Retail Arbitrage: How to Buy, Sell, and Make Money

Retail Arbitrage

In 2005, I was working part-time at the OSU bookstore while working toward my Master’s Degree in English education, when a hefty stack of $90 hardcover Shakespeare anthologies went on sale for $8 each. I bought a single copy since what future English teacher could pass up such a deal? But my purchase got my future husband thinking in dollar signs:

What if I bought the bookstore’s entire stock for eight bucks each, and sell them for full price on Amazon?

Thankfully, I checked the online prices for the Shakespeare anthology before I put this plan into practice. It turned out that everyone from Amazon to eBay to Craigslist was selling The Bard at bargain-basement prices. I would not have been able to turn a profit.

Though my first and only experience with retail arbitrage did not end with an impressive profit (or even any actual retail arbitrage), the years since then have shown that my husband and I were potentially onto something:

Retail Arbitrage is when you find items that have been marked down at retail stores in your area and then sell them for more online. It can be a lucrative side hustle.

Here’s what you need to know about getting into retail arbitrage, without having to lug home a stack of 10-lb Shakespeare anthologies:

What is Retail Arbitrage?

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.

But arbitrage does not have to be limited to currency. You can find it in retail as well. This is when you buy an item for a low price and re-sell it for a higher price and keep the profit. This is no different from how any number of retail establishments have always worked. Vendors buy items at auction, at wholesale prices, or from individual sellers. They then sell them at a higher price to the public.

What’s different about retail arbitrage in the modern age is how democratized it has become. You no longer need a physical storefront or even your own online sales site to sell items for a profit. Successful retail arbitrageurs generally find low-priced, discount, or clearance items at their local thrift or big box stores. They buy up the stock, then post their finds online at a markup.

Sites like eBay, Craigslist, and even Amazon give you the opportunity to sell directly to your potential buyers. This can be a great way to dip a toe into arbitrage.

See also: 8 Tips to Help You Make the Most Money Selling Items on Craigslist

If you make retail arbitrage a regular side hustle, you can also take advantage of programs like Fulfillment by Amazon (FBA), which relieves you of the burden of storing your stock. More on the FBA program below.

Yes, Retail Arbitrage is Legal!

A big concern for potential arbitrageurs is the possibility that you are doing something illegal, wrong, or untoward. Somehow, buying items at a low price and selling them at a higher price feels like getting away with something.

To start, re-sellers are legally protected by what’s known as the “first sale doctrine.” This stipulates that any authentic good you have purchased legally is yours to re-sell.

That said, it’s important to make sure you are buying authentic items for resale. For instance, if you are selling knock-off Xbox consoles, you can be held liable for trademark infringement for selling counterfeit goods.

In addition, you should be careful of any trademarked, major label items that are sold only by authorized dealers. For instance, major clothing designers like Jimmy Choo and Prada fiercely protect their brand. They will not allow unauthorized retail arbitrage.

The majority of retail arbitrageurs are buying and selling items that are marked for clearance at big box stores. That means you likely have no need to worry about either authenticity or trademarks.

Taking Advantage of Clearances

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. There are many people across the country who want items you can find on sale in your hometown. Buying goods locally and then reselling them online can be a very profitable business. You just need the time and patience to look for deals.

Remember that you are doing nothing wrong by relieving your local brick-and-mortar retailers of their low-priced items. Items are put on clearance because the store does not have the room for them anymore. The sale items aren’t bad. They simply represent a miscalculation the store’s part as to how many they could sell at that specific location.

The store needs to make room for new items that they will sell at full price. When you buy all the discounted stock of light bulbs, Avengers walkie-talkies, or athletic socks, the store doesn’t mind.

How to Make Money with Retail Arbitrage

As I learned with my uber-cheap Shakespeare tome, there’s more to retail arbitrage than simply buying something at a discount and selling it online. You need to make sure you identify quality products that will sell. There are a number of things that go into that:

Buy the Right Products

You can make a profit on retail arbitrage with any number of different products. But being able to identify a salable product can take some practice.

According to the Resale Renegade, the four 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 Resale Renegade where he shares more detail about the four buying factors he looks for:

Other Things To Consider

There are also a few additional rules of thumb that can help steer a newbie arbitrageur to profit without headaches:

  • Try to find items that cost between $10 and $30. Less than $10 and your profit margin is potentially tiny, even with doubling your money. More than $30 and you’re looking at a big initial outlay if you want to buy in bulk.
  • Size and weight matter. There’s a reason nobody wanted those Shakespeare anthologies: they were large and heavy. Even a decent profit margin would have been eaten up by shipping costs.
  • Consider fragility. Another potential shipping cost relates to how fragile your sales item is. You will have to pay for the packaging if you have to go above-and-beyond to ensure it arrives in one piece to your buyer.
  • Restrict your arbitrage to well-rated items. If you are trying to sell items that have a 1- or 2-star average rating, you may be stuck with them for a while. When you’re considering buying an item for arbitrage, check out the reviews pages to make sure it’s not a dud.
  • Look for a decent profit margin that can handle price changes. Experts recommend aiming for a 40%-50% profit margin. This gives you some room to lower your price but still make a profit in case another seller offers the same item.

While the first three rules of thumb are something you can easily check in store, the last two will require a little research on your part. Plan on whipping out your smartphone in the store to check the Amazon reviews and price of the item you’re considering. Even if you do not plan to sell on Amazon, this can give you a decent snapshot of what to expect.

From there, take the time to check your product on CamelCamelCamel, a site that monitors historic prices on Amazon. That can give you a sense of whether or not the item you are considering is going to sell quickly and at a profit.

Related: 10 Ways to Use the Internet to Save Money Online

Best Stores for Retail Arbitrage

While you can certainly find inexpensive items that will sell for a big profit at places like garage sales and thrift stores, this will often require more work and a little more savvy on your part to make it worth your while. Here’s why: you will first have to take the time to rummage through the chaff at such stores to find salable items. If you do not have a background in retail or intimate knowledge of specific types of items that are likely to be mispriced (like baseball cards, for instance), it will be difficult for you to recognize the truly profitable items sitting on a folding table at the local tag sale.

See also: Thrift Store Shopping Tips

In addition, even if you do bring in a nice haul of salable items from your trip to a thrift store, it’s likely you’ll have a number of one-off items you will have to list separately. That takes time that you don’t need to spend.

Buying from national big box stores is an easier way to learn retail arbitrage. These stores will often have great items on clearance because of miscalculation of demand in local areas. And you can often buy in bulk.

According to successful arbitrageurs, the following stores are consistently fruitful:

  • Walmart
  • Target
  • Home Depot
  • Best Buy
  • Gamestop
  • Walgreens
  • CVS
  • Lowes

If you have an IKEA near you, this can also be a great option. The Swedish furniture chain has a pretty slow shipping speed for online purchases. Many online buyers are willing to pay a little more to get their lingonberry juice sooner.

Another great regional store to check is Tuesday Morning. This store is a clearinghouse for discontinued items that can sell very well online.

Check out Spocket

Spocket allows you to choose products to sell in your online store from thousands of dropshipping suppliers all over the world. After all, finding a great deal on a product doesn’t have to be limited to physical stores. You can keep the entirety of buying and selling for your business online.

You can even order product samples from different retailers to find the best quality at the best price.
Think of it as your one-stop arbitrage supplier warehouse. You have access to endless products, across multiple countries, at steep discounts. Now you can decide what type of product you want to focus on, and then find it at a huge reduction in price.

With 60% of their suppliers in the US/EU, shipping times for your customers is much faster. Fulfilling your orders is as simple as one click, it is linked with your online store and all your orders automatically appear in your app.

Spocket offers a 14-day free trial, and prices start at $9/month. Membership tiers range from $9/month to $299/month, making it an option that is suitable for a wide variety of online businesses.

Sign up for free with Sprocket.

How to Sell on Amazon Using Retail Arbitrage

It is actually pretty easy to start selling items through Amazon’s website and its 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 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. 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 are selling less than 40 items per month, you will pay a per-unit fee between $2.41 and $5.26 for standard-sized items. There is also warehouse fee of $0.69/cubic foot from January-September, and $2.40/cubic foot during the Christmas season.

These FBA costs can be well worth it for the part-time retail arbitrageur if you like to find bargains on items. 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.

Related: 5 Tips for Optimizing Credit Card Rewards

Leverage the Scanning Apps

If you are planning on selling on Amazon, there are a number of scanning apps that help you determine if the products you find in-store will be a good investment.

Not only do such apps allow you to scan the barcode of your potential purchase, ensuring that you match with the exact right product, but it will also give you:

  1. The current price on Amazon
  2. Your estimated profit (after fees)
  3. The product’s ranking
  4. Your eligibility to sell the item on your Amazon account

The Amazon Seller app is 100% free, which makes it an excellent option for the new arbitrageur. You can list items for sale right from your smartphone, update your inventory, check on orders and Fulfilled by Amazon (FBA) shipments, and respond to buyer questions. If you want to check on price history with a site like CamelCamelCamel, however, you will have to do that separately, because the Amazon Seller App does not include this function.

The Profit Bandit app (available on iTunes and Google Play) is a $9.99 per month service. It calculates your potential profit using 15 different factors, provides you with the item’s sales rank, provides restricted item alerts, and highlights Amazon’s price offer. You cannot list items on Amazon from Profit Bandit. But the app works well if you use it in conjunction with the Amazon Sales App.

How to Make Money Online With a Retail Arbitrage Online Store

Listing your items on sites like Amazon, eBay, and Craigslist isn’t the only way to make money with retail arbitrage. You may also want to consider starting your own online store.

By running your own ecommerce store, you may be able to make even more money with retail arbitrage.

What is Ecommerce?

Ecommerce is simply the buying and selling of good online. Ecommerce sites tend to focus on physical products but may sell digital products as well.

With the advent of ecommerce tools, anyone (even without any web design skills) can launch an ecommerce site today, and very affordably. Having your own ecommerce site can help you avoid listing and transaction fees and boost your bottom line. 

What is an Online Store?

Steve Chou, from MyWifeQuitHerJob, and his wife have built a 7-figure online business. We interviewed Steve to learn how he and his wife were able to do it.

Related: How to Make Extra Money with Your Own Online Store

We began our interview with Steve by asking what an online store even is.

He said, “An online store is simply a website that allows you to sell goods online in an automated fashion. For a store that carries many products and manages inventory, there are many complete shopping cart solutions available that allow you to list and organize unlimited products, accept various forms of payment, manage shipping and allow for a multitude of sale and discount options.”

“These days, many of these shopping carts are open source and free which makes it easy for anyone to get started.”

How to Start an Online Store

If you want to start an online store, here are a few tips that could help you.

The biggest difference between using listing sites like Amazon or Craigslist and starting an actual store is that you’ll probably want to pick a niche.

With traditional retail arbitrage, you could sell lightbulbs this week and T-shirts next week. But online stores tend to perform better when all of the products are related in some way. Your niche could be baby products, gardening tools, or coffee accessories. It’s really up to you.

You’ll also want to brainstorm a business name and think about whether you want to ship products yourself or use a dropshipping model.

Setting Up an Online Store

Once you’ve picked a product, business name, and shipping model, it’s time to start actually setting up your store.

Thankfully, it’s easier today than ever before to set up an ecommerce store. There are a number of ecommerce platforms like BigCommerce that can help you create a beautiful store fast. 

Here are a few things you’ll want to look at when shopping for an ecommerce platform:

  • Is the website builder easy to use and offers all the functionality I need?
  • Do they have reliable hosting?
  • What kind of customer support do they offer?
  • How many products can I sell?
  • What are the transaction fees (if any)?
  • Is the platform secure?
  • Will the payment and checkout process be simple for my customers?

The ecommerce platform you choose is probably the second most important decision you’ll make as an online retailer — behind only the products that you decide to sell. So choose wisely.

We asked Steve Chou what additional advice he could give about building an online store.

He said “The best advice that I can give is to get started now. The sooner you start, the sooner you can become entrenched in the search engines and the sooner you can build a business reputation. These days, it is extremely cheap to start any business online. In fact, my wife and I only invested around $600 to launch our store and it only cost us about $30 a month to maintain. It’s easy and cheap to start so why not give it a shot?”

Setting Up an Online Store With BigCommerce

BigCommerce is a turn-key solution that makes it possible for online entrepreneurs like Steve to manage online stores so efficiently and affordably.

With BigCommerce, you get a number of built-in features, including several marketing options that allow you to find (and woo) your target customers, integrated education to help you make the most of your online store, and excellent loading speed, payment security, and site functionality.

For anyone who would rather focus on their product, marketing, and sales than on maintaining the website for their online store, this kind of service is invaluable. You get the beauty and functionality of a website designed by a professional web developer without having to shell out the money for one. Not to mention the fact that you won’t have to spend time or money troubleshooting bugs on your website.

BigCommerce offers a 15-day free trial, and prices start at $29.95/month, making this an excellent choice for a reasonable price.

Is Retail Arbitrage Right for You?

One of the best aspects of this side hustle is that you can ease your way into it. Start by downloading a scanner app and keeping an eye out in the clearance sections of the stores you already frequent.

Using the Fulfillment by Amazon program can help you keep your time investment low while you gain confidence in your arbitrage skills. Or start your own online store using a platform like BigCommerce.

Anyone with a little bit of money, some time, and an eye for a good deal can potentially make a profit with retail arbitrage.

Or, as my friend Willy Shakes put it: If money go before, all ways do lie open.

What’s your experience with retail arbitrage? Tell us in the comments!

Retail Arbitrage
About Emily Guy Birken

Emily Guy Birken is an award-winning writer, author, money coach, and retirement expert. Her four books include The Five Years Before You Retire, Choose Your Retirement, Making Social Security Work For You, and End Financial Stress Now. Learn more about Emily at EmilyGuyBirken.com

Comments

  1. I’ve been selling thrifted items on Ebay and on local online stores and I learned that they key really is understanding your market and offering them what they need and want. I enjoy thrifting and this is slowly becoming my bread and butter.

  2. CommonCentsWealth says

    Nice article.  I have sold many things online for more than I bought it for in a store, but it’s tough.  Most of the time I find good deals at garage stroes and then sell them.  The big thing to realize is that Amazon takes 10-15% of the sale price.  So you need to make sure you can sell it for at least 15% higher than what you bought it for.

    • hankcoleman says

      CommonCentsWealth That’s a great reminder. Many retail arbitrage experts even recommend buying items that sell for 100% more on Amazon to get your overhead costs covered.

  3. OneSmartDollar says

    Awesome article.  I actually just started doing this as a credit card rewards strategy.

    • hankcoleman says

      OneSmartDollar That’s a great idea to get even more out of it with your credit card rewards. Where are you finding the items that you buy to later sell on Amazon?

      • OneSmartDollar says

        hankcoleman OneSmartDollar Right now I am focusing on the office supply stores because i have a 5X card.  If I decide I want to do this for income I will branch out to other stores.  I am just starting so I want to get my feet wet first.