Low initial investment. You don't need to invest a lot to start in retail arbitrage. Signing up for an Amazon seller individual plan is free. You only pay $0.99 per item for each sale you make. You also pay the shipping fee to an Amazon FBA warehouse if you’re using FBA. Any other fees are added to the selling price and paid by the buyer. There’s no minimum number of items required to sell, so you can literally start with any amount. According to Jungle Scout, 39% of new Amazon sellers start with less than $1,000. You can even start selling some items you have at home. However, it can be a good idea to put in more as you start so you can have more products to sell.

You don’t need to register a business entity. Just sign up with Amazon Seller Central and you are ready to start. This makes arbitrage more accessible than other business models. Beginners who are testing the waters of e-commerce do not have to deal with business registration.

Low risk. There's little risk in retail arbitrage because you only put in a small amount of money. This makes it an appealing option, especially for inexperienced online sellers who want to minimize potential losses.

It’s fast to set up. Requirements are minimal and you can make your first sales within a week of starting. This means you can get your initial investment back quickly and roll it over to your next purchases.

No minimum order quantity. You can start with what you can afford. For the most part, your success “heavily depends on how wisely you choose your products,” says Redditor Future_Feedback_6116. “You can buy items for $30 to $50 and make a profit of $10 to $15 each.”

Brand awareness. Buyers are more likely to make a purchase because you’re selling branded products. Exploding Topics says 81% of consumers “need to trust a brand to consider buying.” Salsify also reports that 46% of consumers are “willing to pay more for a brand they trust.”

Product gating. You can't sell gated products unless you have approval from Amazon. This can limit your product selection. Gated categories often include high-demand items like top electronics and popular brands.

Limited stock of products. Once you sell all your stocks, you can no longer sell that product. Arbitrage sellers don't have any agreements with retailers to supply them with those same products. This can lead to inconsistent inventory levels and potential gaps in your product listings.

Long payment cycle. Getting paid can take 3 weeks to 1 month. If you don't have extra funds, you'll need to wait to receive your payments before you can restock your store with new products.

Limited chance to win the Amazon Featured Offer. The Featured Offer is a critical source of sales. According to Statista, it accounts for over 80% of sales on Amazon. Unfortunately, you will rarely win it as a small seller. You’ll often have to compete by lowering your price. Also, having an active Professional selling plan is a requirement. You can’t win it if you’re on an Amazon Individual selling plan.

You need to invest time and effort to find good products to sell. As an arbitrage seller, you're always out there visiting retail stores, hunting for new products to sell online. According to successful sellers, they spend around 20 to 30 hours per week sourcing products from retailers.

Difficult to delegate. It's not impossible, but it's going to cost more compared with private label. You’ll need a hands-on approach as you look for potential products in retail stores in your area.

Difficult to scale. A retail arbitrage business is difficult to scale without hiring more people. Your expansion depends on hiring the right people and using the right technology. Scaling often requires significant investment in both time and resources.

Your income is not predictable. There's no way to predict your revenue because your products vary from month to month. Sudden price changes can affect your overall earnings. This unpredictability can make financial planning a challenge.

Lower profits. You are directly competing with many other sellers selling the same products. Price wars are common among sellers on Amazon.

You're selling other companies' products. This lack of brand ownership means you have less control over product quality and customer loyalty.

High level of competition. The low barrier to entry makes it easy for anyone to start a retail arbitrage business. Moreover, many wholesalers, brands, and even Amazon itself are competing in the Amazon marketplace.

You own the brand. You are in total control of your Amazon private label business. This means you get to decide what products to sell and how much you want to sell them. Furthermore, you can customize and market them on your own terms. If you build a successful product line, that can open up new product lines. If your brand grows and succeeds, you can eventually decide to sell the business.

Potential for big profits. You can earn high profits if you pick the right private label niche. As you avoid saturated markets and look for one with few competitions.
Income is more predictable. Your monthly revenue is more stable and calculable as a private label seller. Because you are selling the same product, you can have a good idea of the demand and expected sales.

Unlimited product supply. Your business is not dependent on what’s available from local retailers. Instead, you’re working with reliable manufacturers who help you with your business.
Product gating is not a problem. As a brand owner, you get to avoid this common arbitrage obstacle.

You can enjoy advance payments. Even though retail arbitrage and private label have the same payment cycle on Amazon, a private label merchant can make an advance or get a loan against the pending payment. There are sites like Clearco and AccrueMe that provide this service. These sites require a business entity and a minimum sales volume, so most retail arbitrage sellers won't qualify.

You can hire people to help run your business. Unlike arbitrage that requires much of your attention, you can delegate day-to-day tasks to team members. You won’t need to scour retailers daily to find good deals. Instead, your suppliers are only an email away. That said, a JungleScout survey says 61% of private label sellers only spend less than 20 hours each week on their businesses. 

A private label business takes a long time to set up. You need time to develop your brand concept. You'll also have to create a marketing strategy and find a reliable manufacturer. Seller App says it takes an average of 3 to 6 months to launch a private label product on Amazon.
You must register your business. Your supplier and Amazon will require that you have a legitimate business entity to get started.

A private label business requires high initial investment. You will need about $12,000 to $15,000 for a $6 product to start an Amazon private label business. The actual amount may vary with different products and suppliers. However, that's the amount I ended up needing for the Amazon FBA case study I conducted. I initially thought I’d only need $3K for the initial order of $500 units. However, manufacturing and shipping the product to Amazon took 90 days. So I ended up needing to place additional orders to make sure I don’t run out of products to sell. Also, I needed to pay for shipping, storage costs, and marketing.

Selling your own brand brings higher risks. Because your brand is unknown, there's a high probability that it will fail. You’ll also need to invest in advertising to boost brand awareness. This means spending on paid Amazon PPC (Pay Per Click) ads and other methods.

Competition can be tough. As with retail arbitrage, you will be going head to head against numerous sellers in the marketplace. In fact, you may even have to compete against Amazon if the platform is selling similar products.