Table of Contents
- 1 Retail Arbitrage Business on Amazon
- 2 What Is Amazon’s Online Arbitrage?
- 3 How to Do Online Arbitrage on Amazon?
- 4 Amazon Retail Arbitrage vs. Amazon Online Arbitrage
- 5 What Is the Future of Amazon Arbitration?
- 6 A Few Tips for Arbitrage on Amazon
- 7 Final Thoughts
Sellers do market research on online platforms or in stores. At this stage, the goal is to find products cheaper than on the platform. 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. Now that you know the answer to “What is Amazon Arbitrage ?” let’s move on.
Since we are talking about AMZ, there are two ways for resellers: retail arbitrage on the platform and online.
Retail Arbitrage Business on Amazon
So, what is retail arbitrage 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 AMZ and profit from the difference
Why does it work? Customers cannot purchase what they need from retail stores (they do not have access to them or for other reasons). Therefore, it is more convenient for them to buy in the marketplace.
Why should you choose arbitrage over other models of selling on the platform?
- Lower cost to launch your business: According to a recent study of more than 1,000 AMZ sellers, 33% of merchants doing arbitrage were able to start their businesses with less than $500, and almost half of them did so for less than $1,000. On the contrary, 75% of private label merchants spent more than $1,000 to launch.
- Easier to start selling: Two in five AMZ retail arbitrate merchants indicated they could launch their businesses in fewer than six weeks. In turn, only a quarter of private label merchants stated the same.
Essentially, if you do not already have an item to sell or have money to purchase merchandise at scale, Amazon FBA retail arbitrage is a fantastic, low-risk method of running a business in the marketplace.
What Is Amazon’s 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, your goal should be to increase sales to make more profit.
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?
This model 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 dealing with new things in the market, consumers are initially unfamiliar with the prices. This way you can increase your profits.
In research, product research services can be helpful. First, they search for the most popular products on the platform. Moreover, the tools discover those product categories that are in the highest demand.
Assess your competitiveness
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, listings, 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 makes it easier for you to compete with others in product listings. Moreover, it’s a quick way to win BuyBox by getting good reviews with SageMailer.
Be ready for expenses
Every reseller should keep a few costs in mind to get a profitable and smooth business.
- 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 the platform, merchants pay $39.99 monthly 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 AMZ seller 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 product preparation and delivery stages. AMZ 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, an ROI of 40-60% promises good profit. Therefore, a seller should strive for this index.
Amazon Retail Arbitrage vs. Amazon Online Arbitrage
If you decide which AMZ arbitrage method to choose, then the following information will be helpful.
What are the differences?
- 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 a 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 AMZ services are subject to change
- Profit margins depend on the commissions paid
- Sometimes getting a product online requires the platform’s approval
Retail Arbitrage on 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 the Future of Amazon Arbitration?
While online arbitrage and retail arbitrage are lucrative businesses 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 unsure of their 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, they will probably request the blocking of reseller accounts to protect their pricing policy and private label.
A Few Tips for Arbitrage on Amazon
To make the internet arbitrage smooth, adhere to a few recommendations for 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 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 selling 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 sellers’ tips so that the time spent on your growth is minimal.
To wrap up, the one who owns the information owns the world (and a lot of profit on the platform!).