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What is Amazon Arbitrage? Arbitrage on Amazon is a profit-making method for resellers. It works like this:
Sellers do market research on online platforms or in stores. At this stage, the goal is to find products cheaper than on Amazon. To understand the process better, consider an example:
The price of one product in one online store is $2, and in another, it is $6. What do dealers do? They buy a certain amount of products for $2 per unit and sell them higher. The difference is their income. As of now, you know the answer to “What is Amazon Arbitrage ?” let’s move on.
Since we are talking about Amazon, there are two ways for resellers: retail arbitrage on Amazon and online.
Retail Arbitrage business on Amazon
To define the retail arbitrage concept, imagine:
- You find a retail store
- Buy products that you plan to sell at a higher price
- Purchase a certain number of units
- Finally, sell it all on Amazon and profit from the difference
Why does it work? Customers cannot purchase what they need from retail stores (do not have access to them or other reasons). Therefore, it is more convenient for them to buy on Amazon.
What is Amazon online arbitrage?
The sequence of actions is the same here. The difference is that you, as a reseller, find the product online. In addition, you only need the Internet to work.
Also, OA Amazon implies shipping costs. Therefore, to make more profit, your goal should be to increase sales.
Even among marketplaces, this is a common practice. After all, online arbitrage opportunities are replenishing stocks and providing customers with an even wider assortment.
How to do online arbitrage on Amazon?
E-commerce arbitrage requires some preparation to increase profitability and reduce the amount of time spent on it in the future. But, then, there are only three steps, and you can get to work.
Research the product thoroughly
Otherwise, you will not know about those consistently in-demand products or some new items on the market. When you are dealing with new things in the market, consumers are initially unfamiliar with the prices. This way you can increase your profits.
In research, the product research services can be helpful. They search for the most popular products on Amazon. Moreover, the tools discover those product categories that are in the highest demand.
Assess your competitiveness on Amazon
This simple analysis helps to maintain a stable position on the platform. First, check how many sellers you are competing with and what the trends are right now.
Fortunately, some pricing tools from IT designers regularly notify the user about price changes, listing, and more.
SageMailer is a popular tool among Amazon sellers. Why? The point is that arbitrage sellers need feedback from buyers. So why are they beneficial to them? First, high ratings and positive reviews make it possible to get the upper hand over other sellers. This way, it is easier for you to compete with others in product listings. What’s more, it’s a quick way to win BuyBox by getting good reviews with SageMailer.
Be ready for expenses
To get a profitable and smooth business, every reseller should keep a few costs in mind.
Purchase of goods. Although it sounds obvious, the more accurate you make the calculations, the higher the chances of more revenue.
Place on the trading platform. To sell on Amazon, sellers pay $39.99 a month and referral fees up to 17% of the item’s price. In addition, some product categories imply a closing fee (e.g., books).
Therefore, a strong recommendation for every Amazon person in business is a detailed study of commissions.
Amazon FBA. Choosing this way of fulfillment frees up time for sellers. It is because they entrust the platform with all stages of product preparation and delivery. Amazon FBA online arbitrage sellers pay the fulfillment and storage fees. And if they have a need, they also pay for long-term storage.
It is essential to add that FBA has special offers for customers – Buy Box and Amazon Prime (they are not free).
If you choose a different fulfillment method, consider each of its stages regarding the financial cost.
Other (salaries, subscription costs, marketing).
Important tip! The indicator of profitability is a priority for every novice seller. For example, ROI 40-60% promises good profit. Therefore, a seller should strive for this index.
Amazon retail arbitrage vs. Amazon online arbitrage
If you are deciding which Amazon arbitrage method to choose, then the following information will be helpful.
- For a retailer, it is a mall, retail trader, or shop.
- For online, these are e-commerce marketplaces.
- Retailers use their own logistics facilities and cover the related costs for each delivery step.
- For online, this is an opportunity for resellers to place the responsibility for shipping on dedicated service. Thus, there are savings on logistics, and this is less time-consuming.
What are the similarities?
Arbitrage traders increase sales of retail sources because they buy in bulk or during a sell-off. However, this increase only occurs when the arbitrage traders themselves are interested in it. They are also the reason for the increased offer for a particular product. Moreover, it leads to price fluctuations. Since there is an accelerated sale of goods at reduced prices, this is unfavorable for competitors.
What are the difficulties?
- Your success as a trader depends on the skills of the reseller (ability to deal with the market, etc.)
- The prices on Amazon services are subject to change
- Profit margins depend on the commissions paid
- Sometimes getting a product online requires Amazon approval
Retail Arbitrage Amazon
- Resellers spend time searching for goods in different outlets
- Scanning barcodes is also time-consuming
- Then they have to sort them all
- They need a lot of time and effort to pack the product.
What is in the future for Amazon arbitration?
While online arbitrage and retail arbitrage is a lucrative business for many Amazon users, there are potential threats in the future.
Perhaps resellers will create invoices for goods in a new state. Namely, they will not apply bulk invoices if they are not sure of the authenticity.
There is a chance that resellers will describe branded items as “Purchased Retail” or “Like New” since they are not new. Before they reach the buyer’s hands, the intermediary buys and processes them.
Manufacturers of goods can become an obstacle to the business of resellers. Therefore, to protect their pricing policy and private label, they will probably request the blocking of reseller accounts.
A few tips for arbitrage on Amazon
To make the internet arbitrage smooth, adhere to a few recommendations for Amazon sellers.
- Always keep in mind the commission that the platform charges when choosing a source for sales. Thus, it is easier to make profit calculations.
- Be ready to provide invoices for “new” items.
- Track the market situation and competitors using unique applications.
- Try to avoid products with volatile prices. In this case, likely, reselling on Amazon will not be profitable.
- In the initial stages, it is best not to take risks by investing too much. A rational approach will mitigate potential losses in the future.
- To avoid overpaying for storage, make an effort to find quick resales.
- If we go back to the product research, remember the following fact. The more meticulous and attentive you are, the less risk you take.
- Hiring employees streamlines the sales process. Therefore, consider looking for assistants.
Whichever Amazon arbitrage method you choose, it all depends on a responsible approach to business.
IT developers offer applications to help both experienced and novice arbitrage practitioners. For example, SageMailer, as mentioned, is an essential part of the arbitrage sellers business. For them, it is a tool to stay ahead of the competition, win BuyBox, and increase sales.
In addition, we studied Amazon arbitrage sellers tips so that the time spent on your growth is minimal.