Amazon Retail Arbitrage is becoming BIG business, pretty much every blog that I read or podcast that I listen to has spoken about selling products on Amazon as a way to earn more money, with a high number of people seemingly earning a good amount of money as an additional side income every month.
After hearing a podcast interview with Travis Scott from Stuff Parents like (who I also interviewed for this site) I thought “Why not give it a shot?!”
So I did.
Basically, the short version is this:
You need to find products that are being sold cheaper in local shops, online etc. than what they are being sold on Amazon for.
It’s a pretty simple formula.
Buy Low/Sell High
It is the same formula that everyone is already doing on every ecommerce website, you pay a product for one amount, put money on top and then sell it for a profit. It’s the way business has been done for years.
This video on YouTube explains more about the process:
But with this method, you find the products locally, or as local as you are willing to travel in your spare time, box them up and send them to Amazon who will then pack the items up and ship them out to a consumer when the item has been purchased.
It really is that easy and straight forward, pretty much anyone can get involved in Amazon Retail Arbitrage, it just all depends on the amount of time that you are willing to dedicate to sourcing the products to sell as the process can be very time-consuming.
The steps involved are pretty straightforward to start selling products on Amaon, first up you need to create an Amazon sellers account, you can sign up here.
When you first go to sign up to sell products on the Amazon marketplace as an individual seller you will be presented with the following sign up image, click on “only want to sell occasionally” to avoid paying the £25 monthly fee:
The difference between an “occasional” (basic) seller account and a professional seller account is merely how Amazon charges you to sell items in their marketplace. If you set up a basic account, you will have to pay a per-item fee of £0.75 to list your products on their marketplace.
With the professional account, you pay a monthly fee of £25 to sell as many items as you want. If you work out the math, you will find out that if you sell more than 35 items per month, it makes more sense to go with a professional account.
If it ever becomes your case, and you start selling more than 35 monthly items and are thinking of scaling this into a real business, a great resource to check out is Startupbros’ retail arbitrage guide.
They teamed up with Ryan Grant to shed some light on topics you are likely to get interested in if you are thinking about growing a company into the millions.
(Ryan built a 7-figure business using the Amazon retail arbitrage model.)
Topics they talk about in the case-study include how to chose the right products, figure out your margins and how to price your products.
But to start off with, the basic account is the best option in your experimental days, if you do start to sell a lot of items you can then switch to the professional account which would work out better cost wise for you over a month’s selling period.
Once you are signed up, you can then download the amazing Amazon sellers app for your smartphone.
The Amazon seller’s app is a beast of an app! It is awesome!
Here is the Amazon app on my phone, installed and ready to aim the camera!
So how does the app work? You simply walk into a store, find and item that you think, or hope, you might be able to make a profit on, open the app and click on the camera icon, aim your phone at the product or use the app to scan the barcode, the app then tells you all the information that you need to know such as:
You can then click on the item which will then take you to another screen where you will be informed of the selling price, fees and your gross proceeds.
I scanned the latest book that I am reading to show you as an example.
This app basically does all the hard work for you so you know exactly the amount of money you would be making if you decided to purchase the product that you have located or if there is no profit to be made.
How awesome is that!
Remember, when looking at the gross proceeds, you will still need to factor in the postage costs of packing and posting your products to send to Amazon so they can store them in their warehouse.
The trick with postage is to add as many items as possible to one box as you will probably still get charged a flat postage fee up to a certain weight, about 5kg, so the more products you can pack in a box the cheaper the postage cost works out per item giving you a better chance to make a profit.
Once you happy that you can make a profit on an item, simply click on the sell icon and add your product to the “sell on Amazon page” where you enter the products information and your selling price etc.
When you have located enough items to place into one box, simply place a postage order through the app, box your items up, print your postage labels out (UPS is Amazon’s preferred carrier) and post your products to Amazon.
It’s then over to Amazon to act on your behalf.
Once Amazon have received the products that you have posted to them, they will check for damage, if the goods have arrived ok they will then add them to the your inventory. Once added to your inventory, the items will then be listed on the Amazon marketplace for potential buyers to see when searching on the site.
If your item is the cheapest listed in the marketplace, you will then be added to the “Buy Box” section, this is the part of the listing that you see when you are looking to purchase an item on Amazon, instead of being listed on the right-hand side of the page.
This is off course a big advantage as most people will simply purchase the item for sale in the buy box section.
When one of your items is then purchased, Amazon will then will pick the item from their warehouse, pack it up and box it, label the goods and then post the products out to the buyer.
It is an amazing process, Amazon basically do all the hard work for you!
Note of caution.
If a product is posted out to a buyer and then the product breaks or arrives damged etc. Amazon will then probably take the product back no questions asked and you will then have the money from the sale taken back from you.
If you do sell enough products this will probably happen to you at some point, it’s the law of average, don’t get to upset if you end up losing out on the profit on one product, remind yourself that it is all part of the game and that it happens to every seller at some point.
As already mentioned, I decided to give this venture a shot after hearing Travis Scott from Stuff Parents Like discuss his Amazon business model on a podcast. After figuring out what I needed to I decided to venture to my nearest and largest toy department store, in my case it was B&M (that’s a well known UK discount store), I strolled around the iles using the Amazon app and after scannig a few different items I manged to find some toys that had a decent enough mark up, it was the Spider laser game (photo shown above) selling in B&M for £14.99 and being sold on Amazon for £44.99 at the time.
I purhcased three of those items along with 3 smaller toys with similar mark ups in profits to make the postage per item more affordable, the total for the whole box would be approx £7.00 so when you divide it up by the 6 items it makes it even easier to earn a profit from selling each item.
I then boxed the items up and posted them off to Amazon:
The bigger margin you have the better, and having a cheaper postage cost per item from the start helps you acheive that aim, but for each item you need to be looking at a profit margin of at least 30% to 50% to ensure that you can earn money from the products that you willl be buying and selling.
As well as postage costs, you need to factor in Amazon’s FBA fees, the Amazon’s seller app is great as we have prevouosly mentoned, you will get an indication on the potential profit mark up straight away but you also need to factor in your time that you will be spending on travelling to various shops and outlets to source the items to buy and sell, box them up, print the labels out and post the products off to Amazon, so the closer you can get to at least a 50% mark up the better.
When I posted the items off it became a bit of a nervous waiting game, I started to worry that the goods might get damaged on the way to Amazon or the products would never sell. I did not check the app for a few days before checking again and then to my suprise the items I had posted were showing as arrived and in my inventory!
The worry then moved to doubt about selling the items….but then I got an even bigger suprise! My items did start to sell! And quickly!
A couple more days passed and another item was then sold!
The remaining items that I had stock then sold over the course of the next two weeks, the only problem that I encunted was Amazon losing one of my items in their warehouse before it was sold, they spent a few days looking for the item but it was deemed lost…BUT as with Amazon’s excellent customer service reputation, I was refunded in full for the listed SELLING price on the item so I still made my intended profit!
In total, I was nearly able to double my money on my Amazon retail arbitrage adventure!
Would I do more Amzon retail arbitrage products again in the fiture? Yes, I would, it does take up a lot of free time but I think you really have to hit stores at certain times, e.g. closing down sales etc. and when you do find lots of great bargains make sure that you double down to make as much profit as possible.
Timing is key, you are probably better off doing one buying hit one a month etc. during a closing down sale instead of going from shop to shop everyday trying to find a bargain to make a profit on, you will end up being discourage and it will seem extremtly hard work for very little return.
My next aim will be to try and find products online to sell instead of travelling to shops, I will sign up to various toy store websites mailing lists such as Toys R us etc. to be notified of sales etc. this should then hopefully save me time but enable me to still get involved in this side hustle to earn some extra money without wasting to much time.
Looking to sell products on Amazon? We have a whole section to get you started here.