If you’re looking for a quick, easy, and low-risk method of becoming a third-party Amazon seller, then you’ve come to the right blog. Amazon arbitrage is described as one of the easiest ways to sell on the platform, and we’ve made it even easier, with our top eight tips for identifying the right products for Amazon arbitrage.
What is Amazon arbitrage
Amazon arbitrage, also know as retail arbitrage, is a product sourcing method where you buy an item from a retailer to then sell at a higher price on Amazon. For example, if your local Walmart is selling a 10-pack of pencils with 50% off, you could buy these for $5 and sell them on Amazon for $10.
Bonus content – sell on eBay? Check out this guide to sourcing products for eBay.
The obvious benefit of arbitrage is profit, especially if you snap up a bargain like the one above. However, there are many other benefits of selling via the arbitrage model, including:
- Quick route to market – you don’t have to wait for design, manufacturing, or shipping
- Low startup costs – you buy the product and sell on
- Reduced marketing effort – products by known and established brands come with built-in customer trust and exposure.
Tips for identifying the right products for Amazon arbitrage
It sounds too simple to be true, and in some respects, it is. Finding the right products for Amazon arbitrage is much more than finding a bargain.
For example, those pencils at Walmart might be discounted because they didn’t sell very well; existing sellers on Amazon might already be selling the pencils at $5; or brand restrictions mean you can’t sell them on Amazon at all.
So, how do you ensure that you identify the right products for Amazon arbitrage?
1. Invest in the right tools
You want to find out as much information as possible about your potential product; therefore, you need the right tools for the job. This includes:
Amazon.com gives you plenty of relevant information about a product, including information on current sellers, prices, customer reviews, and stock levels.
Amazon seller scanner app
An Amazon seller scanner app enables you to scan a product’s barcode to access more detailed information about a product, including performance, FBA prices, sales rank, and weight.
Finally, Camelcamelcamel is an excellent tool for filling in any gaps missed by Amazon or your seller scanner app, including a product’s pricing history and details on out of stock sellers.
2. Compare prices
Product price is the first piece of information you want to compare. What you’re looking for is an item that you can buy cheaper from a retailer than on Amazon. Usually, this happens when a retailer has a discount, clearance, or multi-buy offer on an item.
Normally, a decent ROI is achieved either by finding a heavily discounted item or by buying smaller discounted products in bulk.
3. Check for any restrictions
Next, it’s necessary to check that you’re allowed to sell the item on Amazon. There are two forms of restriction on selling items on Amazon:
Some products are prohibited by Amazon or prohibited for resale by the manufacturer.
Known as Amazon restricted categories or gated items, some products require prior approval from Amazon before being sold. You can read more about these in our guide to Amazon restricted categories.
4. Suss out the competition
Chances are, someone is already selling this item on Amazon, so it’s necessary to check your competition at the top of the search results. The main factors you want to consider are:
- Price – are they offering the RRP, or have they matched the price you’ve found?
- Shipping – do they offer Amazon Prime 2-day deliveries?
- Customer reviews – are they ranked highly on customer service and delivery times?
- Amazon – is it already sold directly by Amazon?
Analyze this information to check that you can beat other sellers on price and on anything else such as customer service or shipping. Never forget that your potential competition can lower their prices to match yours, so always look for an additional USP.
5. Analyze customer reviews
A competitor’s customer reviews will also give you greater insight into the product’s potential for future sales, especially if there are comments or complaints about quality. Be sure to take note of review dates – this will tell you how often the product sells and whether interest has recently dipped.
6. Check stock levels
Even if the competition is pretty solid, you may still be able to compete if their stock levels are low and running out. A quick hack for checking a competitor’s stock levels is to add a product to your Amazon basket and increase the quantity to 999 at the checkout. This should return an error message telling you how many items are left in stock (if it doesn’t be careful not to hit buy!)
7. Calculate storage and shipping costs
If you’re considering buying a bargain product in bulk, it’s important to consider storage and shipping too, especially when calculating your ROI. If you don’t currently have the space to store items, you may want to consider using an outsourced fulfillment provider to handle excess stock.
It’s also crucial that you don’t skimp out on shipping speeds when selling via Amazon arbitrage. The main reasons that shoppers are willing to pay more for an item online that in-store are location and convenience. Either they live too far away to reach the store or they’d rather shop from their sofa. Either way, 2-day delivery is still key and can be achieved through FBA or Seller Fulfilled Prime.
8. Look for an extended return window
Some retailers offer extended return windows for customers signed up to their loyalty program or membership scheme. If you’re unsure of a product’s potential to perform, consider paying for an extended return window that allows you to return a product should it not sell.
And that’s how you identify the right products for Amazon arbitrage. It might sound like a lengthy process, but once you get into the swing of things, you can complete these steps in minutes using your mobile phone in-store. Good luck!