Retail arbitrage is a blanket term that has become commonly associated with doing a type of arbitrage utilizing Amazon Sellers as a method to make money in the short term. However, its history is much older than that, even with the digital age, and it can find its roots in the early days of eBay.
On the famous marketplace site, shoppers would find highly discounted items or even second-hand high-end clothing and use eBay as a platform to sell at a higher price. This has since become a common practice for those that are able to act fast enough, understand associated costs, and profit when possible.
Different types of retail arbitrage
Again – two similar types of retail arbitrage can occur. Both require some initial effort, and both require extensive research
Physical Store retail arbitrage. This is the more common option of the two, and it requires the effort of going into a physical store location and looking for a huge discount which equals opportunity. In this case, it’s about going to typical big box stores such as Target or even Walmart and seeing what’s on a heavy discount.
Typically these items are last-chance clearance items, but they may still find extensive value online. These can range from dozens of low-cost items in bulk to a few TVs that find themselves quite inexpensive.
Digital or online store retail arbitrage. Here there’s no need to physically go to a location. Instead, one would browse the online eCommerce sites of these stores, whether it’s a Walmart, Target, or even a Best Buy, and look at the clearance section and simply see right then and there exactly what’s available online, and simply order as many as are available to be shipped.
This can be an even simpler and cheaper way of buying items as there’s no need to drive around and browse for items, as everything can be found online and shipped to your home, in many cases with low-cost to free shipping.
How to make money from these endeavors
Once the acquired items are found, then it’s all about flipping them on sites such as Amazon (primarily) or even eBay. The idea is to buy them at such a steep discount that it would be possible to sell them for a higher price on Amazon.
This is even after all the fees associated with the Amazon Seller’s pro account and the costs of shipping and Amazon FBA have been subtracted, which is a fixed percentage charged based on the item. Once you’re able to account for all those costs, one will easily see if it’s possible to net a profit out of this type of arbitrage.
It’s become popular due to the low barriers to entry and low risk since the inventory amounts are not massive, especially at the start. Even if it’s not possible to sell on massive marketplaces such as Amazon, there are still places to sell the items, even at cost to recoup the initial investment, such as on Craigslist.
There’s always a possibility with doing retail arbitrage, as there’s always enough variety of products to choose from and eventually net that profit. Always be aware of the fees associated with selling on any marketplace to ensure the right price is charged online for the item.