Because you don’t have to wait long to get your products shipped from the supplier, retail arbitrage lets you sell and generate income quickly. In fact, 19% of Amazon sellers use retail arbitrage as their preferred business strategy. But the million-dollar question is: Is Amazon retail arbitrage worth it? Merch Jar dives into this exciting question to help you decide whether this approach deserves your attention. Let’s get started!
Retail arbitrage is buying discounted products from various retailers and online suppliers and reselling them on the Amazon marketplace. For example, you might purchase a product from Walmart for $10 and resell it on Amazon for $17, making a $7 net profit before fees and shipping costs. The business model is popular with many traders and Merch by Amazon (MBA) sellers because it’s a low-cost investment. You can start with as little as $100 or $200; there’s no steep learning curve to launch your business. But there’s a catch.Patience is the name of the game, as it can take at least six months to make some profit.
Wondering whether retail arbitrage is worth your time, effort, and money? For starters, the Amazon marketplace is a humongous platform of third-party online sellers (about 6 million sellers globally and 1.5 million active sellers in 2021). That’s a sea of competition. But there’s some good news!You can navigate the Wild West of the Amazon marketplace by trying retail arbitrage. So let’s explore whether it’s worth your investment.
One universal truth that applies to all businesses is that every business idea has some level of risk. You don’t have a crystal ball to know exactly how things will pan out. But some business ventures have low risks, and Amazon retail arbitrage is one of them. The beauty of this concept is that you can buy one discounted item from eBay, Alibaba, etc., and resell it on the Amazon marketplace. So you don’t have to start with bulk purchases if you’re a new seller or incur the high costs of owning a physical store. Both of which require a substantial amount of start-up capital. Also, retail arbitrage on a small scale allows you to learn how the biggest online marketplace in the world works. And that’s well worth your effort.
Want to make quick profits? Buying and reselling products on the Amazon marketplace can let you achieve that. You only need to understand what your target group wants and select the right products you can sell.Although retail arbitrage margins are tight, fast-moving inventory in huge volumes can enable you to make money within a short time. You can still make some reasonable profits even after meeting your fulfillment expenses.
What’s the success rate for Fulfillment by Amazon (FBA)? 25% of Amazon sellers. In addition, only 20% of businesses generate at least $1000 in profits in their whole FBA selling career. You can see it’s not a stroll in the park to succeed on the Amazon marketplace. But it means many sellers are more likely to give up if they make continuous losses. And those who persist with Amazon retail arbitrage can realize profits in the long term.
In a nutshell, retail arbitrage is a cost-effective investment for anyone who wants to start trading. The above screenshot shows that you must pay $0.99 for every item you sell on the online store, which is affordable.Furthermore, you only need the following to get started with the Amazon e-commerce platform:- Find relevant products to sell
While retail arbitrage appears to be low-hanging fruit, it has a downside. Let’s look at a few of its challenges:
Ad Badger reports that US Amazon online sellers paid $0.71 on average for every click on their ad in 2020. And the cost per click (CPC) has been skyrocketing since the pandemic, hitting $0.89 for every click. Advertising costs on the Amazon marketplace vary depending on several factors. Some of them include the following:- Type of Amazon ads
When it comes to profit margins, it’s not a pretty picture. Recent stats indicate that 62% of sellers involved in retail arbitrage made nearly $5,000 per month. And 25% of them earned less than $500 a month (_via Influencermarketinghub.com)._The same report says it takes about six months to realize profits with this business approach. Amazon retail arbitrage needs a ton of patience, persistence, and a winning Amazon bidding strategy.Profit margins can also fall if you don’t source your products directly from manufacturers and suppliers.
Amazon retail arbitrage can compromise product quality. It’s possible to buy items with damaged packaging, mismatched product descriptions, etc. Shoddy products or poor customer service can turn many buyers away.
The success of retail arbitrage hinges on getting discounted products so you can have a meaningful markup. You buy anything that can give you good profits. So there’s no consistency when it comes to inventory. Anything goes.
According to the Office for National Statistics in the UK, shopping online has been gradually falling since the easing of COVID-19 restrictions. Consumers are slowly returning to physical stores.Elsewhere in the US, the trend is the same as shoppers are rushing back to stores. Because of these latest developments, Amazon retail arbitrage is likely to suffer from low sales.And Amazon is also feeling the heat, as shown by the large number of employees laid off.
Is Amazon retail arbitrage worth it? Yes, it’s worth it. It’s a great business model for newbies with a small amount of capital who want to learn the tricks of the trade. Also, you don’t have to go through a lengthy course to start selling on the online platform.However, retail arbitrage has its share of problems. They include the following:- Increased competition means low profits
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