Many people who sell online already do retail arbitrage but may not realize it as the proper phrase or business definition makes it sound more formal than what it really is. Retail arbitrage there are two main ways that online sellers apply retail arbitrage today to grow there business and I will try to go into the details of both within the article.
First is the most classic and oldest form of retail arbitrage which is online seller who finds themselves at a big box store like Walmart or Target. From there you search the isles looking for clearance items, end of season items or highly discounted products and acquire those products at that low price. From there you turn around and sell the items online at eBay, Amazon or any marketplace. This form of retail arbitrage allows online sellers to acquire products fairly easily, at a lower price and a fairly assessable process to repeat depending on where you live, typically there are a number of big box stores around that you can drive within a few miles to hit a few locations and restock on a normal basis.
The challenges of this process is you do ultimately have to put your own capital out to acquire the products but at a highly reduced price so your entry level is really low but you still need to fork out the cash to get started. Additionally, you are not likely able to restock anything you ever sell since you cannot predict what will be on clearance and when this will occur to really plan a restock forecast. As a result, you really need to know what sells and what doesn’t online and at what price points so you buy what you can get your hands on when the clearances or discounts occur and make the largest profit possible. Nothing is more disheartening than only buying 1 item on clearance, selling it for a big profit but realizing when you go back to the store, all of the other units are gone and there is no more upside for you.
Retail arbitrage in this way also creates a branding challenge depending on how you go about it. If you plan to build a business around a specific category like fashion this limits how much you are able to find in fashion on clearance but would need to expand what stores you go to when you look to acquire more products. If you are less concerned about a specific brand and selling in a specific category you are able to create a wider net and buy any product that will move online for a profit which long term makes it easier to grow but limits your brand.
This covers the more traditional retail arbitrage model but as ecommerce has changed the way we do business, sellers have also adjusted how they work within this business model. Over the last 10 years online sellers have found a way to combine retail arbitrage and dropshipping to create a new business model. This version has a seller monitoring popular marketplaces like eBay and comparing prices of the same product on Amazon. If the same product is on eBay and is selling for $5.00 and also on Amazon but selling for $10.00 then this new version of retail arbitrage starts. From there, the seller makes themselves a seller of the ASIN or product on Amazon selling at $9.99 to win the buy box. When a customer buys the item, they take the customer information, goes to eBay, buys the item on eBay and has that seller ship it to the customer from Amazon.
In this fashion, they are really dropshipping from one marketplace to the other marketplace where other sellers are doing the lifting of storing and fulfilling the product. The online sellers work as marketers who market from one channel to the other and communicate sales data and buying the product on a different channel. The main challenge in this world of doing business is that prices change constantly so what sounded like a good deal to dropship within this retail arbitrage model turns sour quickly and you need to constantly monitor prices to make it work. Additionally you are trusting other third party sellers to serve as your fulfillment and if a customer has a bad experience you are stuck with the result.
At the end doing retail arbitrage is a classic great way to get started to selling online as it takes time for online sellers to create relationships with suppliers to buy products in discounts and this is an easy and accessible step to get started.
