A Little Webinar about Retail Arbitrage

So I did a webinar with Matt from The Secret Wealth Project, on the topic of Retail Arbitrage (buying stuff from shops and selling on Amazon). I’m always uncomfortable speaking in front of an audience (in person or virtual) but I quite like Matt and the fact we agree to disagree is cool. Only thing I’ll add is I should of answered “There’s only one King of the North and his name is Snow”.

I don’t normally waffle, so no idea how this lasted longer than an hour. If you watch all of it you probably need a bit of help and do some more useful shit than watching videos.

Different Selling Business Models on Amazon

So I’ve been selling on Amazon for just over 3 years now. In that time I’ve made a fair few mistakes and successes. I’ll document a load of examples in future posts. For this post I’m going to explain some of the different business models that Amazon sellers are using today (this is more for folk that don’t sell on Amazon or are just starting out).

Secondhand Stuff

firstsales
Great way of learning the process, sell the crap you’ve got around the house that you don’t use or read anymore. I tested the waters by sending in some books and DVDs (see the screenshot of my FIRST sales). Looking at the prices I’ll have lost money on those (I was testing (or clueless about fees)). I know a few people that purely source stuff from car boots (garage sales to US friends) and do pretty well out of it. The biggest third party seller on Amazon in the UK is Music Magpie and I think they do ok.

Pros:

  • Very cheap to get started

Cons:

  • Not so easy to scale

Retail Arbitrage (RA)

This is were you go out to physical “retail” stores, find stuff that you can buy and sell for a profit. At first it seems odd that you can buy something from a shop and then sell it on Amazon for a profit (even when you take all of the other fees and costs into account), but it’s very possible and lucrative. Major stores often do sales and 3 for 2 deals which means you can often find stuff cheaper than a wholesaler.

Pros:

  • Can be very profitable
  • Pretty easy to do
  • Cool if you enjoy shopping

Cons:

  • VERY time consuming (traveling)
  • Location dependent
  • Painful if you hate shopping
  • Not easily scaleable

I don’t enjoy shopping but it’s lucrative so I employ somebody near enough full time to drive around in a white van and shop (she loves it (I think)).

Online Arbitrage (OA)

This is the online version of RA, so you do your shopping online. Probably one of the most common business models on Amazon (I don’t have statistics to back that claim up with, it’s just from what I have noticed when speaking to other sellers).

Pros:

  • Location independent (can use prep centres)
  • Scaleable
  • Easy to find suitable suppliers and products (this is also a con)
  • Easily out-sourceable with VAs (Virtual Assistants)

Cons:

  • As not much skill is needed there’s LOTS of competition
  • Penny price wars
  • Not always repeatable (you need to keep finding new deals)

Flipping

This is just bizarre, Amazon prices fluctuate a lot. When the price is low you buy off Amazon, send the stuff back in to Amazon and sell at a higher price. I used to do this a bit when I first start selling on Amazon. I’ve made a fair few grand profit from it. I will post examples of some of these in a future post. You can also do euro flips, were you buy from co.uk to sell into the European marketplaces and vice versa (I used to buy light sabres from Amazon Germany to sell on amazon.co.uk).

Pros:

  • Pretty easy
  • Can be highly profitable (I bought things for £5 and sold for £32)

Cons:

  • You are restricted to what deals are out there
  • Cannot buy with a prime account and quantities are often limited (3 or 5)
  • Not scaleable
  • Feels like a grey area (to me) that Amazon could slam the door on

The Keepa graph below shows a flip I did, were I bought at ~£7 and sold each unit for ~£20. As an example of some of the random stuff I sell it was a soft hammer (with hindsight I wouldn’t of bought that as they took ages to sell).

Wholesale

This is now getting to the more ‘traditional’ way of selling businesses. You buy the products from a wholesaler and ship them to Amazon to sell.

Pros:

  • Scaleable
  • Repeatable
  • Proper invoices
  • Finding suitable wholesalers is hard (yes that’s a pro)

Cons:

  • Often lower profit margins
  • Not all wholesalers will work with Amazon sellers
  • Anybody can find easy to find wholesalers (competition)

Own Products

If you already sell your own products then adding them to the Amazon marketplace should be a no brainer. This is not something I do but have advised a few different businesses about it.

Private Label (PL)

In simple terms, you buy a generic product from a manufacturer or supplier (often imported from China), put your own brand on it and create a new Amazon listing. Promote the listing and sell for a profit.

Pros:

  • Highly scalable
  • You are creating an asset
  • Can be very profitable
  • Own the Amazon listing so should be no competition on it

Cons:

  • A relatively high investment
  • High risk (if it doesn’t sell you could be left with a lot of stock)

I’ve done a bit of PL with other people before and this is an area I am actively growing into at the moment.

Drop Shipping (DS)

I’ve got no experience of drop shipping on Amazon (I have on other platforms). This is basically when you do not physically have the product but still sell it. When somebody buys from you, you get your supplier to ship it to the customer. I know a few people that do this (some very successfully)

There are probably other models that I don’t know about (yet) but if you’ve ever wondered how third parties sell on Amazon they will typically be using one or more of these methods.