FBA, Fulfilment By Amazon, is a system through which you can sell products on Amazon and have them processed, packages and sent to buyers. Retail arbitrage is the process of buying products at low prices and selling them higher to make a profit.
Using FBA, you may buy a product from a clearance sale a department store for cheaper than its usual retail price. Then you would list the product on Amazon, have it shipped to their warehouse and they’ll send it off for you once it’s been bought. It really is that simple.
Here are a few pointers for getting started:
- Maintaining a positive mindset is absolutely crucial to the success of your FBA businesses. Regardless of your gains and losses, having a negative attitude towards your progress will not only make your life harder and more miserable, but it’ll also massively inhibit your chances of being successful. It’s key to have a long-term perspective and to think in the long-term rather than short-term. This isn’t a get-rich-quick scheme and its going to require grit and determination if you’re to succeed, just like any other method of earning.
- Make use of the FBA system. Say you purchased a board game from a clearance sale at an online department store for £5. Through FBA, you’d then search Amazon for the same game at its standard retail price (let’s say it’s selling for £15 on Amazon). You’re looking for the same product but at a higher price than you paid for it – you also want the product to have a decent seller rate and a fair number of reviews. Once found, you’d calculate the selling fees (prices for storage & postage) you’ll need to pay to Amazon – let’s say these work out to be £4. Then, you’ll list the game on Amazon at around the same price as other sellers are selling it for. Once listed, you need to check the game for any damage and, if it’s all good, send it off to Amazon. They’ll then store it and send it of to you and you’ll make a profit for it. It’s that simple!
- Late night shopping is a great way to buy products for cheaper than their retail price. In doing this you’ll get to see which products sell best as shelves will not yet have been stocked for the next day, giving you an idea of how to maximise your sales and market products that are high in demand. You should note down all potential resale products that sell most frequently to use for your own online store.
How Much Should You Charge With FBA?
It can be difficult to know how much to charge for products on FBA when you’re buying them for such a low value. Many retail arbitrage-ers aim to sell products at triple their initial value. If you were to buy a product at £4, you should aim to sell it for £12. This will earn you back 100% of your expenses and accounts for product fees as well as shipping & storage fees paid to Amazon. £4 is paid for the product, £4 is paid to Amazon and £12 is earned back for each product sold. Therefore, for each product sold you’ll make 100% return and suffer no losses.
Before you get started selling through FBA you’ll need to set up an account first. Amazon give you two options when you set up your account, personal and professional.
Personal account: this is a free account that’ll allow you to sell anywhere up to 40 items a month. You will need to pay for all standard Amazon fees though, such as postage and packaging. I’d recommend this for beginners as it’ll give you some wiggle room – if you don’t make any sales then you won’t be losing any money.
Professional account: this account will require a $39.99 monthly fee as well as shipping fees, however you’ll be able to sell more than 40 items a month. I wouldn’t recommend this if you’re just starting out as you probably won’t be selling enough products to earn your money back.
To begin with, you’re much better off going with a personal account as you likely won’t be exceeding 40 items in your first month anyway. Sign up through Amazon Seller Central to start. Then, add your credit/debit card to your account to control where your money will go.
How To Find Products For Retail Arbitrage
Many people often buy products for the first price they see first rather than actually searching around to get the best deal – it’s just far easier to choose the top listing on Google instead than filing through pages and pages to save a few pounds. Millions of people buy products from Amazon, regardless of the price an item may be, because it’s a well known and trusted marketplace. However, Amazon (although their prices are generally pretty reasonable) do not always offer the best prices available. Often, items will be being sold for significantly less elsewhere than they are on Amazon, giving you the chance to buy for low and sell for high on Amazon.
The Process of Retail Arbitrage
To simplify retail arbitrage into just four simple steps:
- Find a product that sells well on Amazon.
- Browse other stores for the same product at a cheaper price.
- Buy the lower priced product.
- Sell it through FBA
Amazon has storage warehouses set up for retailers selling through their site – the system is called Amazon FBA (Fulfilment by Amazon). This means that when buying and selling you can send your products straight to Amazon’s storage spaces, removing the need for you to package and ship products yourself.
When searching for a product you should follow these guidelines:
- Find products that are priced at less than half of the price that they’re listed on Amazon. As you’ll be paying for shipping and storage, you want to aim for as big a margin as possible to maximise your profit.
- Try to find products that already have a decent amount of reviews, indicating they they’re selling well on Amazon. By doing this, you’ll confirm that the products you’re listing are selling and won’t be wasting your money buying cheaper ones. It’s best to find products that you can flip quickly so you won’t be dealing with tonnes of orders at once, or struggling for storage space.
- Aim to buy products that are small in size – if products are larger (and heavier) then they’ll cost you more to have them shipped. It’s best to aim to minimise your fees as much as you can and so buying smaller items will not only be easy for you storage-wise but it’ll also considerably reduce the fees you pay to ship the product.
Idealo is a really useful app that’ll help you search a number of stores to find the best prices for products. Using the app you can easily get an idea of how much your chosen products are selling for, ensuring that you won’t be wasting your money or cutting your profits short by buying without conducting your research first.
Additionally, Amazon offers an FBA Calculator that’ll let you input your prices to calculate exactly how much you’ll be paying to in storage and shipping fees. All you need to do then is take this value and take it away from the cost of your profit per item (Amazon’s price take away your buying price) to calculate how much you’ll earn for each item sold.
When you’ve found a product that’s valued at significantly less than Amazon’s price, have it shipped directly to you. When it arrives, it’s crucial that you open it to check for damage. If the product is all good (and it should be if you’re buying new, otherwise return it and get your money back) simply list it on Amazon’s Seller Central store (it doesn’t take long to set up an account). Then, choose how you’d like the item sent and send it off to Amazon. Once the parcel has been collected Amazon will do everything else for you. They’ll store the product and then have it packaged and shipped straight to its purchaser as and when necessary, meaning that all you actually have to do is find, check and ship the product to Amazon. They’ll deal with customers, billing and handling – all while you make a tasty profit for doing very little at all. Simple.