What is Retail Arbitrage? Definition, Benefits, Amazon and Beyond

April 23, 2023

What is Retail Arbitrage?

Retail arbitrage is an online business model where the business owner purchases clearance or low-priced products from a physical brick-and-mortar store, reselling the items online at a higher price and keeping and/or reinvesting the difference. Retail arbitrage is the type of business that a rookie retail arbitrage seller can start or a seasoned seller can expand into. It is often practiced on Amazon, Craigslist, eBay, and other websites.

What is retail arbitrage UK? Retail arbitrage UK is the act of purchasing discounted product from a physical store at a clearance sale price and selling it online for a higher price within the United Kingdom.

What is leverage retail arbitrage? “Leverage retail arbitrage” is a phrase people use to describe how they use retail arbitrage to make money online. 

What is the difference between retail arbitrage and price gouging? Price gouging is the act of taking advantage of a specific turn in the market to amp up prices for a higher return. Retail arbitrage is similar, but is a full business model rather than an illegal strategy for making money online. Plus, to remain competitive, you won’t be able to raise prices too much while doing retail arbitrage, especially if you use Amazon.

What is retail arbitrage eBay? Retail arbitrage eBay is the process of listing products that you bought at a cheap price at a retail store on eBay.

What is retail arbitrage Amazon? Retail arbitrage Amazon is an online business strategy that involves listing products you purchased at a physical store online on the Amazon marketplace at a higher price.

Is Retail Arbitrage Legal?

Yes, retail arbitrage is legal, as long as you are selling products that are not gated by their brands or counterfeit. Reselling legit products through retail arbitrage is legal in the United States and in the United Kingdom. 

Amazon is ok with retail arbitrage, too. Retail arbitrage on Amazon is allowed as long as the listed products are quality, legally sourced, and, if applicable, sold by authorized arbitrage sellers only.

Benefits of Retail Arbitrage

Hundreds of products to sell

Quick earnings

Relatively low risk due to low investment

Low barrier to entry/ easy to learn

Smaller inventory to store

Some benefits of retail arbitrage for Amazon sellers are:

Having a very well known, trusted platform to list products

The Amazon seller scanner app is fairly easy to use

Plenty of resources online for selling retail arbitrage products on Amazon

Disadvantages of Retail Arbitrage

Smaller margins

No chance of selling your own brand after scaling up

Gated brands

Possible lawsuits, possibility of trademark infringement

Takes a lot of time

If retailers have no good deals, you have nothing to list

The stores, brands, and your selling platform have control over your retail arbitrage business

Some disadvantages of retail arbitrage for Amazon sellers are:

Extremely saturated platform

Amazon FBA fees will eat into your profit margins

Strict guidelines on the external packaging on products sent to Amazon warehouses may lead to rejected products

Possible account suspensions

Retail arbitrage is risky. Not only are you dealing with smaller margins and gated brands, but you also need reliable transportation to and from physical discount stores. Then, you will need to transport those discounted items to your home and handle shipping yourself to whatever platform you choose.

Plus, you can lose money in arbitrage. This can happen when you purchase gated products by accident and cannot sell them because of the products’ guidelines. Or, sometimes products simply don’t sell- leaving you to eat the cost of the inventory items you purchased. Compared to other Amazon business models, you’ll lose less money this way with retail arbitrage, but it’s still a possibility.

Retail arbitrage is far more difficult than how it initially appears because often, the messaging online about this business model is sugar-coated by YouTubers and course creators. While it is a relatively simple business model, it is not a get-rich-quick scheme, or a guaranteed way of making money online.

Can You Make Money with Retail Arbitrage?

Yes, you can make money with retail arbitrage, though a typical retail arbitrage salary is around a few hundred dollars/month to start. Eventually, this amount can grow closer to $10K/month. So, you can make a living off of arbitrage, but it will be difficult to become truly wealthy with this business model.

Likewise, you can still make money on Amazon in from retail arbitrage (or online arbitrage). The earning potential remains similar to Amazon FBA; around $100-$500/month for the first few months, slowly growing as time passes. 

Note: it costs around $500-$1K or more to sell on Amazon FBA with retail arbitrage, which will limit your margins in the first few months of selling. 

How Do I Get Started with Arbitrage?

  • Choose a platform for selling products online. You can sell retail arbitrage products on eBay, Facebook Marketplace, Walmart, Amazon, and more.
  • Make a list of stores for retail arbitrage sourcing within driving distance of your home. Especially consider places that you know are running clearance sales or typically carry quality items at a very low price.
  • Schedule a day that you can spend driving around to stores, or include stops in your daily or weekly shopping routine.
  • Drive to these locations and scour the racks for deals. Stores markdown products rather than sell them online themselves because they don’t have the infrastructure to do this extra listing, the shelf space, the fulfillment processes, or the room for lower sales numbers.
  • Choose items. You can study potential profits by conducting product research on the platform of your choice using your smartphone. You can buy a myriad of products cheap to sell for a profit, including books, home decor, clothing, appliances, and more.
  • Purchase items. To further maximize profits, you can use coupons and store credit cards to help reduce the price when purchasing.
  • Return home, and follow the guidelines for fulfillment according to the website you choose to list your products on.
  • List your products. You do not need a license for retail arbitrage (like an LLC). But you may need a sales tax license or resale certificate depending on what you’re selling and where you live. Opt for an LLC if you want an added level of protection for your business.

Amazon Arbitrage for Beginners: How to Get Started with Amazon Arbitrage

Amazon is the most popular online platform to list retail arbitrage items. They have specific processes that apply to Amazon only:

  • Set up your Amazon Seller Central Account. Choose a $0.99/product/month account or a $39.99/month account. With the former, you are only allowed to list up to 40 items per month. This may be a good place for you to start off until you are comfortable taking on more products. Choosing this option will keep your profits higher for a short time.
  • To start Amazon arbitrage, you’ll need at least $0.99/per product, plus at least $100- $500 for products and fulfillment materials.
  • To find products to sell on Amazon with retail arbitrage, download Profit Bandit or the Amazon seller app. This app has a scanning feature that will show you information about a product’s potential profitability.
  • Source your products. You can buy items to resell on Amazon at HomeGoods, TJMaxx, Walmart, Home Depot, Target, Lowe’s, Walgreens, and more.
  • Use additional tools like JungleScout or Aura to help with repricing, building listings, and more. Note: the difference between arbitrage and price optimization on Amazon is that rather than a full business model, price optimization is simply the process of finding the best price for your retail arbitrage product that will keep it competitive for the Buy Box while also maintaining profitability.
  • Keep retail arbitrage Amazon restricted items in mind. These product categories include automotive and power sports, jewelry, music and DVDs, and many more. Read our full list of the products you need to avoid as a new Amazon seller.
  • Wait 4-6 weeks after your first sale to receive any capital.

Is Retail Arbitrage Worth It?

Retail arbitrage is worth it if you want to make a small amount of money fast on the internet or you want a low-risk way to sell online. It’s also a good way to fund a bigger endeavor to make money online without pulling from personal savings. An excellent strategy for “warming up” your online business is starting with retail arbitrage and reinvesting your earnings. Then, broaden to the online arbitrage business model and continue to scale your business from there.

What is the Difference Between Retail Arbitrage and Online Arbitrage?

The difference between retail arbitrage and online arbitrage is that retail arbitrage sources products from physical stores while online arbitrage sources products from online stores. 

What is online arbitrage? Online arbitrage is a business model where sellers purchase low-priced products online from one online marketplace or store and resell it on another online marketplace at a higher cost. It costs about $500 to $1000 to start Amazon online arbitrage, the same as Amazon retail arbitrage. The difference is there’s no chance of selling items you already own and having a 100% profit margin, since the sourcing must come from the internet to be true online arbitrage.

What is the Difference Between Retail Arbitrage and Dropshipping?

The difference between retail arbitrage and dropshipping is that retail arbitrage involves going to a physical store, buying low-priced items and reselling them for a profit online. Dropshipping eliminates the first step. Instead, you list a profitable product that you see online without buying it first. When a customer purchases from your listing, you buy that item and ship directly to the customer.

Dropshipping is one way to be an online middleman, but following a dropshipping model can get you banned from Amazon if you do not first season your Amazon seller account. So, consider starting your business with retail arbitrage, growing to online arbitrage, then switching to dropshipping to free up some time while you start a private label brand.

Is Amazon Retail Arbitrage Worth It?

Amazon retail arbitrage is worth it for those who are learning how to make money online and want to learn the Amazon platform. However, remember it is unlikely that you will become wealthy just following this Amazon business model. 

Moreover, retail arbitrage can be used to improve Amazon seller performance. If you are already selling on Amazon and want to improve your margins and metrics, you could slowly transition your seller account to the retail arbitrage Fulfillment by Merchant (FBM) model. 

By switching to FBM, you can save on Amazon FBA fees. By selling well-known, tested products, you can also increase your customer satisfaction metrics and perhaps your Amazon sales overall. Still, sellers may not be able to prevent a suspension even if they use retail arbitrage, especially if their account is so unhealthy that a suspension is imminent.

How Does Retail Arbitrage Compare to Other Business Models on Amazon?

Overall, retail arbitrage is less complex but also less profitable than other business models on Amazon.

  • Amazon wholesale involves purchasing bulk, branded items at a low price and selling it at a higher price.
  • Amazon private label involves creating your own branded products and selling them online, competing against sellers with similar (but identical) products.
  • Amazon homemade involves selling items the FBA seller made himself.
  • Merch by Amazon involves designing your own print-on-demand T-shirt design. Merch by Amazon is by invitation-only.
  • Amazon KDP involves publishing eBooks and print-on-demand books.
  • Amazon dropshipping is when the Amazon seller lists products they do not have in their inventory for a higher price. This business model does not involve the Amazon warehouse. Dropshipping sellers are likely to experience account suspensions.

CONCLUSION: Retail Arbitrage vs. Local lead Generation

The traditional retail arbitrage definition is an online business model that involves finding products in physical stores at a low price and selling them online for a higher price. The definition of local lead generation is also an online business model. 

But, with local lead generation, you create a website in a localized niche focused on a certain needed service. These sites have less competition than a well-known global brand. In fact, we deal uniquely with local zip codes and rank for keywords like “Detroit Limo Service.” That way, when people need a service, they find our site and we direct traffic to a small business. It’s a highly profitable business model that is mostly passive after the website is created and ranked.

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Ippei Kanehara

$52K per month providing lead generation services to small businesses

Ippei.com is for digital hustlers, industry leaders and online business owners.

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