The past few years have seen significant growth in side hustles and the gig economy. It seems like everyone is looking beyond the traditional 9-5 job in search of greater opportunities and ways to supplement their income.
Retail arbitrage with Fulfillment by Amazon (FBA) is one of the many ways people are making a profit in the modern age. Here’s what you need to know about selling on Amazon.
What is retail arbitrage?
Retail arbitrage is the purchase of a low-cost item from a local retailer or supplier and reselling it for a higher price on Amazon to the global market. For example, someone who engages in retail arbitrage might find a deal on beach towels at their local department store as summer draws to a close, and pick them up for $6 a piece. As winter vacations pick up, they sell them on Amazon for $20 a piece.
The beach towel order is fulfilled by Amazon, who will take a cut to cover shipping and fees, then give the rest to the seller, who could potentially make a 150% return on their investment. With strategic planning and the right Amazon FBA tools in place, sellers can become very successful.
How to get started
The first step to starting FBA retail arbitrage is to open an Amazon seller’s account, which will be used as the virtual storefront through which to peddle your wares. Most newcomers and side hustlers will benefit from using the individual seller account rather than paying the fees associated with a professional account.
It’s important to note that if you plan on selling more than 40 items a month or if your business starts to scale up, you’ll need to upgrade to the professional account to remain in adherence with Amazon’s terms and conditions. Individual accounts pay $0.99 on each item sold, while professional accounts pay a monthly subscription fee and category-specific per-item fees.
Finding items to sell for a profit is a delicate balance between art and science, and may take some experimentation. The Amazon Seller App, when used with the right Amazon FBA app, can give a good indication of what items will and will not work by scanning the barcode in the store.
The Amazon Seller App will tell you if the item is eligible to be sold on Amazon and give a break down of how quickly similar items are selling by way of a sales rank. The lower the sales rank, the better, as it gives an indication of how many items in that category were sold since the last time this specific item was sold. Looking for items with a sales rank under 100,000 is a good starting point.
The app will also show you how much money you stand to make when you sell this item, breaking down the fees for shipping to Amazon, how much it cost you to purchase the item, and the sales fees.
Listing items for sale
Once you’ve determined that your finding will be profitable, it’s wise to purchase a small batch of the item. For example, between five and ten beach towels. When using FBA, you list the products on your seller account then ship them in bulk to the Amazon warehouse. You will have to enter the pricing. Additionally, there will be a section in which you must identify that you want to use the FBA program. From there, Amazon handles shipping the individual goods to the customers.
You will be taken through a shipping information screen. You’ll be given the option to print your own labels to apply to the products or to pay to have Amazon handle it. You will also have to approve your shipments, as Amazon will require you to send to different warehouses for distribution using their courier of choice.
Newcomers to the FBA program can expect to experience a learning curve and work at a loss until they get a better understanding of how everything works. Eventually, though, sellers can make thousands of dollars monthly using retail arbitrage.