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If you are reading this post, you must be interested in online selling, selling on Amazon or Amazon FBA. However, to a newbie this term seems so grand or complicated or involved.
There are a lot of buzz around the internet about Amazon business and Retail Arbitrage (or RA) is one of the buzz word.
Actually Retail Arbitrage is not limited to Amazon business and it can be applied to any channel or platform.
So, let’s see what arbitrage really means. Arbitrage is actually a borrowed word from Finance, meaning the simultaneous buying and selling of securities or commodities in a market to profit the difference in price.
Applying this concept to retail or selling physical products, it means buying low and selling high. This concept is as old as trading itself.
Popular Channels For Retail Arbitrage
As I explained above, Retail Arbitrage is really buying low and selling high, so there is really no limitation as to where you can apply this concept into practice.
However, with the development of Internet, there are a lot of different creative ways you can buy from retail at a low price and sell high online.
Some of the popular ways to sell quick and easy are:
- Facebook Marketplace
With selling on craigslist, there’s no fees involved. Anyone with an email can list on craigslist to sell.
It is really easy to list on craigslist. Go to craigslist.com, simply follow the prompts to “post to classified” and complete all the required information.
Typically, the communication between a buyer and seller is through the craigslist email system. After the price is agreed upon, a mutual date and location is selected to deliver and pay for the item.
Usually a public location such as a coffee shop, parking lot of a big store or a designated exchange place at a local police station chosen by the seller is used to close the transaction.
Similar to craigslist, there is no fees to buy and sell on Facebook Marketplace. However, in order to use this service, both buyer and seller will need a Facebook account and the Facebook app on a smartphone.
Facebook Marketplace is only available as an app on mobile phone. It is the middle icon at the bottom of the app.
There’s no need to join the marketplace or anything. Once you tap on the icon, the marketplace opens up and it will default to whichever location you are physically at.
Click on the “Your Items” at the top right corner, follow the prompts on adding photos and description and immediately the listing will be shown to hundreds of people online in your vicinity.
When someone is interested on your item or has questions for you, they click on the message button and send you a message. Negotiation is done on the Facebook messenger until a price is agreed upon.
Just like with craiglist, the item is delivered and paid for at a location picked by the seller.
The first 2 methods deal with buyers from your locality. With eBay, you expand your potential customer base to all online customers who shop on eBay.
With eBay, you need to register for an account on eBay and a PayPal account. The easiest way to list an item to sell on eBay is to search for an identical or similar item on eBay.
Log in to eBay, in the search bar, type in the item you are selling. Scroll through the results and select one that is closest to the item you are going to sell.
Click on that listing, and click on “Sell Now” under the images. Follow the prompts of the form, fill in title, description, images, price etc.
The difference with this method is you have to ship the item to the buyer. But eBay makes it easy for you.
In the listing, you specify the dimensions, weight of the item and the method of shipping and eBay will provide you with the estimate of the shipping cost. You decide if you want to provide free shipping (i.e. you pay shipping) or the buyer pays the actual shipping cost.
You can also select if you want to ship internationally for foreign buyers.
Once you’re completed the listing, click “List it” and your listing is live!
When someone buys and pays for your item, eBay will send you notification and you will have to ship the item outt.
eBay makes it easy for you to ship with their preferred rates with United States Postal Service (USPS). You click on purchase postage (eBay will charge your PayPal account), then print out the shipping label. Pack your item and put the shipping label with postage on the package and drop it to a Post Office and that’s it.
eBay will send tracking confirmation to buyer and once the item is delivered your PayPal account will be credited for the sale minus the PayPal fee which is 2.9% + $0.30 for each transaction.
The last method I want to talk about is using Amazon to sell. Amazon is no doubt the largest shopping network in the world now and has the biggest customer base.
This method is a bit more involved than the other 3 but it has a lot more potential to scale and has tons of ready to buy customers.
With the Amazon method, you need to have a seller’s account. To sign up for a seller’s account, you will need an email address, a US bank account or a foreign country bank account accepted by Amazon and a credit card.
There is no monthly fee to sell on the Individual Selling Plan. A $0.99 per item plus referral and variable closing fees are charged per item sold. In total, the fees are roughly about 20-40% of the selling price depending on the price of the item.
Once you have your selling account set up, the easiest way to list is similar to eBay if the exact item is already listed on Amazon.
Search for the item on Amazon.com using the search bar, then click on “Sell on Amazon” underneath Add to Cart on the right side bar.
Input condition note (new or used), quantity, selling price and specify whether you want to ship the item to customer (Fulfilled by Merchant, FBM) or want Amazon to ship to the customer and provide customer service (Fulfilled by Amazon, FBA).
Click on Calculate Fees and then click on Submit Listing.
If you select FBM, the process is very similar to selling on eBay. Once an item is sold, Amazon will notify you via email and you have to package and ship the item to customer according to the shipment method customer selected.
If you select FBA, after you create the listing, you have to send in the item to Amazon warehouse using a shipping label Amazon generates. However, once you send in your item to Amazon warehouse, you don’t have to deal with it anymore. When a customer purchases the item, Amazon will take care of shipping and related issues.
Amazon will deposit cash to your bank account every 14 days on a schedule net of fees.
So now that you know where to sell, question becomes where do you buy low?
Great question! There are really many ways to find items to sell and there are tons of courses, blog posts and podcast or even books dedicated to this question.
For a newbie, the most risk free and economic way to get started are items that costs little or nothing to you in the beginning.
Look around your home to see if there are any things that is sitting there not doing anything. So often do we bought something and never use it. These can be useful for others.
You can also sell used items on all these platforms, you just need to sell it as used and specify clearly the condition and price as such.
Another way to get items cheap is at garage and yard sales or from a friend’s house.
When you exhaust the above ways to buy cheap and begin to feel brave, you can start going out of your house to a retail store. Check out the clearance and sales section to find profitable items. Items that can be sell high enough to cover your cost and selling fees.
So there you have it, a quick overview of Retail Arbitrage.
What about Amazon FBA Retail Arbitrage?
Glad you asked.
As explained above, you can sell on Amazon as FBM or FBA. In my Beginner’s Guide to Selling on Amazon post, I have discussed why FBA is the preferred method of selling on Amazon.
Doing Retail Arbitrage on Amazon as a FBA seller is the most preferable because
- it has the largest ready to buy customer base,
- fulfillment and customer service are taken care of by Amazon
- payment is once every other week
Due to the many benefits, Amazon FBA is a very viable business for working moms as it has low barrier entry and provides the flexibility a working parent craves. You can read more about why selling on Amazon is so lucrative in the beginner’s guide post here.
Now that you know what Retail Arbitrage is, there is no reason you shouldn’t try it. It cost you almost nothing to get started. It can be really fun and excited to have your first few items sold in the beginning.
Once you get a hang of the process, you can scale it and buy in bulk and make more money.
My recommendation is to take action. If it’s intimidating to do Amazon right away, try craigslist, Facebook Marketplace or eBay to build your confidence. This way you learn how to write a listing, take pictures and set price in general.
If you still want some free guidance on what to sell as an Amazon FBA business, I recommend subscribing to Jessica Larrew’s free 7 Day Email Course: Everything You Need to Know to Start Selling on Amazon. Jessica did a great job on discussing why Amazon FBA is a great business, where and how to look for products to sell and tool to use.
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