What is retail arbitrage?
Is retail arbitrage legal?
Can you still do retail arbitrage in 2022?
These are just some of the questions I am often asked about my retail arbitrage business.
I see many posts on social media about how retail arbitrage is dead and the market is saturated.
These posts usually come from the "gurus" that just happen to be selling a course for a different strategy such as private label or affiliate marketing.
Of course, their strategy is the only one that works. Okay dude...
I've only been doing retail arbitrage since early 2020, but I can say with absolute confidence that it definitely is not dead.
In this article, I hope to answer some common questions about retail arbitrage so you can decide whether it's the strategy for you.
My answers are based on retail arbitrage UK. Although I know that this strategy is also popular in the US, some of the information may differ slightly.
Please note that this post may contain affiliate links, which means I will earn a small commission if you decide to make a purchase through my links, at no additional cost to you. Any information contained in this post is for general informational purposes only and does not constitute any form of advice or recommendation.
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What is Retail Arbitrage UK?
Retail arbitrage is the act of purchasing products from retail stores and selling them somewhere else for a profit. It is often known as reselling. The purchasing can be done online or in-store, but the former is often called Online Arbitrage and is my favourite way to source products. Selling the products is usually done on an e-commerce platform such as Amazon, eBay or Shopify.
Is Retail Arbitrage Legal?
Yes, retail arbitrage is perfectly legal; I am not aware of any UK law that says you cannot purchase retail products to resell.
There are a few issues caused by this strategy that we will address later on, but nothing that should cause too much trouble.
Is Retail Arbitrage Dead in 2022?
You may have heard that the market has become too saturated with sellers and that retail arbitrage is no longer profitable.
I can confidently tell you that this isn't true.
I myself am earning a comfortable profit and growing my business every day. I have a clear plan on how I am going to scale up to a 7-figure business and foresee nothing that could stop this from happening over the next few years.
Can You Do Retail Arbitrage on Amazon?
Amazon is the platform that I use the most and I believe it is the best e-commerce site for my retail arbitrage business.
Amazon offers a few key advantages over other platforms:
It is the largest e-commerce platform in the world and has the largest customer base.
You can sell your products through existing listings with a proven sales history.
The convenience of Amazon Prime means that customers are often willing to pay more.
The Amazon FBA programme means that sellers do not have to fulfil their own orders and can take a much more hands-off approach.
This last point was the main reason I based my e-commerce business around Amazon. With Amazon FBA, I do not have to worry about stock storage or the fulfilment of orders.
I send my stock to Amazon in bulk once per week. They fulfil all of my orders, leaving me with more time to source stock and focus on growing the business.
I simply sit back and watch the sales roll in on the handy Amazon Seller App.
Is Retail Arbitrage Allowed on Amazon?
It certainly is. There is nothing in Amazon's Policies that state you cannot resell retail products.
Amazon is 100% aware that many of its sellers have adopted this business model.
There is a debate that often gets very heated among Amazon sellers, and that is over whether retail products can be sold as 'new' condition or if they should be sold as 'used'.
This issue arises because Amazon policy states that an item in 'new' condition must still have all the correct warranties from the manufacturer.
Sometimes, the warranty is held by the first retail buyer but is not transferred through any subsequent retail sales.
To protect against this issue, you could check that the warranty is transferrable for each product that you purchase.
But, if I were you, I wouldn't worry about it. I've never had this issue with any of my products and I've never heard of any other sellers having this issue either.
Related post: How to Make Money Online with Amazon.
Can You Do Retail Arbitrage on eBay?
Retail arbitrage also works on eBay.
Like Amazon, eBay benefits from a huge customer base, which means it's easier to get your products seen.
When using eBay, you will have to create your own product listing. This requires more effort but gives you more control over the content.
I mainly use eBay for flipping car boot sale and charity shop finds as the platform is well suited to selling used goods, unlike Amazon.
Another great strategy is eBay dropshipping, which is also a form of arbitrage. Although you should ensure that you only use dropshipping suppliers for this and not retailers.
Read our how-to guide here: 2022 Guide to eBay Dropshipping
Can You Do Retail Arbitrage on Shopify?
Personally, I've never used Shopify, so cannot answer this question with any experience.
Shopify allows you to build your own online retail store with your own domain, which gives you some advantages over online marketplaces and some disadvantages.
Since you will sell your products on your own website, you do not benefit from a large customer base as you would with Amazon or eBay - you need to generate site traffic.
This does come with an upside: you will not be competing directly with other sellers on the same site and so will have more control over the sale price.
Can You Really Make a Profit with Retail Arbitrage?
I was also a bit sceptical when I watched my first video on retail arbitrage - especially when they said I needed to find products that sold for 3 x the price on Amazon.
However, when I set out to source my first products, there they were.
The first product I managed to source was a Baylis and Harding gift set that was on offer at Superdrug for £4.99. The Amazon price was £16.99!
I was so excited, I bought 10 of them (it's not recommended to purchase this many of your first product).
They sold on Amazon for £16.50 each leaving me with around £6.59 profit (£65.90 in total) - a return on investment of 132% which is incredible.
I'm not saying every product you find will be like this, but it happens from time to time.
Most of the products I source are in the 30-60% return on investment range - these are much more common. I don't usually buy a product with an ROI below 30%.
How Much Money Can You Make with Retail Arbitrage?
As explained in the previous answer, you can make around a 30% return on investment on most products.
How that translates into a weekly or monthly profit really depends on how much time and money you put into it.
If you put in the time and effort and have around £1000 to start with, there is no reason that you couldn't produce a full-time income of £1500 per month within a year or two.
I know people that have done this in a shorter time and people who've taken longer.
It really depends on how much capital you have to start with, and how much time you commit to it.
Check out the tips section at the bottom of this page if you want to be one of the quick ones.
Where Can I Source Retail Arbitrage Stock?
You can find product deals at any retail store, even the ones that sometimes seem expensive.
Check the clearance sections in-store and online for some of the best deals.
Charity shops and car boot sales are great for used products to flip on eBay (used books also sell very well on Amazon - this is how I started).
Supermarkets do some great deals and stock a wide variety of products.
I often find good products at discount stores that are not on clearance or on offer. These are the best products as they can be purchased over and over again.
Which is Better, Retail or Online Arbitrage?
Retail arbitrage (shopping in a physical store) is often less competitive because you're only competing with other sellers in your area; sometimes you find deals in-store that are only available in-store and not online.
The chances that a local deal was found by another arbitrage seller is quite slim and so you have an advantage.
However online arbitrage is still my preferred method.
I don't like walking around shops scanning items; I find I can scan items much faster from my computer and it's a more relaxed environment for me.
That's just personal preference.
If you find a good deal online, you can often pick up a larger quantity than you could in a physical store.
However, you should also factor in delivery costs when ordering online.
Can You Scale Retail Arbitrage?
Retail arbitrage is a highly scalable business model.
With the tools and services available today, it's possible to completely outsource your arbitrage business, leaving you free to work on the most important tasks.
The fastest way to scale is to reinvest all profits back into the business; keep building up your capital until you're making a comfortable profit.
When you find that there aren't enough hours in the day to complete all your tasks, it's time to outsource something.
Here are some of the tools I use in my business:
Product Analyser A product analyser is a programme that plugs directly into the Amazon product page to show you historic data such as price, BSR and number of sellers. I use BuyBotPro because it can analyse a deal in just a few seconds, based on my specific deal criteria, making sourcing much easier.
Repricer Repricing software automatically adjusts your selling prices based on your predefined criteria. A good repricer should increase both sales and profit by adjusting your price in line with the competition. I use an algorithmic repricer called ProfitProtectorPro. It understands the Amazon software and works with it to give me a greater share of the Buy Box, increasing my sales.
Deal Sheets Deal sourcing used to take up most of my time, and I didn't particularly enjoy it. With my deal sourcing service, I get around 10 deals sent to me daily. All I have to do is a quick check to make sure they meet my criteria and order them. This frees up hours of my day that I can now spend either sourcing more deals or catching up on other admin tasks. The downside is that the same deals are sent to other sellers as well, which has the effect of flooding the market and lowering the Amazon price for a while. The deal service I use is called Online Arbitrage Deals.
Here are some tips based on my 1 year's experience selling on Amazon.
Hopefully, they will help you to progress to where I am in less time than it took me.
Reinvest all profits back into the business - when starting, cash flow can be an issue and waiting for items to sell so you can purchase more stock is a pain. Do yourself a favour and make sure you invest every penny back into more stock.
Start as a sole trader rather than a limited company - this will save you money on accounting fees (I do my own accounts currently - it's not that difficult). Also, as a sole trader, and if you use cash-basis accounting, you can reinvest your profits without paying any income tax (up to a certain point). You only pay tax when you keep the profit back for yourself. Please seek your own tax advice on this rather than take my word for it, I'm not an accountant.
Get a repricer early on - you cannot constantly keep an eye on your amazon prices 24/7; they are up and down constantly. ProfitProtectorPro will ensure that you don't miss out on sales, but will also make you more profit as well. It pays for itself.
When starting, look for faster-selling products - when deals are in short supply, it's tempting to go for a high profit, slow-selling product. Try and stick to the quick sellers; it's better to take a 30% profit and have your money back in the same month than wait 6 months for a 100% profit. You need to focus on cash flow to grow faster.
Go wide and not deep - if you find a good product, it's tempting to buy 10 of them as I did with my first product. It doesn't always work out so well; prices can crash, Amazon can decide to restrict the product - it's a risk. If you have £100, it's better to buy 10 different products at £10 each, than spend £100 on one product.