Reselling products on Amazon through retail arbitrage or online arbitrage is a popular and potentially lucrative side business. This comprehensive guide covers tips and strategies for successfully sourcing and reselling products on Amazon as a beginner.
Table of Contents
What is Retail Arbitrage?
Retail arbitrage involves buying products from retail stores and reselling them online at a higher price. Typically the product is purchased at a discounted clearance or liquidation price, then resold on sites like Amazon for a profit.
Some examples of retail arbitrage:
- Finding toys at Walmart priced at $5, reselling on Amazon for $15
- Buying a shelf-pull TV from Target on clearance for $100, selling on Amazon for $200
- Getting surplus power tools from Home Depot for 50% off, reselling at full price
The model works by taking advantage of pricing discrepancies and demand gaps between retail channels. With the right sourcing and optimization, resellers can build a substantial business.
How Online Arbitrage Differs from Retail Arbitrage
Online arbitrage follows a similar model but with products sourced online instead of at brick and mortar retail stores. For example:
- Finding electronics and toys underpriced on eBay, reselling at higher Amazon price
- Buying closeout apparel online on steep clearance, reselling on Amazon
- Purchasing bulk lots of groceries and pantry items online to break up and sell individually on Amazon
Online arbitrage can offer flexibility, lower startup costs and larger scalability by removing geographic constraints. But it also lacks the hands-on product inspection ability. We’ll cover the pros and cons of each model throughout this guide.
Is Reselling on Amazon Profitable?
Many people build full-time businesses and six-figure incomes from reselling on Amazon. The profit potential comes from:
- Finding opportunistic discounts and underpriced inventory
- Amazon’s huge buyer demand and Prime-driven urgency
- Leveraging Amazon logistics through Fulfillment By Amazon (FBA)
- Optimizing listings and running promotions to boost sales
- Scaling arbitrage systematically by reinvesting revenue
Building up the necessary knowledge, tools and best practices takes work. But reselling through retail and online arbitrage is undoubtedly a proven profitable model.
Other Benefits of Reselling on Amazon
In addition to the financial upside, reselling on Amazon offers these appealing benefits:
- Easy to get started – Low initial investment
- Flexible work schedule – Can operate as a side hustle
- Utilizes business and technology skills – Analytics, optimization
- Constant learning – Always researching and optimizing
- Minimal infrastructure or overhead – Leverage Amazon for the heavy lifting
- Ability to scale – Expand product selection and order volume over time
Overall reselling on Amazon as an independent seller gives the freedom of running your own scalable small business with minimal startup costs or infrastructure requirements.
How to Get Started Reselling on Amazon
The simple steps for getting started reselling on Amazon:
1. Sign up for an Amazon Seller account
You can register as either an individual or professional seller account.
2. Decide what to sell
Consider products you have expertise in or interest in learning about. Popular categories are toys, books, electronics, video games, clothing, appliances.
3. Set up accounting and bookkeeping
Use accounting software like QuickBooks to track purchases, sales, inventory, profits.
4. Learn Amazon Seller tools
Get familiar with Amazon Seller Central, reports, listing tools, order management.
5. Set up business basics
Get a separate credit card and bank account. Incorporate if desired. Obtain sales tax permits.
6. Start sourcing and reselling!
Begin searching for discounted products to resell. We’ll detail sourcing next.
The keys are starting with the right expectations, building fundamental business practices, and jumping into the critical learning-by-doing.
Sourcing Products for Amazon Retail Arbitrage
Sourcing discounted and undervalued products is the foundation of profitable retail arbitrage. Where to source?
Dollar stores, discount outlets and liquidators sell overstock, returns, closeouts. Products priced way below market value.
Look for deeply discounted clearance items at big box stores like Target, Walmart, Best Buy. Download apps showing markdowns.
Coupons and Promotions
Take advantage of percent-off coupons, buy-one-get-one sales, loyalty programs, rebates. Combine savings.
Look for new or open box items. Sometimes retailers donate brand new product.
Stock up on deeply discounted seasonal goods like holiday decor or summer toys during off season.
Check salvage grocery stores, buy-in-bulk warehouses, overstock retailers.
The best sourcing takes consistent research and legwork to find deals. But identifying consistent sources of discounted products is the entire key to profitable retail arbitrage.
How to Source Online for Amazon Arbitrage
Sourcing online opens up national possibilities without the geographic constraint of in-store retail arbitrage. Ways to source online deals:
Bulk lots and wholesale clearance goods from liquidators like Liquidation.com, Direct Liquidation, Optoro. Products often untested so more due diligence required.
eBay and Craigslist
Search for wholesale lots, liquidations, and underpriced items from sellers clearing old inventory or going out of business.
Sites like Overstock.com, Sierra Trading Post, Nordstrom Rack, SwimOutlet can offer major discounts to buy and resell.
Auction sites like Govdeals.com and PublicSurplus.com auction off large retailer and government overstock. Can get items way below market value.
Research closeout sales directly from brand sites. Sign up for outlet emails.
You can source profitable products from anywhere online by digging for liquidations, overstocks, and untapped discounts. Cast a wide net.
What Products Should I Resell on Amazon?
When getting started, consider focusing your retail or online arbitrage efforts on these types of products:
- Small electronics – Easy to ship and store, huge selection
- Toys and games – Fun niche with high discount potential
- Books – Extremely wide selection and easy to source cheap
- Legos sets – Hold value and appeal, big arbitrage opportunity
- Vintage collectibles – Nostalgia items can be resold at a premium
- Clearance clothing and shoes – Small sizes and odd pieces get deep discounts
- Health and beauty – Everyday essentials like shampoo and toothpaste
- Media – DVDs, CDs and video games with steady demand
- Grocery items – Non-perishable foods and household goods
Think small, light, non-fragile, and non-perishable. Supplement your own interests and knowledge. As you gain experience, expand into larger products.
How to Determine Resell Profitability
Assess potential Amazon arbitrage products using this profitability criteria:
- Current Amazon Price – Check Amazon listing prices for same new product. Higher the better.
- Your Purchase Price – What can you acquire source product for? Lower the better.
- Amazon Fees – Estimate 15-20% of sale price for Amazon seller fees.
- Shipping Costs – Estimate FBA prep and shipment rates if using FBA.
- Profit Margin – Subtract your costs from Amazon sale price. Aim for 30%+ margin.
- Sales Volume – How many units sell per day? Higher demand lowers risk.
- Competition – Too many sellers can compress profits. Check seller numbers.
Crunching the numbers upfront prevents getting stuck with unprofitable products. Use spreadsheets to track your cost and profit on each product.
Purchasing Inventory for Arbitrage
When buying inventory for arbitrage, keep these tips in mind:
- Have a separate business credit card and bank account
- Save all receipts for tracking cost basis
- Research pricing thoroughly – use scanning apps to double check
- Be on the lookout for additional discount opportunities – coupon stacking, rebates
- Buy in bulk if the deal makes sense to lower per item costs
- Focus on profit margin, not just volume – don’t force bad products
- Have a dollar limit and stick to your budget
- Ship purchases to yourself, don’t carry large amounts of inventory in public
Protect yourself legally by making all purchases through appropriate business channels. Don’t take unnecessary risks transporting inventory.
Preparing Items for Amazon FBA
To prepare items for Fulfillment By Amazon, you’ll need to label and prep products:
- Apply FNSKU labels – This ties inventory to your seller account. Can print your own or purchase through Amazon.
- Add other ID labels like your business name and order ID for your reference.
- Follow Amazon’s prep guidelines by department – toys, electronics, grocery etc have specifics like bagging, bundling.
- Properly seal and prep products for shipping to Amazon’s warehouses.
Correct labeling and prep ensures inventory is processed smoothly by Amazon for storage and order fulfillment.
Creating Listings on Amazon
Optimized listings are key for sales. Include:
- Relevant product title and detailed description
- Clear photographs emphasizing any condition details
- Appropriate keywords for the product throughout listing text
- Correct category and product information
- Competitive pricing reflective of product demand and condition
Enhanced listings with additional content tend to convert better. Take time to create quality listings.
Amazon Pricing Strategy and Repricing
Smart pricing is crucial when reselling on Amazon. Remember:
- Check competing listings pricing frequently – Reprice competitively
- Use repricing tools to automatically adjust prices – Keep near top of listings
- Don’t get drawn into race to the bottom pricing
- Consider starting on the higher side, then reducing price over time if needed
- Factor in fees and shipping costs – Maintain enough margin
Adapt pricing based on seasonality, inventory levels, and competitor actions. Test different pricing levels.
Amazon Advertising for Arbitrage
Consider using Amazon advertising to promote listings:
- Use auto campaigns initially while collecting data
- Target keywords related to product name, category, brand
- Monitor performance – Impressions, clicks, ACoS, conversions
- Tweak bids and budgets based on highest performing terms
- Leverage Prime ad placements for greater visibility
Advertising takes trial and error but can provide a major sales boost, especially for new products.
Managing Inventory and Accounting
- Use inventory management software to track products, sales, profits
- Maintain organized records of purchases, receipts, product info
- Monitor inventory levels and restock top selling items
- Analyze reports and metrics to identify top products
- Track profit margins over time, set profit goals
Staying on top of inventory accounting helps optimize the arbitrage process and maximize sales and profits.
Growing an Amazon Arbitrage Reselling Business
Steadily expand your reselling business on Amazon:
- Increase capital to raise inventory volumes
- Expand product selection into wider range of categories
- Streamline product listing process for faster launches
- Identify reliable sourcing streams and strengthen relationships
- Consider private label to enhance profit margins
- Automate pricing adjustments using repricer tools
- Hire help for sourcing, shipping, listing products
- Add other sales channels like Shopify, eBay
Reinvesting profits back into inventory and automation builds a snowball effect.
Mistakes to Avoid When Reselling on Amazon
Some key mistakes to avoid when first starting out:
- Poor accounting and tracking of purchases/sales
- Paying too much for inventory – destroys margins
- Failing to properly prepare and label items for FBA
- Listing prohibited products – stay up to date on Amazon’s evolving restricted list
- Generic, low-quality listings – invest time in listing optimization
- Skipping product research – assumptions about demand can prove costly
- Too much focus on volume over margins – profits matter more than quantity
- Holding slow-selling inventory too long – be ready to liquidate if needed
Learn from any early mistakes and course correct quickly. There is a learning curve, especially at the start.
Amazon Arbitrage vs Private Label
Many Amazon resellers eventually transition into private label:
|Buy products discounted, resell at higher price||Create unique products to sell under your brand|
|Typically low margins but high volumes||Higher margins but lower volume scaling|
|Simple startup but very manual process||Higher startup effort but greater automation potential|
|No brand control or ownership||Full control over branding and design|
|Flexibility in testing products||Long term stability but greater risk if product fails|
Arbitrage provides the familiarity to transition smoothly into expanding your own brands through private label products.
Getting Started Retail Arbitrage vs Online Arbitrage
Retail arbitrage has a lower barrier to start, while online arbitrage offers greater scaling:
|Retail Arbitrage||Online Arbitrage|
|Lower startup costs – just travel and buying budget||Higher initial inventory costs to buy larger wholesale lots|
|Can start as side business||Works better scaled to higher levels|
|Hand pick products at local stores||Sourcing and buying is virtual|
|Limited by geographic area||No geographic limitations|
|Inspect condition in person||Must rely on product descriptions and return policies|
|Immediate cash flow||Delay from ordering and receiving inventory|
Weigh the pros and cons based on your budget, time, and location. Many sellers utilize both models.
Reselling on Amazon as a Business
Running an Amazon reselling business successfully long term requires:
- Tracking all metrics – Use data to identify optimization opportunities
- Systems and processes – Remove inefficiencies, streamline operations
- Specialization – Focus on specific product niches as you scale knowledge
- Automation – Repricing, inventory management, shipping etc
- Diversification – Add additional sales channels, consider private label
- Legal and tax considerations – Set up business entity, obtain sales permits, file taxes
Implement sound business practices and always reinvest to expand. The work upfront creates sustained profits.
Is Reselling on Amazon Still Profitable?
Amazon reselling remains hugely profitable despite increased competition. Profitability comes from:
- Billions in annual sales on Amazon
- Constantly changing mix of inventory allows new niches
- Many retail stores with undiscovered clearance deals
- Constant flow of business and consumer liquidations
- Small sellers can adapt faster than large corporations
- Leveraging automation and analytics to optimize
- Expanding to other channels besides just Amazon
The massive scale of Amazon means the opportunity is as big as ever. Savvy arbitrageurs will adapt to stay profitable.
Getting Started Tips for Amazon Resellers
Keep these tips in mind when first launching your Amazon reselling side business:
- Start small – Minimize upfront investment until experienced
- Learn selling fees, prep requirements, listing process
- Use retail arbitrage initially to learn hands-on
- Source proven evergreen products like toys and books
- Stick to a product niche you know well
- Reinvest profits to grow – compound inventory and sales
- Don’t quit day job prematurely – build savings and proof of concept
- Maintain detailed records from the very start
- Be prepared to work evenings and weekends initially
Reselling on Amazon works best when approached systematically with reasonable expectations. But the effort compounds over time.
Key Takeaways for Reselling on Amazon
In summary, core concepts for Amazon reselling success include:
- Sourcing – Find discounted or underpriced products through both retail and online arbitrage. Cast a wide net.
- Organization – Track purchases, sales, inventory, metrics extensively from day one.
- Listings – Create compelling listings emphasizing value and condition.
- Pricing – Reprice competitively using algorithms, not emotions.
- Promotion – Consider advertising to gain initial product momentum.
- Costs – Focus on profit margins, not just volume. Tighten processes to maximize ROI.
- Mindset – Reinvest constantly to compound inventory. Persist through initial challenges.
Using this guide’s tips and best practices provides a blueprint for building a successful and ultimately highly profitable Amazon reselling business.