One of the best feelings in Retail Arbitrage is having a trolley full of profitable products, which you can later list on your Amazon seller account for a massive profit.
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You’ve successfully managed to source, and now all you simply need to do is pay for the items and get them home.
That’s my retail arbitrage uk guide in a nutshell, but I’ll be going in-depth today explaining everything that you need to know & be aware of. Including the good and bad sides to retail arbitrage. This is my Retail Arbitrage for Beginners handybook.
This guide has been created with the United Kingdom market in mind. There are lots of guides available that discuss the US Markets, but these operate completely differently to UK markets.
What is Retail Arbitrage? How does it work?
Retail arbitrage is one of the most effective ways to make money on Amazon. It’s not to be confused with Online Arbitrage, although they do both share a similar method for obtaining products.
Retail arbitrage is the process of entering a retail store, finding discounted products and purchasing them with the intent to list these on Amazon for a profit.
An example of this would be purchasing a Nivea Make-up product for £5, listing and selling on Amazon for over £20.
It’s not always as easy as that, as some discounted items might not sell well on eBay. However, there are tools such as selleramp which will make your experience much easier. I’ll discuss this a little later on.
There are so many retail stores in each town, each of these run promotions to try to get more customers in their shop. We take advantage of this, by purchasing the promotional items that are well discounted.
It’s a really fast way to build capital, as you can make between 40-80% return on investment with ease, as we can quickly sell the items for a higher price. How’s that for a business model?
The Retail arbitrage business is a funny one, but it’s a really profitable one too.
How to get started with Retail Arbitrage
I won’t advise you to just get in your car and drive to the shops, like most guides do. This is reckless, and will lead to purchases that simply don’t sell.
You can’t buy everything that’s on offer and expect to make a profit. You should also check you aren’t gated!
You will need an idea of what to look for. This will all depend on what store you plan to go to. I’d always recommend a retail park, as there’s multiple niche markets which you can then tick off.
On your first trip, I’d probably go to a supermarket. Sainsbury’s is often a good one and often has Lego sets on offer. Once you’ve sifted through the offers there, you have the beauty section, electronics and more. (Some also have an Argos inside, for extra little purchases!).
This is where SellerAmp will come in really, really handy. For this part of the tutorial, I’m going to head to Smyths. I’ll struggle to take pictures etc, but I’ll try and document it, so that the whole process is easy to understand.
Retail Arbitrage Tutorial: How does Retail Arbitrage Work?
I’ve seen online that Smyths is having it’s usual sale, where specific items and sets are being reduced. This will bring a chance for some profit, providing that the right sets are on sale.
I can’t possibly have the knowledge or every single thing in Smyths; so I turn to an app called Selleramp.
You’ll still have to do the leg-work in store. This consists of finding the items with increased discounts, as this can be even faster profits for you. If you also have a good understanding of retiring toys, such as Lego sets, this could work to your advantage.
I have walked in to Smyths and found a few toys with a retail of £69.99, on sale for £49.99. This is the Lego 60216 set. I wasn’t sure if this set was retiring etc, as I don’t have a great understanding of Lego.
However, I followed the typical process and scanned the barcode using Selleramp.
This was a great find. There were only three sets on the shelf, but I decided to take all three of these. It wasn’t a direct success though, before this I picked up three sets which offered under 15% return on investment, which is my cut off point.
I also found another set, which offered 35% return on investment, but would have been a complete pain to ship out. I decided against this one too, but I wish I had picked it up now!
This is how easy Retail Arbitrage can be for you. All I’ve done at this point is walk into Smyths and scan some items. You can do this in literally every shop on the high street.
Another thing that I like to do, is check their Home Delivery availability when I find a good set. In this instance, I could also add one to my basket that would be delivered to my house, free of charge. (Now this is Online Arbitrage instead of Retail Arbitrage), but when there’s a chance to make money they go hand-in-hand!
I will admit that it can feel a little awkward to scan product barcodes in every shop. This is no problem though, as on SAS you can enter the product name instead. This would look less suspicious and more like you were asking someone about a gift idea.
This is the day in the life of a retail arbitrage seller, it doesn’t take much time at all and you can easily access hundreds of retail stores every week.
It’s worth noting at this point that you don’t need to use Seller AMP SAS, if you prefer to use a free method. It’s not as effective, but it works.
You can use your Amazon Seller App to work out the maximum price that you can purchase the item for. However, it’s not automated, and you miss some vital info such as the Sales Rank, Units Sold per month and more.
Retail Arbitrage Strategies: Products to Focus on
The most successful items to purchase would be things such as Lego, Playmobil etc, but there is also so much more that you can search for.
If you can see a store with a good sale on, it’s always worth checking these out for sure. However, that doesn’t mean that you should ignore normal retail price products. Some things sell consistently well, because there are people that can’t go out to a local town.
If you’re just starting out, I would focus on items with higher profit margins, which will allow you to scale quickly. You’ll be surprised at how fast the scaling happens, I remember going from 20 units to 500 units on Amazon within 3 weeks.
Is Retail Arbitrage illegal?
Retail arbitrage isn’t illegal. However, there are certain brands out there that don’t take kindly to resellers. Some have IP claims against their brands, which will physically stop you from being able to sell on Amazon. Again, Selleramp will tell you all about this, before it becomes an issue for you.
Although it’s legal, it’s frowned upon by quite a lot of the population. Scalper, Penny Pincher and Con-man will be the first thing people think if you have two or three trolleys full of lego. However, it’s also worth noting that it’s a legitimate business model. Otherwise, Amazon wouldn’t allow FBA for non private label businesses.
In the same way, there is no 100% guarantee that your items will all sell for a profit. So although it might seem ethically wrong to flip items for a profit, you’re running a very small calculated risk when doing so.
In addition to this, you’re providing a service. You’re allowing people to purchase and receive next day delivery on items, meaning they don’t need to leave their homes.
In many ways, you’re as much as a ruthless profiteer as they are lazy!
I’ve never been stopped in retail stores from physically purchasing items, but there is a culture in the UK that nobody really cares. I’ve had a few funny looks, but that’s normal when purchasing 20-30 of the same toy.
Benefits of Retail Arbitrage
- It’s a genuine low-risk way to open your own retail arbitrage business.
- High Profit Margins, with a Fast Turnaround on Sales
- It’s an easy way to make money
- You can start with as little or as much budget as you have
- There is no limit to what products you can source and sell
Difficulties with Retail Arbitrage
- It can feel like a constant strain to source more stock
- Gated categories can slow sales down
- It can feel uncomfortable in stores when you have lots of inventory
- It can be a little time consuming (especially if you have a trip where you fail to source)
- You have to be prepared to travel far to secure many items
Is Retail Arbitrage better than Online arbitrage?
I’ve always felt a little bit awkward when conducting retail arbitrage. I don’t mind looking through clearance and sale products, but I’ve just never really liked the retail arbitrage strategy of buying lots of the same item. In the above example when I purchased the sets from Smyths, I received funny looks.
I suppose at the end of the day it doesn’t really matter, it’s only a look. However, I can see why people do prefer Online arbitrage. This is completely stress free, even if you don’t manage to source any stock. You can complete many online stores at a much faster rate. However, order limits and increased competition from other arbitrage sellers means this can also be difficult.
Vital tools for Retail arbitrage sellers
I really would advise for you to ‘tool up’ if you’re heading into store. You don’t want to go in blind and hope that you’ve purchased an item that’s profitable. You need to be sure that these product listings are good and the sales history will tell all.
In my tutorial, I used SellerAMP which showed me all of the information that I could possibly want to know. The most important; it told me exactly what the maximum price I should pay is. Keepa is also another massively affordable tool, with others such as Jungle Scout and Helium10 more premium alternatives.
I’d always ensure that you keep you receipts, so you know exactly how much you spent which will be required for your cogs sheet.
Is Retail Arbitrage legal?
Retail Arbitrage is 100% legal. Amazon Sellers have to register for a Professional Seller Account in order to start selling and pay taxes on profits, so it’s not a ‘backdoor scam’ or illegal at all. There is a section of the community that belives it’s not 100% ethical, as buyers are taking in-demand items and selling them.
However, this is the same for any business that makes money. Kwik Fit don’t sell you tyres for the same price that they buy them for!
Retail Arbitrage Guide: Conclusion
This marks the end of the retail arbitrage sellers guide. If you can remember to stick to strong selling products with a good profit margin, this will help you to make a strong foundation for your FBA business.
It’s also definitely worth checking out any clearance items or bargain bins, as you can find oddities here that can easily double your money on the Amazon marketplace.
If you’re looking at ways to automate your sourcing, I’d definitely look at Source Mogul or Selleramp. These are almost hacks in the FBA world, efficient tools that will save you so much time. Don’t forget to view my Retail Arbitrage Tips too.