Amazon Retail Arbitration: Everything You Need to Know

Given the huge amount of consumers and demand in the e-commerce niche, selling your products online has become the go-to business idea and an almost default choice for any new business. However, for e-commerce enthusiasts who are dragging their feet due to the investment required to launch a brand, there are a few methods to utilize this opportunity without risking a large portion of their budget. One of these methods is retail arbitrage.

What is Amazon retail arbitrage?

Arbitrage essentially involves reselling to take advantage of the price difference. This is a simple concept. The seller sources products from retailers at discounted or lower rates and then sells them on Amazon at a higher price. This price difference may be due to wholesale, regional cost differences, or special discounts.

The practice of arbitrage exists on the markets; it was already used by companies in the stock markets, commodities, bonds, etc. In case you buy and sell products online, it is called online arbitrage.

Amazon retail arbitrage is different from normal retail because the seller does not have to deal with suppliers and manufacturers. While this reduces profit margins, it also makes operating an online store easier.

Is retail arbitrage legal?

You may be wondering about the authenticity of this economic model and whether or not the choice of this process is legitimate.

Arbitration is an absolutely legal and accepted model. However, you should follow some best practices to ensure there are no legal obstacles.

A legally purchased product is the property of the buyer, and the buyer has the right to sell it. The only restriction is that the condition of the product must not be altered, i.e. an unused item can only be sold as new.

Difference between arbitrage and other business models

Besides retail arbitrage, there are other business models that operate on a similar principle of taking advantage of price margins. Let’s look at them:

In this model, the seller only acts as an intermediary for the buyer to purchase from the supplier. As an intermediary, the seller forwards the order to the relevant supplier or manufacturer, who is then responsible for delivering the order to the customer.

While in the case of drop shipping, the seller is not responsible for maintaining inventory, in the case of retail arbitrage, the seller will have to maintain the inventory. This also sometimes leads to losses due to reduced sales.

In this model, the brand owner has control over how the product will be designed, manufactured and packaged. The product will carry the brand name in the form of a label. Third-party manufacturers make the products that are sold under the seller’s brand. Arbitrage sellers cannot label products with their brand, nor do they have control over design or manufacturing.

Wholesale companies sell their products to retailers. They stock products according to market demand and sell them at wholesale prices. Arbitrage sellers buy products from retailers to resell.

The advantages of arbitrage on Amazon

The popularity of Amazon retail arbitrage is due to its many benefits. Here are the benefits of Amazon arbitrage:

Retail arbitrage is easy, to begin with. You don’t have to worry about manufacturing, design or shipping. You just need to identify the initial products and work on suitable products. Amazon Listing Optimization.

Unlike product labeling or wholesale models, you need very little investment. In addition, you can choose the amount of starting capital and scale it according to your choice. Marketing is also not necessary because retailers already manage this department. However, you can hire Amazon product listing optimization services for experienced assistance in getting listings up and running quickly.

You can plan business operations according to your needs – conduct them part-time or manage them as a main job. This also allows you to purchase products at your leisure.

This model is a good way to familiarize yourself with the Amazon platform and online commerce. Gradually, you can set higher goals, such as launching your private label, including a drop shipping model, and becoming a wholesale seller.

As retail arbitrage involves less investment, the risk of loss is reduced. It’s also not very difficult to find products that give you enough margin.

Price margins are due to regional taxes, lack of supply, etc.

However, if your inventory faces a decline in sales, the same risk may increase, so it will be wise to manage your inventory according to demands and reap the benefits.

How to start retail arbitrage on Amazon?

Many entrepreneurs looking to get into the retail arbitrage segment don’t know how to get started. This section should clear your doubts about launching such a store.

• Step 1: Create an Amazon seller account

First, you need to log in to Amazon Seller Central. The two types of accounts you can create are:

Individual Amazon account

Creating this account is free. Amazon charges a commission of $0.99 on each sale made through this account. An additional 15% consolidated fee is charged on total sales.

An individual account can only list 40 products.

Amazon Professional Account

Amazon charges $39.99 per month, plus a referral fee and variable closing costs. Fees are not set on a per sale basis.

A business account can list more than 40 products.

The account is eligible for FBA (Fulfillment by Amazon) services, which handle storage, packaging, delivery and customer support, although there are additional fees.

• Step 2: Find Products to Sell

• If you haven’t yet found a product that can be sold at good margins, you can look for clearance sales from wholesalers.
• You can go to wholesalers like Walmart or Target, but remember that due to the evolution of the digital market, costs have become competitive and arbitrage margins are lower.
• You can also find local retailers with stock of locally made products, who can find an easy market on Amazon.
• Before finalizing a product, review its demand, price, and availability on Amazon.

List of Amazon products for Arbitration

Since you won’t be selling a private label, you need to find the current listing for an identical product and use that ASIN in your central seller account.

Amazon Product List Optimizing Amazon product listings will be key to the success of your arbitrage store. Amazon uses the A10 algorithm to source content for consumer searches on the platform.

The following factors influence Amazon A10:

• Keyword matching
• Stock availability
• Product parent-child relationship
• Pricing
• Refund by Amazon
• Number of sales
• Advertisement
• Customer Feedback
• High resolution images
• Promotions
• Brand and manufacturer
• Category

The following points should be kept in mind while creating Amazon Product Description:

• Create a searchable title
• Use high-quality, well-focused images
• Use bullet points in the product description
• Don’t overload content with keywords

Conclusion

Amazon arbitrage is a great model for starting your online store. Additionally, it can also help you establish yourself as an online seller and gives you the opportunity to grow your online store in the future once you understand the pros and cons of selling online.

At the same time, although it is an easy model, it is no less competitive. Sellers will need strategic planning and execution to realize marginal profits. Well-planned product supply and Amazon Listing Experts will help you achieve your goals.