Attention all entrepreneurs, bargain hunters, and money-making mavens! Would you like to turn your hobby into a profitable business venture? If you answered yes, then you have to learn about the business model known as retail arbitrage!
It’s not an entirely novel concept, but it works differently from dropshipping. While the latter is a hands-off business model, which means you don’t need to manage your inventory of products because the supplier does the packaging and shipping for you, retail arbitrage is different. Retail arbitrage sellers have to do bargain hunting to find potentially profitable products to sell online!
At first glance, the business model appears straightforward. But once you dive deeper into how to source retail arbitrage products, that’s when it becomes a challenge. For example, how do you identify the most profitable products for your retail arbitrage business? And where do you begin in retail arbitrage sourcing?
I’ve created this guide that takes you through the ins and outs of finding retail arbitrage products. From thrift stores to big box retailers, you can use your guide for retail arbitrage to help you spot a good deal and how to negotiate prices. You’ll also learn from other sellers who are killing it with sales in the retail market!
Are you ready to embark on your retail arbitrage business journey? Take notes because you’ll find plenty of valuable tips and tricks to turn your passion into a profitable business!
Article Overview
What is Retail Arbitrage?
Retail Arbitrage Sourcing Guide & Strategies
Identify the Best Stores to Source Products
Start With One Category
Sign Up for Email Newsletters
Check Out Chain-Wide Sales
Use a Market Research Tool to Determine Profitability
Using Market Research for Retail Arbitrage Sourcing
Step 1: Check the most profitable products and categories.
Step 2: Find products for your storefront.
Step 3: Examine the product on eBay or Amazon.
Step 4: Look for the suppliers for this product.
Step 5: Calculate your potential profits for the product.
Final Thoughts
FAQs
What is Retail Arbitrage?
The retail arbitrage business model involves buying inventory at a discount or sale price from an offline or online retailer. Once you have purchased the product, you can resell it online, such as on eBay or Amazon, to earn a profit.
It should not be confused with the wholesale ecommerce business model. With retail arbitrage, you don’t usually buy products in wholesale quantities. Hence, you won’t be able to take advantage of the wholesale discount as a seller.
Instead, you must scout local stores and online retailers for discounts or look for items on clearance. You can then list those items on your online business at a marked-up price. Once you have a sufficient market demand for those products, you can earn a good profit from those products. You can look at specialty stores and the clearance aisle of local stores and retailers to save a good chunk of money and maximize profits when you start selling through the retail arbitrage model.
However, it’s not as straightforward as it seems. Experienced retail arbitrage sellers are quick to tell you that making money from your online marketplace using retail arbitrage products is not as profitable or as easy as it seems. First, you must have a solid retail arbitrage sourcing strategy to find discounted products with constant market demand. Otherwise, you won’t be able to start selling items in your store.
Retail Arbitrage Sourcing Guide & Strategies
So, how do you identify the best retail arbitrage products? The secret is in knowing where to look and what to look for. That’s how you can locate the best products that will help produce a sustainable business model.
Follow this guide on sourcing products to make steady profits.
Identify the Best Stores to Source Products
Identifying the best stores where you can source your products is the best start to your retail arbitrage business. You can check out local stores and their clearance aisles for low range price tag items or those on clearance. You can get a deep discount on most of these products as the retailers would be willing to give them away. Another option is to check private label sellers.
Aside from local stores and retailers, you can also check out online retailers like Dollar Stores, Target, and Walmart. Searching various stores for the lowest prices would be best, so you can still profit when you sell them for a higher price. Consider the cost of shipping the items and other pertinent fees.
But it’s not enough that you buy the items at discounted prices. The most important thing is to make sure that they will sell!
Start With One Category
It can get quickly overwhelming when you list the best stores for retail arbitrage sourcing. Therefore, it’s best to step back and focus on one category.
Diversifying your product portfolio is an excellent way to target more customers and sell products with constant market demand. But it can be difficult to manage if you’re starting as a retail arbitrage seller.
Pick one category while you dip your toes into the retail arbitrage business. Start with general-purpose items first, and then once you get the hang of it, you can move into investing in big-ticket items. Then, slowly branch out into other categories.
For example, start selling beauty products first. Eventually, you can branch out into selling shoes, toys, health products, and other categories.
Sign Up for Email Newsletters
Another excellent strategy for retail arbitrage sourcing is to sign up for the email newsletters of your preferred stores and retailers. It will help you save time in finding discounted products because you will be notified via email if there are sales, and you can get clearance items.
To avoid flooding your inbox with marketing emails from various stores and retailers, you can set up your email to forward those messages to a designated folder. Therefore, you can organize any email alerts for sales so you will be informed immediately, and you can check out the retail stores and their clearance racks.
Check Out Chain-Wide Sales
Some retail stores and chains hold frequent sales or offer discounts on a seasonal basis. For example, if you want to source products from major retailers like Walmart or Target. If they provide chain-wide sales, check out every location you can visit.
By checking out all store locations, you give yourself a better opportunity to snag discounted products or clearance items. If you can get a hold of discounted items, it’s a recipe for you to make a serious profit from selling using the retail arbitrage method.
If you’ve been buying from the same retail chain, you can identify sales patterns and predict when they hold sales. Thus, you can use this to predict when to buy off their clearance racks. Once you list the items on your online stores, you can visit the local retail store locations to buy the items in bulk!
Use a Market Research Tool to Determine Profitability
The final tip for your retail arbitrage sourcing strategy is to use a market research tool like ZIK Analytics. Without this tool, you have to make estimated guesses and look at trends to determine what to sell for retail arbitrage on Amazon.
However, this could be a perilous business move, and you could lose thousands of dollars on items that won’t sell! Finding profitable products is what makes retail arbitrage a profitable business model. You can’t rely on personal judgement for picking the best products. You need data pointing to the customer’s purchases and how much you could sell it for!
You must invest in a reliable product research tool to be among the successful Amazon sellers. It’s a vital tool to help you generate a steady flow of income from your retail arbitrage business model.
Using Market Research for Retail Arbitrage Sourcing
Using a market research tool, like ZIK Analytics, is one of the best sourcing strategies to identify profitable items for retail arbitrage. Of course, you can do manual research on competitors and profitable categories, but it would be time-consuming, and the data might not be accurate.
Therefore, using ZIK Analytics empowers your decision, knowing that you have updated and relevant data insights that inform your decision for your business. Once you have access to market data, you can identify the best products and eliminate the guesswork of the process.
So, how do you use ZIK Analytics to identify the best products? Follow these simple steps to help you start this business and get the profits rolling in!
Step 1: Check the most profitable products and categories.
Launch the ZIK Analytics tool to gather data on a particular category. For this example, I’ll be looking at the electronics category. You can use this approach to determine this category’s sales rank and find online arbitrage suppliers.
Using ZIK Analytics, we can determine that this is a profitable category with a high sell-through rate and over 2,000 sold items in the last 30 days. In addition, the total sales earnings in the past 30-day period are $514,416, with the average product price at $251.
It’s understandably a category with many big-ticket items. But if you have the sales data to back it up, you can confidently choose this category for your retail arbitrage online store. Another option is to select a sub-category.
Step 2: Find products for your storefront.
The next step is to browse the various products sold under this category. Make sure to specifically look for items under retail arbitrage on Amazon or eBay.
It’s easy to spot these items versus dropshipping items since the sellers mostly photograph them. Meanwhile, dropshippers usually post images of the products supplied by wholesale suppliers so they look more generic. With retail arbitrage, they use the actual photos of the products sold.
ZIK Analytics also provide insights on each product, whether it’s a VERO brand or it’s from a dropshipper. This is valuable information that will help you when doing market research or competitor analysis.
Step 3: Examine the product on eBay or Amazon.
Click on the specific product you want to see or examine closely on Amazon or eBay. For this purpose, start with products in the lower price range. That way, it will be easy to afford and resell them at a higher price.
For this example, let’s look at this product: Computer Keyboard Super Cleaner Glue Magic Washing Dust Remover. According to the eBay product listing, the product is sold for $6.98 per bottle. It’s a trending product, with 82 items already sold!
So, using this information, you can assess that this would be an excellent product to add to your retail arbitrage store since it is lower price and has a good sales performance.
Step 4: Look for the suppliers for this product.
The next thing you must do is perform a quick Google search of the product. This step will help determine the potential suppliers or retail stores from which you can buy this product.
Input the keyword for the product on Google to find relevant searches. Then, browse various stores to see that this particular product is available from Aliexpress, one of the wholesale suppliers online for dropshippers. You can also buy this product from Aliexpress for a lower price, giving you a good profit margin if the product sells.
The product is sold for $2.41 per bottle on Aliexpress. The shipping cost to the US (if you’re a US retail arbitrage seller) is $1.60. So it would bring the total cost of buying this product to $4.01. However, the Aliexpress website states that the product offers discounts when you buy in bulk.
Step 5: Calculate your potential profits for the product.
In the final step, you will calculate to determine if you can profit from this product. In this case, the item is sold for $6.98 per bottle on eBay, and the total cost of acquisition per bottle is $4.01 (including shipping fees).
The total profit for the seller per product is $2.97. The product has sold 82 pieces, meaning the seller has made $243.54 in profit for this product. It’s a slim profit margin, but considering the low cost of buying the product and its trending, it’s a good start for you to make profits in your retail arbitrage business.
You could use the process listed here to identify the most profitable retail arbitrage products. Eventually, as you make more profits, you can move on to big-ticket items or get more discounts when you buy items in large quantities.
Final Thoughts
Retail arbitrage is one of the most profitable business models online if you know the right strategy, just like any other business. Investing in the right tools will help you find the best products to sell and will give you confidence in knowing that you’ve invested in products that customers are willing to buy.
FAQs on Retail Arbitrage
Is retail arbitrage legal?
Yes, retail arbitrage is a legal business model. As long as you abide by the rules and regulations of the online marketplace where you’re listing the products, you can make money from those products legally.
Is Amazon OK with retail arbitrage?
Yes, it is legal to sell retail arbitrage products on Amazon. You only have to worry about when you sell any prohibited products or categories on Amazon. If you do that, you risk your Amazon seller account being suspended.
Can you make money with retail arbitrage?
If you can sell the best retail arbitrage products from the clearance racks and your product sells, you could potentially make a steady stream of income. Therefore, you need to invest in a retail arbitrage sourcing strategy to help you identify the most profitable items at a lower price to sell them for a profit.
How much does it cost to start retail arbitrage?
One of the main advantages of using the retail arbitrage model for selling is you won’t need significant capital to start this business. It also depends on which online marketplace you use to start selling your retail arbitrage products. Amazon and eBay have varying store subscription levels that you can pay for to sell more products on their corresponding e-commerce platforms.
