Ecommerce expands and changes daily – so does the way we tend to sell and buy online. As more businesses enter the industry, sellers adapt their business practices in an effort to remain competitive and in demand. One strategy more and more sellers are taking on is the practice of retail arbitrage.
What is retail arbitrage?
Retail arbitrage is described as the following process: “you buy items that are on sale for less at your local store than they’re selling for online, and then resell them on the web for a profit.”
The concept is essentially to “buy low locally, sell high online.”
Retail arbitrage is a selling strategy used by liquidators, resellers and thrifters. If you aren’t already dabbling in retail arbitrage, many successful arbitrage sellers suggest starting small, and working your way up to a larger inventory. Here are the top 5 ways to nail retail arbitrage and grow profits.
1. Check out mom and pop stores first.
Retail arbitrage expert and author of aLittleSliceofthePie.com, Daniel Johannes, warns against sourcing all of your products from major retail chains. You can definitely find some great stuff at big box stores like Walmart or Target…but your competition can (and will) do the same. Seek out places that no one else has heard of to find unique, one of a kind items. These will be your high-profit/low-competition winners. Garage sales and auctions are other great sourcing options. Check out online auction sites like auctionzip.com.
2. Watch competitor prices.
Use historical pricing data to determine how you can price your arbitrage items. Tools like CamelCamelCamel.com are free sites that allow you to see how competitors have priced items in the past.
3. Know the rules.
Being aware of all of Amazon’s policies is a necessity. This is not to scare you off, but to protect you from accidentally miss-stepping and breaking an Amazon rule. Familiarize yourself with the rules and regulations, and join Facebook groups for other arbitrage sellers. Ask questions, and learn from the experts by interacting with them online. To get you started, join this Facebook group. It’s run by Katharyne Shelton, a successful arbitrage seller and the expert who provided tip number 4.
Bundling products is a great way to come out ahead of competitors. Retail arbitrage is highly competitive. A lot of sellers are figuring out how to get in with manufacturers and work with them directly, effectively allowing them to undercut others. To fight back, bundle items creatively. Competitors won’t be able to copy you (at least, not easily), and buyers will be willing to pay more for a good bundle that combines a few of the items they are looking for. Pro-tip: look for an ecommerce inventory software that can track the SKUs of bundles and its individual products across your marketplaces.
5. Get chummy with thrift store managers.
Successful seller and author of HonestOnlineSelling.com Jordan Malik thinks one way to fail at retail arbitrage is to expect thrift store owners to tip you off when good products arrive – without establishing some sort of relationship first. If you can form a good relationship with your local thrift stores, you can work out a system where they let you know when hot products arrive at their store. This will take time – you can’t steward this kind of relationship overnight. A good place to start would be to visit your local thrift store, explain a little about your business and how it works, and maybe bring a plate of cookies for good measure. Build that friendship over time, and you may find a great partner in that manager.
If you are new to retail arbitrage, follow expert suggestions and start small, listing a few products at a time. With these 5 tips, you should feel confident growing your online business and winning more sales. But be careful, if you make some of these common retail arbitrage mistakes, instead of making easy money you’ll be losing it.
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