The labeling service was pretty awesome as it made all my product information really organized for viewing. All I had to was provide the pictures, the product descriptions, the price, and the bundles if I wanted to sell my wares in a package deal. Now comes the shipping.

I used Amazon FBA, a service that a lot of sellers on Amazon use for their merchandise. My friend who was also doing retail arbitrage suggested I use this service since it’s very convenient. With this service, you will be shipping your wares to an Amazon warehouse and they’ll take care of the rest. The cost wasn’t that big so I didn’t mind and allowed them to store my stuff.

My Success in Retail Arbitrage Amazon

After I left my wares in the Amazon warehouse, I checked my account to see what happened. I was surprised that I got a few orders right away! Fine, I didn’t make such a big killing with my wares but I actually made some profit. At that time, around 5 of my 20 items were already being ordered – and all that happened in just 2 days. To think I got those items for cheap off of red tag sales!

About 3 weeks in and I was down to my last 5 items. I noticed that they weren’t selling that well, so I tried giving discounts and slashing the price. In the following days, 4 of my items were sold. I was down to my last ware which was a bracelet. Since I had already made some profits, I dropped the price down to break even and it eventually got sold off.

I kind of got addicted to it so I decided to do another round of shopping and selling on Amazon. This time, I didn’t just pick any random item in those clearance sales. I researched what some of the popular items are and tried to find them at cheap prices. Since my new set of merchandise was more targeted and more in demand, I sold off my wares faster. I noticed that wallets, cardholders, and work bags were especially in demand. I even found a Cobra Kai shirt in Walmart that I sold for a profit (this became in demand since Season 2 of Cobra Kai is coming up and there are a lot of fans of the series).

Anyway, my trial with Amazon was a huge success. Sure, I had a few wares that I had a hard time selling, but I just had to think of a strategy to sell them off. I think around just 5 of my items have been stuck there without any buyers. I’m thinking of selling them as a bundle with other more popular products.

Extra Tips to Succeed in Retail Arbitrage

So that’s the story of how I entered the arbitrage business. As I went along with it, I did pick up a few more tips that I’m going to share with you guys here. Here are some of the expert tips that I picked up while doing what I do:

  • Get Products for a Target Market

When I first started, I just went to Walmart and looked for any products that can be sold. While I did make a lot of money doing this, I realized that it won’t be that good for my Amazon listings in the long term. After all, no one really wants a junkie type of seller.

Anyway, I noticed that there are some products that sold better than others. So what I did is that I focused on a product category that sold the most items in my listings. This worked so much better for me. I spent less on inventory and made a lot more profit than I did before.

  • Ask for Reviews

I never did think reviews were that important at first because I was too focused on money. However, I learned that reviews got me more customers. Luckily, there were customers who did enjoy my services. Of course, I took my game to the next level by asking Amazon top reviewers to review my products (after they buy it). If they liked it, I’d ask them to leave their honest feedback. I noticed that if a top reviewer rates your products 5 stars, then more customers will want to visit. In the case to save my time asking for reviews manually, I used SageMailer instead. It's a great service which automates the whole process of asking your customers and getting more Amazon reviews. All you need to do is set up it once, however, it took me just a couple of minutes.

How did I get these top reviewers? Well, I just looked for them on Amazon listings and contacted them. I got rejected a lot of times but a lot of them agreed too. The key here is to get top reviewers that have interests related to the products you’re providing.

  • Don’t Skip the Large Items

I noticed that a lot of people dread carrying the big items because they’re hard to ship and they cost more to deliver. Honestly, I also didn’t carry big items at first – even if I clearly knew that there was a demand for them. I consulted my friend about this problem and he told me that I shouldn’t worry too much about big items.

If the items were large, then all I had to do is charge a higher price so that I could get a higher profit margin to cover the higher fees. I did follow his advice and sold a few big appliances in the course of my Amazon retail arbitrage journey. Now, if you want to do this, then you have to be ready to shell out some capital for these big-ticket items. Trust me because the profit margin is really worth it. They’re surprisingly very easy to sell and can rake you in a bundle.

  • Visit Stores at Night

With the exception of clearance sales, big wholesale places usually re-stock items on their sale shelves. The reason why you’d want to go at night is because you’d want to see which items are popular. The ones that quickly get disposed are the ones that you’ll want to sell. Take note of the items that are always out of stock. After that, come back in the morning and look for them.

  • Don’t Just Stick to the Usual Stores

There are going to be times when Walmart or wherever you go isn’t going to carry the items that you’re looking for. In that case, you’ll want to visit other stores. Conduct some research on the stores that have red tag sales near you. I’m willing to bet that there are a lot of them in any area.

  • Make Friends with The Store Manager

Why would you want to do this? Well, you’ll get a lot of perks if you’re friends with the store manager on your local Walmart. For instance, if you’re a regular, the store manager won’t mind giving you extra discounts. I can actually get a 10% extra discount if I buy stuff in bulk simply because the store manager of the local Walmart knows me.

Sometimes, he’ll even offer to send the goods directly to my house. Since we’re friends, the store manager would even call me up and tell me if there are new items up for grabs. I can even reserve these items. Talk about service!

So how did I do it? Well, after being there pretty often and ordering a lot of products, the staff will obviously be curious as to what I do with all the stuff. I was totally honest with them: I sell them on Amazon. I even taught the store manager how I did it. That’s really how I made friends with all the staff there.

These are some tips that I learned from both experience and the mentoring of my friend. If they work for me, then they can definitely work for you.

What I Did About the Competition

One of the things that I’d like to address would be the competition. Obviously, my products aren’t going to be the only ones there. For instance, I sell stylus pens for smartphones. If I search for stylus pens in the Amazon search bar, I’ll see a lot of them and not just mine. With the number of competitors in the market, I have to have an edge if I am to dispose of my goods. As per my experience, these tips will help when competing with other sellers:

  • Use Only High Quality Images

Buyers will want to buy from a seller that takes his or her craft seriously. If you put low-quality pictures of your product, then buyers won’t take you seriously. Besides, Amazon has requirements when it comes to adding photos. Your photos must be clear, have a white background, and can fill 80% of the frame.

  • Optimize Your Bullet Points

In your product listings, you only have a few minutes to get the attention of your buyers. You see, your buyers are going to just scan through your listings before deciding whether to buy your product or not. If you want to convince them, you have to put your product’s features in bullet points. Also, keep them short and simple. No one is going to read walls of text and long descriptions.

  • Use the Right Keywords On Your Title

Ever heard of SEO and keyword usage? Well, most websites use keywords in order to get high rankings in Google search. Amazon is pretty much the same with the difference being that Amazon’s algorithm only considers the title of your product.

This means that you have to put keywords in your titles. What I do is I make long titles with keywords that my potential clients may want to search for. I usually include the brand name, model, size, and other keywords that are relevant. Of course, don’t keyword stuff your title. Just make sure the keywords fit naturally. You’ll need some pretty good writing skills for that.

  • Be Willing to Play with the Price

No matter where you go, it will end with a battle of the lowest prices. It’s no different in Amazon. If you’re going to compete with other sellers, you’d better be ready to cut prices or offer discounts.

Every week, I would always check my competitors just to see if my own price is updated. If a lot of sellers cut down the price of their product, then I usually do that too. I don’t do price wars though. I just follow a market price.

  • Offer Bundles and Bundle Discounts

Amazon has a cool feature that allows you to bundle items and sell them at discounted prices. For example, if you bought a bunch of clothes in a clearance sale, you can sell them as a complete outfit. Instead of just selling a pair of pants, add a shirt and shoes to it. You’ll be selling a complete outfit which will get you more profits and help you dispose of your goods faster. Just make sure that the option to buy them individually is still open. After all, not everyone likes buying stuff in sets.

These are just a few of the things that I did to stand above the competition. If you have some other methods to do so, then you can do them. The bottom line is that you make money and dispose of your merchandise as quickly as possible.

The Bottom Line with Amazon Retail Arbitrage

The whole experience was great for me. Due to Amazon retail arbitrage, I learned how to scout products for cheap prices and sell them on the platform. I also learned how to make use of Amazon’s reseller services such as their shipping, labeling, and warehouse services. I have not been disappointed so far.

They also offer services for private label brands if you want to level up your reseller game. With a private label, you can create your own brand that you can market in Amazon.

That said, I would really recommend that you try this out if you want to make some passive income. You don’t even need to quit your full-time job to do this. You can buy your wares during the weekend and ship it to Amazon’s warehouse via the Amazon FBA. All you have to do is post your wares. After that, you can let Amazon handle the rest. They’ll take care of your store, the shipping, and the whole system of handling money. You’re definitely covered by their platform.

If you want to make it big in Amazon retail arbitrage, learn as much as you can about it. It’s actually not that hard to do at all. Just follow some of the steps I provided in the article and do your own homework. Also, make sure to take note of the extra tips that I gave you. In the Amazon battlefield, you’re going to need all the help you need if you’re going to take on a lot of competition. At least my little story and tricks will give you some sort of edge.

And don't forget to try SageMailer, they have free 21-day trial. This tool will greatly simplify the process of getting product reviews and contacting your customers.

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