How To Sell On Amazon Using Retail Arbitrage

Retail ArbitrageHave you ever been “showrooming” at a store, comparing prices at the brick and mortar location with Amazon’s prices online?

Have you ever found that your local store is actually cheaper than the online leader for once?

Maybe you have found a great deal thanks to coupons or clearance sales that you just can’t find online.

Have you ever wished that you could take advantage of these price differences and maybe sell the item yourself on Amazon for the higher price? Did you know you can sell items on Amazon?

Most people think that they have to actually produce the item in order to sell it to the retailing giant. Not true. You can be a traditional middleman, or wholesaler, and sell to them as well.

Where Retail Arbitrage Gets Its Name

When finance experts hear the term “arbitrage,” they almost always immediately think of currency price fluctuations. Traditional arbitrage occurs when two or more currency prices are poorly matched in the economy on exchanges.

To give you a relatively simple example, suppose that you were trading the U.S. dollar, British pound, and the Euro in the currency markets. If one dollar equaled 1.5 pounds and 3 Euros, you would expect one British pound to cost two Euros. But, what if they didn’t equal that? What if one currency was throwing off the equilibrium of the others in relation to each of them?

Let’s say that 1 U.S. dollar equals 3 Euros. But, what if 1 British pound actually also equaled 3 Euros instead? You could then take advantage of the pricing error to earn a free profit. You could take your U.S. dollar and buy British pounds. Then, you would use those pounds to buy Euros, and finally you could turn those Euros into U.S. dollars again.

In this simply circular illustration, you would actually end up being able to buy more Euros with pounds than you would have simply been able to buy from trading U.S. dollars for Euros directly. This is arbitrage in its simplest form.

Arbitrage does not have to be limited to currency. You can find it in retail as well. I have had a lot of fun over the years buying and selling things on eBay that were mis-priced either online or in a brick and mortar store. That’s called eBay arbitrage, or retail arbitrage in the broader sense.

Take Advantage of Retail Arbitrage

Retail arbitrage is a popular buzzword that has been traveling around the internet right now. Retail arbitrage, like other forms of arbitrage, is where you take advantage of pricing irregularities and find products in stores at a discount that are later sold for full price online.

There are many reasons why an item may be full price in a store but not discounted online yet. Retail spending and needs differ across the country. Companies spend millions of dollars every year trying to research and determine, based on spending patterns and traits, who will pay the most for each item for sale. Several years ago, Victoria’s Secret received negative press for their dynamic pricing inequalities in both their print catalog and online, which both showed different prices and discounts to separate customers based on consumer characteristics and buying behavior.

However, you can take advantage of one of the hottest concepts in retail right now through retail arbitrage. There are many people across the country and internationally who want, for whatever reason, items that you can find on sale in your hometown. Buying goods locally and then reselling them online can be a very profitable business if you have the time and patience to look for deals.

How To Sell on Amazon Using Retail Arbitrage

It is actually pretty easy to start selling items through Amazon’s website and their huge distribution network. There is a program that they run called Fulfillment by Amazon (FBA) which allows you to send your goods to Amazon directly until they are sold. Have you ever noticed all of the different vendors that you can choose from when you select an item to purchase on Amazon? Those are venders using Fulfillment by Amazon.

Using Fulfillment by Amazon allows you to send your items to Amazon at a low cost and the retail giant will store your items in their warehouse. After a customer makes a purchase, they will then pack and ship your goods directly to the customer. Amazon will even handle the returns and customer service for the orders as well.

The costs for using Fulfillment by Amazon depends on how many items you are selling, the size of the items, how long they sit in their warehouse, and whether or not you are paying the fee per item or on a monthly plan. If you sell fewer than 40 items per month, you can pay $0.99 per sale plus the other small selling fees for warehousing the items. If you sell more than 40 items in a month, there is a flat fee of $39.99 per month plus the warehousing fees when you use Fulfillment by Amazon.

While this may not be a money-making venture for everyone, it does have the potential to supplement your income if you like to find bargins on items and take advantage of the retail arbitrage. Madison from My Dollar Plan has been using the program and last year made over ten thousand dollars in her spare time doing Amazon retail arbitrage. To boost her profits she uses her cash back credit card to make the purchases. Speaking of purchases…

How to Buy Items for Retail Arbitrage

According to the Retail Rengade, the 4 factors you need to pay attention to when buying items at a retail store for resell online are: income potential, quantity, size and weight, and demand. Here a great video from the Retail Renegade where he shares more detail about the 4 buying factors he looks for:

Looking for more information on this topic? I’ve looked around the online retail arbitrage community and this book, Arbitrage: The authoritative guide on how it works, why it works, and how it can work for you, by Chris Green, seems to be a favorite for getting started with retail arbitrage. Chris even includes his phone number in the book so you can call with questions.

Have you ever found some great items that were priced incorrectly? Did you take advantage of it? Have you ever thought about selling things on Amazon using retail arbitrage?

Share Button



Last Edited: June 13, 2013 @ 12:22 pm
About Hank Coleman

Hank Coleman is a fan of everything personal finance. He's the creator of the popular site Money Q&A, as well as other financial sites. Hank is currently studying to become a CFP. His freelance writing work can be seen across a variety of top-notch publications in finance and investing.