If you want to learn how to make money selling on Amazon via retail arbitrage, you’re in the right place.
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.
You might be wondering, can I actually make money with retail arbitrage in 2018? The simple answer is yes. My business is on pace to sell over $2 million worth of retail arbitrage products in 2018, and I’ve helped hundreds of others make money via these methods as well.
This beginner’s guide will go into more detail about how retail arbitrage works in general and how you can start making money using retail arbitrage strategies.
I’ll also share expert retail arbitrage tips, including 16 of the best stores for retail arbitrage.
By the time you finish reading this intro to retail arbitrage, you should have a very clear idea of what you need to do to get started. You’ll find links to helpful resources and tools throughout the guide, but I encourage you to read the whole thing once before you start down those paths!
What is Retail Arbitrage?
Like I said above, retail arbitrage is the act of buying items in retail stores (like Walmart or Target) and then selling them via a different marketplace like (Amazon or eBay) for a profit.
Items purchased in this manner are generally acquired on sale, offering a significant discount compared to the retail price.
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.
Retail Arbitrage for Amazon FBA
Over my years of selling online, my business revenue from retail arbitrage has been significantly higher on Amazon compared to other marketplaces. For that reason, this guide focuses on Amazon arbitrage, since Amazon presents the best opportunity for profit.
If you don’t have an Amazon Seller account yet and you aren’t familiar with selling on Amazon, you should start by reading my Beginner’s Guide to Getting Started Selling on Amazon. It’s a step-by-step guide that covers everything from how selling on Amazon works to how to set up your Seller account.
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. But don’t forget — you need to account for marketplace fees and shipping costs.
For 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.
Essentially, this is how retail arbitrage can earn you money on Amazon. Below, you’ll learn more about how to get started with retail arbitrage. More importantly, you’ll learn how to source products and be profitable.
Can you make money with retail arbitrage in 2018?
Yes, you can definitely still make money with these strategies.
In fact, I consider it the best way to get started selling online for most people. While other sourcing methods like wholesale and private labeling have their benefits, retail arbitrage offers a very low-risk option to reliably make a profit from the very beginning. In my experience, this is exactly what most people need and are looking for.
At the end of this post, I’ll talk about how much money you can expect to make.
How to Get Started with Retail Arbitrage Sourcing
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 the tools you need to get started.
When you are signing up for your account, I recommend using an “individual” seller account. This account type has no monthly fees and is perfect for new sellers on Amazon. You can sign up for here. Be sure to scroll part way down the page and click the link about becoming an “individual seller” as shown in this screenshot:
Next, 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.
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.
What Apps Do I Need for Retail Arbitrage?
There are a variety of retail arbitrage scanning apps out there, but the only one that I recommend for beginners is the Amazon Seller App. It’s a free app that you receive access to with an Amazon Seller account. It provides the information you need when deciding which products to buy to sell on Amazon, and it’s the only retail arbitrage app you need to get started.
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.
Another option is the Fulfillment by Amazon Revenue Calculator. It provides much of the same information. Throughout this post we’ll focus on using the Amazon Seller App, but if you haven’t set up an account yet, this is an option that’s available right away.
How to Find Items to Buy for Retail Arbitrage on Amazon
Now that you have the Amazon Seller App installed, it’s time to use it 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?”
As you’ll learn here, the best items are items that sell fast at a healthy ROI (more specifics below). 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.
We’ll walk through a hypothetical example of what this looks like. This should 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 illustration, we’ll be using Gary Vaynerchuck’s Jab Jab Jab Right Hook to walk through the numbers. 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 check mark 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. So in this example, since the sales rank is 1,488, there are 1,487 items in the books category that have sold since this item last sold.
When it comes to sales rank, the lower the number, the more recently that item has sold. I won’t get into all of the details of sales rank in this post, but the key takeaway for now 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.
The third step is to check the return on investment of the item. 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 then 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, we 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. When you are starting with retail arbitrage sourcing, I recommend sticking to 6 max per item. This should maximize the rate at which inventory sells through, and keep your risk to a minimum.
Then it’s time to repeat this process on the next item, and the remainder of the items in the clearance section. When you are first getting started, I recommend scanning as many items as possible. As you gain more experience you likely will be able to avoid scanning certain items that don’t appear viable for resale. When first getting started though, I recommend scanning as many items as possible. Scanning a large number of items will lead to you learning about what types of products are profitable most often and which products aren’t. Over time it makes you much more efficient.
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.
How to List Items for Sale and Send them to Fulfillment By Amazon Warehouses?
After you have purchased items to sell on Amazon, your next step is to list the items for sale on Amazon. In my business, we use the Fulfillment by Amazon 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.
I have a complete blog post to walk you through listing your items for sale and getting them shipped to FBA warehouses. If you’ve never gone through this process before, you’ll want to read my comprehensive guide to Amazon FBA shipping.
16 of The Best Stores for Retail Arbitrage for Amazon FBA
When it comes to deciding which store 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 some of the best places for retail arbitrage. It’s where I have purchased items via retail arbitrage to sell on Amazon in the past. They are good ones to consider (in no particular order):
- Home Depot
- Big Lots
- Rite Aid
- Toys R Us
- Bed Bath & Beyond
- Office Depot
Want to see how I made $114 in profit in one hour buying items at Home Depot? Click here!
These are some of the best places to get started with retail arbitrage. Pick one from the list above, or select a store that is close to you, and give it a shot. Over time you can test out a variety of stores and figure out which stores enable you to have the best results. Then, you can focus your efforts at those locations.
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.
I think that’s best answered by showing you some results from my experience. If you don’t know my backstory, I quit my job in September of 2013 to pursue selling on Amazon full-time. The first 21 months that I was full-time I documented financial results posts showing exactly how much money my business made. The primary method of sourcing inventory I used was retail arbitrage.
You can read about October of 2013, my first month selling online full-time, in this post.
You can read about one of my biggest months while I was doing financial results posts (December of 2014) in this post.
If you don’t have the time at the moment to check out those posts, the short version is that you can make a significant amount. Within the first year, I was making more from selling on Amazon via retail arbitrage than I was making at my prior job as a full-time accountant.
On one fairly ordinary trip to Home Depot, I was able to make $114 in profit in an hour in the store. I’ve put together a free download that will show you exactly what items I purchased, how much they sold for, and how I was able to make that profit. This will let you see exactly what an individual retail arbitrage sourcing trip looks like. Get access here!
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. 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 when just getting started have 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 for Amazon FBA
If this all sounds interesting to you and you are serious about trying it, you should check out my retail arbitrage course called How To Make $1000+ Per Month Selling On Amazon.
It contains all the secrets I use in my own multi-million dollar Amazon business that I don’t want to publish for the whole world to see – including the exact buying guidelines I give to my employees.
The course also comes with a 30-day, money-back guarantee. If you are serious about trying retail arbitrage out, enroll in the course and use the strategies to start smart and efficient from the very beginning. It will increase your odds of success, and you can always get your money back if you can’t make it work.
With that being said, you definitely don’t need a course to start. There’s a ton of free content on this site that will get you going in the right direction.
Here are a few that you might want to check out: