If you'd like to get an idea of how to run an Amazon business without the hassle of getting a commercial brand, retail arbitrage might be the right choice for you.
The question is: would that be an ethical move?
Starting a new business venture requires not only a capital investment but also a large risk-taking. Nowadays, thanks to the fast-growing e-commerce sector, more and more people prefer to start an online business to save on the expenses of opening a traditional store.
Over the course of 25 years, the eCommerce giant - Amazon - has opened the door to a whole new world of possibilities for small and medium-sized businesses, embracing new technologies, and new generations, and betting on features and programs to help sellers, all over the world, to build their retail empire.
The reality is, however, that there are people who prefer to start their career as sellers on Amazon by listing items from other brands or to gain experience so they can start their business as brand owners later on or simply because they find it convenient. And, in some cases, this works for them.
Retail arbitrage on Amazon
Retail arbitrage has been around for a long time now. It is known in the eCommerce world as "... the act of buying products in local stores and selling them through online marketplaces for a profit ...". - Online sales experiment.
This practice has become common because it seems to be accepted quite well by many retailers; and somehow, it has gone under the radar for far too long.
Since brick-and-mortar stores have limited storage space, it is easier for them to clear the shelves by putting products up for sale. And while this process of buying liquidated items to sell them for a good profit on Amazon - or other eCommerce platforms - seems like an easy task, it actually requires a great deal of persistence, effort, and discipline.
Is retail arbitrage illegal?
In 2013, the US Supreme Court ruled, in a historic ruling, that retail arbitrage does not constitute trademark or copyright infringement as long as the merchandise has been legally acquired, which means it is genuine and not counterfeit.
However, if you decide to dive into this reselling adventure, you may find yourself facing some problems, such as:
Intimidation/harassment by brands for marketing their products
Retain customers after the discontinuation of liquidated products
Finding that the items you are reselling are counterfeit (this will cloud your seller rating).
Note: If this happens, you may not be able to retrieve your items from the FBA and they may be destroyed.
How does retail arbitrage work on Amazon?
Retail arbitrage can be summarized in 3 simple steps:
Create an individual Amazon seller account
Download the Amazon Seller App
Start looking for products and list them on Amazon
The purpose of this practice is to start as an Amazon seller with minimal investment; so first, you should create a single Amazon seller account as it does not require monthly fees.
However, you must keep in mind that, with the Private Seller account, you will have to pay a fee of $ 0.99 per item sold and if you start selling more than 40 per month, your total income will be used to pay these charges.
So as soon as it makes sense for your business, we recommend that you upgrade to the Professional account as it allows you to sell a wider range of products without commissions "per item sold".
Additionally, you should download the Amazon Seller app, which allows you to scan the barcode of any product - with your cell phone's camera - to find out what the selling price of that item is on Amazon and see what yours would be. profit if you decide to resell that item.
These are some of the best retail arbitrage shops:
Walmart
target
Home Depot
CVS
Bed, bathroom and beyond
Office Depot
Staples
Walgreens
Once you have the items you want to sell, you need to list and rate them. The Amazon Seller App can help you decide which price will give you the best profit.
Which settlement option is best for retail arbitrage?
During the first quarter of your sales journey, it may make sense for you to place orders yourself, using Fulfillment By Merchant (FMB).
But as you start gaining more experience and customers, you might want to try FBA. FBA (Fulfillment by Amazon) is a pay-as-you-go program that aims to make the storage and shipping experience of Amazon sellers hassle-free.
FBA allows you to ship items in bulk, then Amazon ships them to individual customers. If you opt for this program, be sure to adjust your pricing to a similar level to your competitors.
This is a budget option as you will be charged for the storage and orders that Amazon fulfils ONLY.
The cost of shipping is already included in your expenses and if you decide to start selling your products and become a brand owner, with this shipping program you do not receive additional costs for free two-day Amazon Prime shipping and FREE shipping for eligible orders.
Closing thoughts
Retail arbitrage is one of those questionable practices that Amazon has been fighting indirectly for a few years. How? Launching advertising features to help brand owners stand out from the crowd and attract new customers.
While many find retail arbitrage appalling, others believe this to be a great sales tactic; there are testimonials from vendors who built their empires this way.
Ultimately, you decide if retail arbitrage is the best way to start your Amazon business. Just remember that there are other companies that have built an unrivalled reputation for themselves through effort and dedication, and you can too.
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