If you would like to understand Amazon FBA arbitrage, this article is for you.
In it, you will discover everything you need to know about Amazon FBA arbitrage, why it’s a good entry to reselling, and how to conduct the product research necessary to succeed in this type of reselling.
So, if you’re ready, let’s get started!
What is Amazon FBA Arbitrage?
Also known as “retail arbitrage”, Amazon arbitrage is a method of sourcing products where you purchase items from retailers and then resell them at a higher price on Amazon.
For instance, you might purchase a pair of sneakers on sale at your local Walmart for $40 and then resell them for $60 on Amazon.
The trick here is to take advantage of the price difference between two markets in order to make a profit and build your own reselling business on Amazon.
There are tons of places where you can find discounted products, such as the sale aisles of your local brick and mortar retailers, thrift shops, other online marketplaces like eBay, Craigslist, and Etsy, etc.
When you find products for resale online, it’s called “online arbitrage”. But, regardless of what it’s called, the process is the same:
All you need to do is to source products at a low price, and then resell them on Amazon for a profit.
Oftentimes, when people learn about retail arbitrage, the first question in their mind is:
“Is retail arbitrage legal?”
The answer is, absolutely!
Countless people are using this business model as a way to make money online.
Although some are using it to make a few hundred dollars to supplement their income every month, a lot of other people are making a full-time income using this method.
Why Is Amazon FBA Arbitrage A Good Entry To Reselling?
As with most other online business models, Amazon FBA arbitrage has massive competition, and in order to succeed, you need to be able to find ways to set yourself apart from the rest.
Having said that, Amazon FBA arbitrage is still a great entry to reselling.
Here are the reasons why:
It Requires Little To No Initial Investment
One of the main benefits of Amazon FBA is its low cost of entry. It requires very little capital to get started. You can start with $100 and find a ton of different items to flip.
It Offers Quick Profits
In addition to the low cost of entry, yet another reason why Amazon FBA arbitrage is great for those looking to get started in online selling is that it offers very quick profits.
Simply do your research to find the best products to resell that will move quickly, and ensure you an adequate return on investment within a short period of time. Some items can sell within minutes of being listed and you can see the profit in your bank account two weeks later.
There Is No Marketing Investment
As a reseller on Amazon, all you have to do is leverage the brand power of the product manufacturer in order to attract the attention of buyers. Amazon does the heavy lifting and you use that platform to reach your future customers.
Choosing products that already have an established brand presence and are in demand will help make it easier for you to make sales so you don’t have to spend hours on marketing strategies and tactics. Simply put, you can sell items on Amazon that are already being sold on
Product Research Is Necessary For Any Type Of Reselling
Here, we’re going to talk about one of the main determining factors of your online success as a reseller on Amazon: Product Research.
Product research is vital regardless of your reselling business model. The last thing you want is to experience supply-chain problems, inconsistent inventory, and a lack of control over your profit margins.
These are just a few of the many potential problems you could encounter – and each of them can be avoided by doing the necessary product research before diving into the Amazon reselling arena.
Using data for online arbitrage is one of the most important things you can do to achieve better results.
You can use data for online arbitrage, wholesale, private labels, and even proprietary products.
Having the right data at your fingertips will help you make the best decisions in every aspect of your Amazon reselling business, including the types of products to sell, the best pricing strategies, promotion strategies that work, and much more.
Below are 13 product research tips to help you succeed in Amazon FBA Arbitrage:
- Demand
There are countless products you could sell on Amazon. That being said, you need to make sure the products you sell are actually being purchased on Amazon.
That’s why this is one of the most important things to research before deciding on any product to sell in your Amazon retail arbitrage business.
The trick here is to find products with low BSRs (Best Seller Rankings). Lower rankings equate to higher demand for a product. For example, if an item has a BSR of 1, it means that it is the number-one seller for that category.
- Price
The products you want to sell should have a high enough price point that there is room for you to make some profit. However, you shouldn’t price your items so high that it chases away customers.
So do your research to find the middle ground where you can make adequate profits while still being able to compete with other retail arbitrage sellers on Amazon.
- Profit Margin
Profits are the main reason why anyone would take up Amazon FBA arbitrage in the first place. So, make sure each transaction you make gives enough profit to make each of your sales worth your while.
Some products offer higher profit margins than others (even though they may be priced lower).
Consider everything from the product cost, packing, shipping fees, duties, and taxes, to Amazon’s referral commission, FBA, storage fees, product returns, and more.
Ideally, you should try to come out with at least 25-30% of the product cost (or at least $5.00) per sale.
- Competition
Any time you launch a new product on Amazon, there are already tons of competitors on Amazon eager to lure away your customers.
And, with Amazon being the world’s largest online marketplace, you can be sure that there will be thousands of other sellers who are already established on the platform.
So, before sourcing or buying any products, first make sure you’re not competing against major sellers, including Amazon itself. Otherwise, you will likely never get the Buy Box which means you will be stuck with your inventory for much longer than you intended.
- Customer Reviews
Amazon relies heavily on customer reviews and feedback when deciding which products to show on the first page of the platform’s search results.
Buyers also tend to lean heavily on reviews from other customers as trust signals before making a buying decision.
If the top sellers for your chosen items have thousands of customer reviews, you are going to fight an uphill battle to get your own products seen.
- Seasonality
As a seller on Amazon, you need to know what kind of revenue to expect each month, quarter, or year.
This will be hard to determine if you are selling items that are in demand only seasonally on Amazon. So make sure you choose products for your retail arbitrage business that make sales steadily all through the year.
Although it may seem like a no-brainer (considering things like Christmas decorations, Valentine’s gifts, and Easter baskets), you’ll be surprised to learn just how many other products there are that have seasonal aspects you may not be aware of.
So make sure you do your research before choosing the best products to resell on Amazon.
- Weight
Since shipping is one of the factors that impact your profits as a reseller on Amazon, it’s important to ensure that you choose your products wisely.
When starting out on the platform, it’s a good idea to choose lightweight items over heavy or bulkier items since they are easier and a lot less expensive to ship.
- Listing Quality
The overall quality of your listing will be a major determining factor in your success (or lack thereof) in Amazon FBA arbitrage. It will directly impact the number of sales you make.
By following the best practices for listing your product on Amazon, you will be able to differentiate yourself from your competitors, and therefore increase your chances of making sales on your products.
- Product Photos
As previously mentioned, photography is crucial for boosting your sales on Amazon. Since people can’t see or touch a product, they rely on the images they see in order to help them decide whether or not the item meets their needs.
So make sure you always have high-quality photos that stand out and give the customers enough information to compel them to make a purchase. This will help you make more money and boost your bottom line.
- Manufacturing Ease
Although this article is about Amazon FBA arbitrage, it’s worth mentioning that if you want to sell a proprietary product, you should make sure that it’s something that you can realistically make or order without much hassle.
Always aim for simplicity rather than complexity because you may have to create several samples or iterations of your product before you find success.
- First Page Results
The first-page search results on Amazon typically look the same. For instance, if you conduct a search for a product like “kids crayons” or even “can openers”, you will likely see multiple top-selling products that are all exactly the same.
The search results will be dominated by big brand names and other big retail arbitrage sellers, but there’s really very little differentiation among all the sellers.
Stay away from such products where you will have to fight to get noticed on a page dominated by a major brand.
- CDI Opportunities
CDI stands for “customer-driven innovation”. If you want to source a product directly from a manufacturer, it’s a good idea to see whether or not you can improve on that existing product.
For instance, you can look for negative reviews on Amazon and other places online to see whether or not there are ways you can improve the product without driving up its price.
In such an instance, a little extra effort can go a long way in dramatically increasing your profits.
- Complexity
In the beginning, make sure you steer clear of products that have a lot of electronic components or moving parts. This includes things like televisions, washing machines, watches, etc. Avoid these as they tend to come with a lot of problems that result in returns or negative reviews.
Pro Tip: Tools like Tactical Arbitrage and ManagebyStats will help you gather and sift through data so you can gain helpful insights that will help you maximize your profits on Amazon.
Final Thoughts
And there you have it. Everything you need to know about Amazon FBA arbitrage. The information you’ve learned in this article will help you use data-driven insights to start and grow a successful Amazon reselling business.
