Retail arbitrage is the process of buying products at low prices and selling them higher to make a profit. For example, a person may buy a product from a clearance sale at, say, John Lewis – the product will be being sold for significantly less than its standard retail price which opens a perfect opportunity for retail arbitrage. Then they would, through whichever online retailer they choose (Amazon is probably your best bet here – more on this later), sell their product on at an increased price and thus make a decent profit for very little work. It really is that simple.
Below are four great tips you should follow when looking into retail arbitrage.
- Having the Right Mindset
As mentioned in previous articles, having the right mindset when setting up an online business is absolutely key. Regardless of your gains and losses, having a sour outlook on your progress will not only make your life harder and more stressful but it’ll also hugely inhibit your chances of being successful. It’s vital to have a long-term perspective and to think in terms of months, years even, rather than days. ‘Get rich quick’ schemes simply do not exist and if you plan to make any decent long-term gains then you’ll need to stay dedicated and determined. You may well have some setbacks and fail a number of times before succeeding, however quitting will not only lower your expectations for the future but will absolutely kill your chances of ever succeeding with your business. Stick at it and persevere. You will succeed.
2. Utilise Amazon’s Fulfilment System
Amazon has an excellent system called ‘Fulfilment by Amazon’ (FBA) that allows you to register as an Amazon seller and sell your items. It also has options to store your items and will ship them directly to customers for you. Let’s use a DVD box set as an example of how you could sell using FBA. Say you purchased a Friends box set from a clearance sale at an online department store for £6. As a member of FBA, you’d then search Amazon for the same box set at its standard retail price (let’s say it’s selling for £20 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 product on Amazon at around the same price as other sellers are selling it for. Once listed, you need to check the product 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!
3. Source Your Product Late at Night
A handy little trick when buying products to upsell from physical stores is to shop late at night. 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.
4. Try to Forget About Personal Interests
Now, of course, it would be great to buy and sell products based on your hobbies and interests, however this simply isn’t an efficient way to market online. Hobbies and interests are, however, a good place to start. You should try to think of products that are likely to be high in demand – perhaps there’s a new gap in the marketplace for home-gym equipment or garden furniture. Whatever it may be, keep an eye out for any current trends that you could make the most of in your online store. It’s important to remember, though, that the larger/bulkier your product is the higher it’ll cost to deliver. This may not always be an issue if your product is worth more as your shipping costs will be earned back, however if you’re looking to sell large products at a low price then you may be hindered by higher fees. Be cautious, not afraid.