Want to start selling online and making money immediately without having to go into debt or invest thousands in inventory before you even know how or what to sell?
You might want to try retail arbitrage.
Retail arbitrage refers to the act of buying products in your local retail stores and then selling those same products through online marketplaces for a profit. The most reliable source of products is generally the clearance racks of stores like Walmart, Home Depot, and Target.
This guide is going to walk you through everything you need to know to be successful with retail arbitrage, including the exact steps to take to get your first products listed in the next few days.
Many people who want to sell you on expensive private labeling strategies will try to convince you that retail arbitrage either doesn’t work or is illegal. Neither is true.
My business sells over $2 million worth of products sourced via retail arbitrage on Amazon each year.
Keep reading to find out what we do, why we do it, and how you can start and scale your own retail arbitrage operation.
Here’s what we’ll cover in this guide:
- What is Retail Arbitrage?
- Can you really make money with retail arbitrage in 2021?
- How to get started with retail arbitrage sourcing…
- How much money can you make with retail arbitrage?
What is Retail Arbitrage?
Retail arbitrage is the act of buying items in brick and mortar retail stores (like Walmart or Target) and then selling them online (typically on Amazon or eBay) for a profit.
Items for retail arbitrage are generally acquired on sale or clearance, offering a significant discount compared to the retail price and the potential for good profits when sold online.
Items that are purchased via retail arbitrage can be sold on a variety of marketplaces. These marketplaces include Amazon, eBay, Jet, Walmart.com, Etsy, Craigslist, Facebook Marketplace, OfferUp, Let Go, and many others.
Later in this post, we’ll go through some of the best stores for retail arbitrage in terms of sourcing products.
In my experience, Amazon is the best place to sell when getting started, so this post will focus on Amazon FBA and FBA sourcing tips.
So, in a nutshell, retail arbitrage means buying low in a physical retail store and selling high online.
Other sourcing methods include flipping, online arbitrage, wholesale, and private label. For a general overview of how these various sourcing strategies relate to selling on Amazon, check out this post about what to sell on Amazon.
How Does Retail Arbitrage Earn You a Profit?
Retail arbitrage makes you money when you buy items at a significantly lower price than you will earn when selling them on a marketplace (after accounting for marketplace fees and shipping costs as well).
As an example, let’s say you can buy an item for $9 on the shelves at your local Walmart, and it’s selling for $23.99 on Amazon. After all of the fees and shipping costs, Amazon will pay you $17 after a customer buys your item. In this example, you would make a profit of $8 on your initial $9 investment.
There is no guessing involved regarding the profitability – there are a variety of “scan tools” that allow you to scan the barcode of a product and see exactly what it is selling for and how much you will pay in fees. One of these is provided by Amazon – and it’s completely free!
We’ll talk more about scanning products soon, first let’s address the question everyone seems to have when they first learn about retail arbitrage…
Does retail arbitrage actually work in 2021?
Yes, you can earn a very nice profit with retail arbitrage in 2021.
My business does over 7 figures of sales for products that are sourced via arbitrage each year. All of these products are being sourced the same way that I just described above. We’re going into retail stores, using a scan tool to identify products that can be sold profitably online, buying them, and then selling them online (mainly via FBA).
If we can do this, so can you.
If you want help starting as fast as possible, you should check out our Arbitrage Accelerator Challenge.
Aren’t there too many people already performing RA?
No. This misconception largely comes from the fact that when you read articles and watch videos with hundreds of thousands or even millions of views, you naturally assume that a good chunk of these readers and watchers are taking the information they are getting and putting it into action.
They aren’t. A very, very small percentage of people ever bother to try to find their first product.
And the vast majority of people who do try quit within a week or two and tell everyone that retail arbitrage is dead and that it’s impossible to find products.
This process is simple – but it’s not easy. There is a lot of hard work involved. As a beginner, it’s very time consuming to find products. This creates a big barrier to entry, so the vast majority of people – we’re talking 99%+ – who learn about retail arbitage don’t ever see a profit.
Not because there aren’t products out there to buy and profits to be made. Because they don’t have the right mindset and they aren’t willing to invest the time to make it work.
That’s good news for everyone who is willing to work through the frustrations that come with being a beginner. While there is plenty of competition in RA – especially when hunting for products that show up in BOLO Groups or products with big profit margins, there is also plenty of room for new people to carve out their own slice of this huge market.
How can you compete with the big RA operations?
First of all, there is no guarantee that you will even be competing with big RA operations. Depending on where you live, there may not be anyone doing RA at a large scale. If you live in a major metropolitan area though, there is a good chance that there are people doing RA at a large scale.
Fortunately for you, competing is a simple as beating them at their own game. Work harder. Get to stores earlier. Study the markdown schedules of the stores in your area and make sure you are hitting the stores at the ideal times.
At the end of the day, you have access to all the same stores, tools, and marketplaces that my business does – even the same products if you join our leads lists. While we may have a lot of experience that helps us operate efficiently, the training options I offer can help you bridge that gap quickly by giving you access to every strategy and operational system we use in my business.
Why would a store markdown products when they could just sell them online themselves?
While you may look at the revenue and profits that a business like mine makes and think that the numbers are huge, they are very tiny compared to the revenues and profits that the stores we source from enjoy.
So while earning $500 profit from a day of sourcing clearance from a handful of stores may be a great day for you, those numbers wouldn’t even register for a business like Walmart.
Keep in mind, brick and mortar stores have limited space to stock inventory. Stocking that limited space with the inventory that will earn them the most customers, sales, and profits is a complicated and constantly-changing affair. When they need space on their shelves for a new shipment that comes in, sometimes that means they need to cut ties with a product that isn’t selling as well (or doesn’t have as much long-term potential) as that new product.
Simply put, sales and clearance help brick and mortar stores clear out inventory to make more room for new shipments. While you may look at this as them missing out on making money, it’s actually allowing them to make even more money on something else. And you’re free to take advantage of these leftover profits by buying those products and selling them places where space isn’t a limiting constraint – online.
How to Get Started with Retail Arbitrage Sourcing
Getting your first product listed for sale on Amazon is a straightforward process. Here are the steps you need to take:
- Register for an Amazon Seller Account.
- Download the Amazon Seller App.
- Visit your local retail stores.
- Use the Amazon Seller App to scan clearance and sale products.
- Buy any that offer over $3 profit after fees and shipping.
- List them for sale on Amazon.
This process is one that you can get started immediately – and you should plan on starting as soon as possible.
Let’s go through each of these steps in detail now…
1. Register for an Amazon Seller Account.
The first step in getting started with retail arbitrage is setting up an Amazon seller account. This is the account you’ll need to sell items on the platform. It will also give you access to the tools you need to get started.
To start the process, head over to services.amazon.com.
When you get there, you’ll see this page:
The yellow ‘Start selling’ button will start the registration for a Professional selling account, which will cost $39.99 a month regardless of how much you sell. Your other option is to scroll further down the page and look for the link to set up an Individual account:
The Individual account is free – but you will pay a $0.99 per item sold fee that you don’t pay on the Professional account.
In the long run you will want a Professional account because you’ll save money once you are selling more than 40 items a month, and because you need a Professional account to earn the buy box. Professional accounts also unlock the ability to apply to sell in restricted categories, allowing you to sell a wider range of products over time.
You can find a more detail discussion of this in my beginner’s guide to selling on Amazon. Click here to jump straight to the discussion on Individual versus Professional accounts.
In general, I would recommend going with the Professional as soon as it makes sense and you can afford it, but you are fine to get started with the Individual option. You can upgrade to a Professional account at any time.
Once you choose the account type you want, you will be required to fill out some forms to get your account setup. It should take less than 10 minutes, and then you will be able to get started selling on Amazon.
The guide I linked to above includes more details about this process in case you get stuck.
2. Download the Amazon Seller App.
Once you have signed up for an account, you will have access to a free app that will help you figure out which products to buy.
There are a variety of retail arbitrage scanning apps out there, but the Amazon Seller App is the best option as a beginner because it provides all the details you need and it’s free.
The app allows you to use the camera on your cell phone to “scan” the barcode of any product. Then it will show you the selling price on Amazon, what the fees to sell the item are, and a few other pieces of helpful information. We’ll walk through exactly how to use the app and evaluate products later in the post.
3. Visit your local retail stores.
When it comes to deciding which stores to get started at with retail arbitrage, there are a huge number of options. My recommendation is to start with whichever store is closest to you and that you have the easiest access to. Make it easy on yourself for your first trip and over time you can try out a variety of stores.
Here is a list of 16 of the best stores for retail arbitrage. I have purchased items at all of these to sell on Amazon in the past.
- Home Depot
- Big Lots
- Rite Aid
- Toys R Us
- Bed Bath & Beyond
- Office Depot
4. Use the Amazon Seller App to scan clearance and sale products.
Once you have the Amazon Seller App installed and are in a store, it’s time to use the app to find profitable items to sell on Amazon.
When it comes to finding items via retail arbitrage, I often get the same question: “what are the best items for retail arbitrage?”
The best items are items that sell fast at a healthy ROI. There is no silver bullet – you need to hunt until you find these items, and you shouldn’t narrow yourself to one type of item.
For any item that you are considering selling on Amazon, you should be scanning it with the Amazon Seller App, or using a similar tool before you make a purchase. This will tell you the exact fees on it so you can make an informed decision about that item. With these type of calculators available, you should know in advance what your expected profit is on any item you are going to sell.
Let’s walk through a hypothetical example of what this looks like to help you understand exactly how to use the Amazon Seller app to determine if items you buy via retail arbitrage will be profitable to sell on Amazon.
In this example, we’ll be using Gary Vaynerchuck’s Jab Jab Jab Right Hook to walk through the numbers. (FYI: It’s a book I really enjoyed, but that’s not the point of today’s post.)
So, let’s say you came across a copy of this book available to purchase for $8 at Barnes & Noble. These are the steps to determine if it’s an item that will be profitable to sell on Amazon:
Open the Amazon Seller App on your phone. Click on the camera icon in the top right-hand corner of the app (shown with the red arrow).
This will activate the camera. At this point, you want to focus your phone’s camera at the bar-code on the product, which will look like this:
After scanning a product, you will see a screen like this:
Then you will click on the arrow that is next to the item that matches the item you scanned. Indicated by the red arrow in the screenshot above. Then you will see a screen like this:
There are two things that we need to check on this screen above.
The first is to make sure that you are eligible to sell the item on Amazon. This is shown under the selling eligibility section and will show a green checkmark if you are able to sell the item (this section is marked by the green arrow).
The second thing to look at is the sales rank in the top left-hand corner of the screen. On this item, we can see the sales rank is 1,448 in the books category (shown by the yellow arrow).
The sales rank is an indication of how quickly an item is selling on Amazon in relation to other items in the category. When it comes to sales rank, the lower the number, the more often the item is selling. I won’t get into all of the details of sales rank in this post, but the key takeaway is the lower the number the better.
For your first few retail arbitrage trips, I recommend looking for sales ranks that are below 250,000 in their respective category. Over time I highly recommend adjusting this, but staying under 250,000 is a good range when you are just getting started.
If the app shows you are eligible to sell the item AND the sale rank is less than 250,000 it’s time to move on to the next step of the evaluation.
If either of the above criteria are not met, do not buy the item, and move on to scanning the next item.
5. Buy any that offer over $3 profit and 50% ROI after fees and shipping.
The next step is to check the return on investment on potentially profitable items.
We do this by clicking on the arrow on the right side of the screen as indicated by the red arrow in the screenshot above. That will bring up this screen:
You will be able to enter the selling price (green arrow), your cost per pound to ship to Amazon (I use $0.50/lb), and your cost to purchase the item. In this example, I’m showing that I can buy this item for $8 (yellow arrow).
Once we have that information entered, we can see what our profit on the item will be based on the information we entered (red arrow).
At this stage, there are 2 quick checks that you want to go through.
The first is to see if the net profit number shown at the bottom is higher than your minimum profit threshold. Typically I recommend setting this at around $3 per unit.
This means that you won’t buy any items that you will make less than $3 in profit on. Having a potential net profit of less than $3 per unit does not allow for very much upside and a small drop in price can wipe out your profit. It’s your decision what minimum profit threshold you want to set, but $3 is what I use.
If the item meets your minimum profit threshold, then you will want to calculate the return on investment percentage. You can do this by dividing your profit by the cost of the item.
In this case, it’s your profit of $6.40 divided by your $8 cost, so the return on investment percentage is 80%. When you are first getting started, I recommend looking for items with a return on investment percentage that is greater than 50%.
To say this more succinctly, when getting started with retail arbitrage, you want a profit of greater than $3 per unit and a return on investment greater than 50%.
So this particular item meets all of the criteria for purchasing the item and should be purchased.
For any item that fits all of the purchasing guidelines, I recommend purchasing up to 6 of the item. In this example, if there were 20 copies of this book on the shelf for $8 each, then I would buy 6 of them.
The reason for this is to keep your inventory diversified to keep your risk as low as possible. If you buy 20 of an item and the price goes down after you buy it, then you have a much bigger problem than if you only have 6. It also generally takes longer to sell through more units of a single item, as compared to a few units of many different items.
As you gain experience, you will find scenarios where it makes sense to buy more – especially when you can find a high-demand item at a healthy profit.
When you are first getting started, I recommend scanning as many items as possible. Don’t make assumptions about what is selling and what isn’t. Doing this makes it easy to miss out on products you might not value that are still profitable to sell!
For each item that you scan, I recommend going through the evaluation in the order that I showed above. That order is as follows:
- Make sure you are eligible to sell the item
- Sales rank is under 250,000
- Profit is greater than $3 per unit
- Return on investment is over 50%
Going through the process in this order will be most efficient, and allows you to quickly move on from items that don’t fit your buying guidelines.
These are the guidelines that I recommend when you are first getting started with retail arbitrage sourcing. Over time as you gain more experience, you should adjust these guidelines based on your experience.
6. List them for sale on Amazon.
After you have purchased items to sell on Amazon, your next step is to list the items for sale on Amazon (and ship them to FBA warehouses if using Fulfillment by Amazon).
In my business, we use the FBA program for just about every item that we sell on Amazon. Utilizing this program allows us to ship items to Amazon in bulk, and they handle shipping items to the individual customers.
Fulfilling orders yourself (merchant fulfilled) will sometimes make sense, especially during Q4 if you are running out of time to get a product to FBA warehouses or if you want to take advantage of a temporary absence of FBA inventory for an in-demand product. But the vast majority of the time, FBA will be the better bet.
If you need help with the listing process, pages 23-38 in my new E-book (Get Your First Sale On Amazon) cover it in detail, complete with screenshots of the process. You can download the book using the form at the top or bottom of this post. Click here to jump there now.
How Much Money Can You Make With Retail Arbitrage for Amazon FBA?
As you’re reading, you might be wondering just how much money you can make using retail arbitrage strategies.
In the near-term, this largely depends on how much time and money you are able and willing to invest in the beginning.
The more money you are able to invest, the more inventory you will be able to buy. And the more inventory you have, the more you can sell.
For perspective, in my first three months selling online full-time, I was able to take $5000 in start-up capital and earn $16,376.35 profit. The $5000 start-up capital was money I had saved up from selling online in college and when I had my accounting job.
When I first went full time I published monthly income reports about my experiences, so you can actually go read the details from those early days here to gain even more perspective on this.
But you don’t need $5000 to get started. In fact, you don’t need any money. If you don’t have any money to invest right now, you can still get started by taking on the Flipping Challenge.
The Flipping Challenge is to take 5 items you already own, sell them on Craiglist or Facebook Marketplace, reinvest the profits into more products – and keep doing that over and over with the goal of making $1000 within 90 days.
So even if you don’t have much to start with, you can still earn a substantial sum in short order if you are willing to invest time and work hard.
Expert Level Retail Arbitrage Tips
As you are getting started on your journey I want to share a few of my best FBA sourcing tips. This should give you the best chance of success.
Know your numbers!
The apps will give you all the information you need to stay profitable. I’ve seen many people get surprised by the Amazon fees, and it simply should not happen if you are using the app as outlined in this post.
Make as few assumptions as possible.
When you are just getting started with retail arbitrage, you need to be on guard against assuming things aren’t worth scanning. I’ve sold cereal for over $20 per box, sold beauty supplies, sold discontinued items for over 5 times their normal retail price among many other “crazy” items.
If I made assumptions about what these items sold for, I would have been wrong.
Learn individual store markdown schedules.
If you learn which day stores discount certain items, this can give you a leg up on your competition.
Along this same line of thinking, some stores will discount items further the longer items sit on clearance. Figure out how each store runs its business and use this information to your advantage.
For example, Target follows a predictable markdown schedule on their clearance items. Most items will start off at 15% off and the discount will increase the longer the item sits on clearance. The normal progression is 15% off > 30% off > 50% off > 70% off. There are exceptions to this, but at Target if you are buying at 70% off, that’s likely the lowest the price will go.
Be patient in learning the process.
Gaining the experience to know which items will be profitable and which ones won’t takes a lot of time.
In some ways, it’s similar to fishing. An expert fisherman and a novice fisherman can go out on the same lake and come back with vastly different numbers of fish. So be patient in learning the process, and as you build experience, you will become more efficient when sourcing via retail arbitrage.
Take as much time as you need at each store.
Many people start with a desire to get to as many different stores as possible in a single day.
I prefer the opposite approach.
I will go to one store and make sure that I get to ALL of the different clearance sections in that store. Sometimes this will take 30 minutes, other times I will be in the store for a few hours. By going through all of the items in a store in one shot I am not losing time to traveling between stores. I also learn a lot more about that store for the future.
Those are a few things that I highly recommend that you consider when you are just getting started with retail arbitrage. If you follow this advice, you will have a leg up on your competitors.
Learn more about retail arbitrage, Amazon FBA, and more…
I offer a variety of training programs that can help you start faster and scale bigger once you decide that online retail is something you want to do.
The very first thing you should do is subscribe. Remember, all subscribers get a free copy of my Get Your First Sale on Amazon E-book.
The next thing you should do is check out when our next Arbitrage Accelerator Challenge is starting!
If you have any questions, email firstname.lastname@example.org or leave a comment below!