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Ultimate Guide on Retail Arbitrage Salary
Arbitrage has been around since the concept of money was invented. It is best known by the adage “buy low, sell high.” Retail arbitrage involves buying a good or service for a specific price and then reselling it online at a higher price to take advantage of market price discrepancies.
You may shape a general idea of the concept of arbitrage when you picture publicly traded stockbrokers or people trading houses. Or maybe you’re familiar with geo-arbitrage, which involves leveraging your currency to move to a country where the dollar has more power.
While these forms of arbitrage may seem extreme, there is a more affordable option: retail arbitrage.
Retail arbitrage is the perfect business model to try if you want to make money buying and reselling everyday products.
What is Retail Arbitrage?
Retail arbitrage is the act of buying products and reselling them for profit. It may sound simple, but like any investment business, your success depends on selecting products that sell quickly and considering your margins to make a profit.
Typically, people make money from retail arbitrage by buying heavily discounted products through clearance sales. Buying products on sale helps increase profits by widening the price discrepancy between your initial purchase and resale price.
For example, you can buy a pair of discounted men’s swim trunks at Walmart for $12.99. You can then resell it on websites like eBay or Amazon for $19.99, earning a return on investment of $7 before any fees of sale and shipment.
This is a basic example of how you can make money from retail arbitrage, but swimwear is just one example. Popular product categories for arbitrage retailers include:
- Clothes and shoes
- Books
- Toys and baby supplies
- Electronics
- Jewellery and accessories
- Personal care products
- Sports equipment and clothing
The key is to find products for sale that are in constant high demand.
It doesn’t matter if you resell running shoes or makeup: successful retail arbitrage means selling products for a profit, and it’s the maths that matters.
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Is Retail Arbitrage Still Profitable?
Retail arbitrage is an excellent and profitable business model if you’re willing to invest the required time and effort. As consumers’ shopping preferences shift to the online world (especially since COVID-19), selling on eCommerce platforms such as Amazon has become more popular due to its high profitability.
Although it seems easy to start, retail arbitrage is challenging because of the intense competition. However, by doing keyword research and using the right keywords when listing your products in addition to advertising, you can make significant profits and earn a lot of money.
Pros and Cons of Retail Arbitrage
If you’re considering making money from retail arbitrage but aren’t sure if it’s a suitable business model to pursue, consider these pros and cons.
Pros:
- Existing market and access to millions of global buyers.
- Easier product selection and the ability to sell various everyday products, such as clothing and home furnishings.
- Because you primarily sell commodities with retail arbitrage, there is a constant demand for your inventory.
- You don’t have to brand your business or pick a niche to focus on with retail arbitrage. You can sell anything if you think the purchase price is low enough to profit from reselling.
- Learning how to source inventory for retail arbitrage and what products sell out quickly takes time. But once your business is up and running, the main limitation to growth is how quickly you can get cheap inventory.
Cons:
- When starting a retail arbitrage business, it’s important to test multiple products to learn what sells well and how to price your ads appropriately. But this also means spending money on inventory before making sales.
- Start-up inventory costs are not your only expenses for running a retail arbitrage business. Depending on your selling platform, you may pay seller membership fees, listing fees, and shipping costs. Also, restocking your store with products is an ongoing cost.
- Retail arbitrage is not a suitable business model if you want to earn passive income. Between stocking inventory and managing your listings, a lot of work goes into a retail arbitrage side hustle.
How Much Can You Make from Retail Arbitrage?
Retail arbitrage is an excellent business model with many opportunities for profitability and scaling up your business. You can make anywhere from $100 to $50,000 per month with retail arbitrage. Your income depends on your capital and the amount of time and energy you invest in your business.
There is no promised model for earning money from retail arbitrage. Still, the following timeline can give you a general idea of how much money you can earn using this business model:
- 0-3 months: $100-$500 per month
- 3-9 months: $500-$2000 per month
- 9 months and more: $2000 and more
How Much Do Amazon’s Top Sellers Make from Retail Arbitrage?
Most Amazon sellers make at least $1000 per month through retail arbitrage on the platform. Some super-sellers make more than $100,000 a month. 50% of Amazon sellers make around $1000 to $25000 a month, which means $12,000 to $300,000 in annual sales. The top sellers (making up about 13% of Amazon’s total number of sellers) make $25,000-$250,000 per month, which amounts to $300,000 and $3,000,000 in annual sales.
How to Start Doing Retail Arbitrage?
Like other online trading ideas, it helps to follow a game plan when starting a retail arbitrage business. There is a steep learning curve, and it takes time to grow your inventory and monthly income. But if you stick to a process, it’s possible to turn your retail arbitrage business into a meaningful sideline or even a full-time business.
1. Research Products to Sell
Before spending money on your first batch of inventory, spend time researching products that sell well online. This provides a product knowledge base you can refer to when shopping for deals in the store.
A valuable resource for product research is the Amazon Best Sellers list. This page highlights the best-selling products based on sales volume across dozens of Amazon categories.
2. Source Products from the Right Retailers
Once you know the best sellers and product-buying tips, you are ready to get inventory.
Low daily prices and clearance sales are your best bet for finding arbitrage-ready products. Some popular retailers for inventory sourcing include:
- Best Buy
- Bed Bath & Beyond
- Home Depot
- Kmart
- Lowe’s
- Walmart
You can also try selling thrift store products, as long as the product’s condition is good enough to sell as used online. Similarly, garage sales can also have gems such as clothing, toys, and books that are great candidates for resale.
3. Resell the Products Online
After you’ve purchased inventory, you’re ready to start generating sales.
Many retail arbitrage sellers rely on the Fulfilment by Amazon or Amazon FBA program to drive sales. Using this program, you won’t have to handle logistics and shipping. Instead, you ship inventory to Amazon warehouses for Amazon to handle order fulfilment when you make sales.
This allows you to focus on getting more inventory and managing your listings instead of dealing with endless shipments.
Final Thought
With the growth of eCommerce, business ideas like retail arbitrage and drop shipping have quickly gained popularity. New ways to earn money online continue to appear, thanks to technology and changes in shopping habits.
You can make money from retail arbitrage while working full-time with time and practice. The key is to learn little by little, use your profits to fund additional inventory, and continually optimize your listings.
