Online arbitrage vs retail arbitrage: which is more profitable on Amazon?

What does Arbitrage mean?

Arbitrage simply means buying items at a discount on one or several marketplaces in order to resell them at a profit on a separate market.

Online vs Retail Arbitrage

With retail arbitrage, third-party sellers typically visit retail stores in search of clearance items, or reduced inventory that they can resell for a profit. A good example of this would be purchasing a £5 product at Tesco,  and then reselling it on Amazon for £20.

With online arbitrage, third-party sellers check online stores for deals, clearance sales so that they can resell on Amazon for a profit. You don't have to go anywhere if you find discounts online, you can buy the products at any time of day or night, and you can usually buy in larger quantities.

Black Friday shopping
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Amazon Arbitrage

Amazon arbitrage means: buy low (from online or retail outlets) and sell high on Amazon. The good thing about Amazon arbitrage is that you don't have to stick to one method - you can do both online and retail at the same time, as many sellers do.

On Amazon, third-party sellers who use arbitrage to source products to resell usually choose online arbitrage or retail arbitrage, also known as OA or RA.

RELATED: The ABCs of Amazon Online Arbitrage

Important metrics to consider when choosing arbitrage

Cost

The cost of transportation to stores (in some cases, from store to store) is one of the disadvantages of retail arbitrage. This cost will be calculated into the cost of purchasing your inventory which will lead to an increase in the selling price of the product or a decrease in your profit margin. While with online arbitrage, you don't have to go anywhere if you find deals online; you can buy them at any time and have them delivered to Amazon fulfilment centres.

Time

Arbitrage is very time-consuming. With online arbitrage, you can outsource deal souring to VAs, use product scanning tools like Buybotpro or buy deal sheets/ leads from platforms like One Good Deal.

Retail arbitrage is a lot more hands-on.

You spend a lot of time online finding deals, coupons, and sales before going to the retail stores, scanning barcodes on shelves, sorting the items you bought and packaging all the items properly. Also, as a result of the increasing competition, the fantastic deals might no longer be available before you get to the retail store although some retailers offer you the opportunity to order online and then pick up in-store.

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Quality of products

Some sellers argue that with retail arbitrage,  it’s easier to physically check the quality of the products that will be resold on Amazon. With online arbitrage, items purchased online can be transferred to FBA Prep Service centres where they are screened, properly packaged before shipping to Amazon fulfilment centres.

Selling through Amazon's online or retail arbitrage can be a lucrative business and you want to save time and increase profits. Although online arbitrage is more convenient and time-efficient, you can do both if it is convenient.

Online Arbitrage v Retail Arbitrage


Retail Arbitrage

Online Arbitrage

Transportation cost

High

Low

Storage cost

High

Low (with Amazon FBA)

Time

High

High

Quality of products

Verified on sight

Difficult to verify

Generally, online businesses are becoming increasingly popular, especially after Covid-19. Online arbitrage is growing in popularity, whereas retail arbitrage is declining. The main limitation of retail arbitrage is that you can only buy products physically from stores while in online arbitrage, you can buy from any website regardless of your location.

Quick Tips for Reselling on Amazon.

  • Take note of fees/charges

Make a quick cost analysis before deciding on products. What would the cost of obtaining the item be? Take into account Amazon fees, delivery, costs of labelling, packaging, shipping, and warehousing, among other things. You might even want to factor in average marketing costs in the margins for each product.

  • Offer a lower price on a product with a lot of competitors.

Offer a lower price for products that are highly competitive. This will help you stand out and increase your sales. A reduced price can help you get on the Buy Box and attract customers that are ready to buy. Selling a popular product can result in an inflow of sales to your Amazon seller account, boosting your seller ranking and metrics quickly.

  • Sell products with high quality

You want to make sure you're selling a decent quality product, whether you're selling a low-competition or high-competition product. Selling low-quality products will almost always result in high return rates and negative feedback, which will harm your seller account in the short and long run.

  • Keep track of price changes and take advantage

Keep track of an item's price and rank history with Chrome browser extensions like Keepa and CamelCamelCamel so you can profit as quickly as feasible. Avoid items with unusual or rapid price increases because this usually means less or thinner profit margins on Amazon.

  • Use Fulfillment By Amazon (FBA)

FBA is one of the simplest ways to improve your Amazon ranking while streamlining your operations. FBA will take care of stocking, storing, picking, and shipping products, as well as customer service and returns. This allows you to devote more time and resources to sales and marketing.

Be extra careful when sourcing

While sourcing for products on sale that you can resell on Amazon, be extra certain to dot your i's. One tiny detail could cost you money if you don't take the time to crosscheck. For example, a product listed at the source could look just like an Amazon listing but the material might be different or size. If you deliver an item that is different from the Amazon listing, Amazon could suspend your account.

One Good Deal Team

One Good Deal Team