Our first article on retail arbitrage was received so well that we decided to call Ryan Grant from Online Selling Experiment to give you the exact tools and insanely actionable plan you need to start an Amazon retail arbitrage business in 2018!
Let’s get right down to business….
Ryan was recently featured on CNBC for quitting his job and focusing on retail arbitrage full time, we got a chance to team up with him and he did not disappoint!
In this post you’ll learn exactly how to get started with retail arbitrage from Ryan to finally start selling on Amazon.
Starting a Retail Arbitrage Business in 2018
The first step in starting with retail arbitrage is setting up your Amazon seller account.
You need an account to access a free app that provides you with the information you need to begin researching items on Amazon.
I recommend signing up for an individual seller account to start because it doesn’t have any monthly fees.
Click here: Open an Amazon individual seller account: Scroll down and sign up as an individual button as shown in this screenshot:
After clicking that link you will go through the process of setting up your Amazon account. Setting up your account should only take a few minutes, and then you will be able to sell products on Amazon.
GET THIS CHEATSHEET FOR FIGURING OUT PRODUCT WINNERS
The Amazon Seller App & How to Quickly Figure Out Product Selling Price
After you’ve setup a seller account, the first thing that I would recommend is to download the Amazon Seller App.
It’s free and directly available through Amazon.
You get details on the selling price, fees, among a few other details, of any product that is available on their website.
This is crazy:
It uses the camera on your cell phone to scan the barcode of any product, and will then show you the pricing and fee information for any item that you are considering selling on Amazon.
If you haven’t yet setup a seller account, then there’s another option that doesn’t require a seller account.
Check out the Fulfillment by Amazon Revenue Calculator and get the fee details on any item. Here’s a look at an example product:
If you go to the Fulfillment by Amazon Revenue calculator, you will be able to search for any item that you are considering selling on Amazon.
Enter the price (red arrow)
How much it will cost you to ship to Amazon (black arrow),
How much the product costs you (green arrow).
The calculator displays exactly how much you pay in fees, and most importantly at the bottom it lists exactly how much profit you can expect to make on that item.
I recommend running every single item you sell on Amazon through this calculator and the Amazon Seller App.
With calculators like this available, you should know exactly how much you can expect to profit on every item that you sell.
Now it’s time to find some items to sell:
Finding items to sell via Retail Arbitrage
Let’s do a quick overview of how to start with retail arbitrage:
- Download the Amazon Seller App
- Create an Individual Amazon Seller Account
- Now we can start looking for products
After you have the app installed, go to a local big box store in your area.
Wal-mart, Target, Home Depot, Toys R Us, Kmart, Walgreens, or any similar store will work. Once you are in a store, look for a clearance section or aisle similar to this:
This example shows a Walmart clearance aisle.
How to Use the Amazon Seller App
Open the Amazon Seller App, and use your phone’s camera to scan the barcode of the products in the clearance aisle.
After scanning a product, you should see a screen like this:
On this screen you want to check for 2 things right away.
- The first is to make sure you are eligible to sell the product on Amazon under the selling eligibility section.
- The second thing to look at in the left hand corner is the sales rank.
On this particular item we can see that the sales rank is 60 in the toys category, which is an exceptionally good rank.
The sales rank is a piece of information that Amazon provides that gives us an idea of how fast an item is currently selling on Amazon.
A full discussion of sales rank is beyond the scope of this post, but it’s important to know the lower the number the better.
For your first few trips, I’d recommend looking for sales ranks that are lower than 250,000. As you gain more experience you can definitely tweak this, but ranks under this range are a good starting point.
If the app shows that you are eligible to sell the item, and the rank is less than your threshold, then you want to check and see if the item will provide a desirable return on investment.
To do that, click on the arrow on the far right of the app in the “gross proceeds” section. Once you do that you will see a screen like this:
You will be able to enter the selling price, your cost per pound to ship to Amazon (I use $0.50/lb), and how much you can purchase the item for.
In this example, I’m showing that I can buy this item for $10.
Here’s the deal:
You can’t have a business unless you’re profitable.
So our goal is to make sure that we’re selecting products that give us the best chance at a successful business.
Check Your Retail Arbitrage Products Profitability
At this stage there are 2 quick checks that you want to go through.
- The first is to see if the net profit number shown at the bottom is higher than your minimum profit threshold.
- If the item meets your minimum profit threshold, then you will want to calculate a return on investment percentage.
First I recommend setting your minimum profit at around $3 per unit.
This means that you won’t buy any items that you will make less than $3 in profit on.
You’re probably wondering why:
Well….having a potential net profit of less than $3 per unit does not allow for very much upside
So, a small drop in price can wipe out your profit.
If the item meets your minimum profit threshold…
calculate a return on investment percentage.
Do this by dividing the net profit by the cost of the item.
In this case it’s $7.13 divided by $10, so the return on investment percentage is 71.3%.
When you start, look for items with a return on investment percentage that is higher than 50%.
This particular item meets all of the criteria for purchasing the item.
For any item that fits all of the purchasing guidelines, I recommend purchasing up to 6 of the item. In this example, if there were 6 copies of this game on the shelf for $10 each, then I would buy all 6 of them.
You may be wondering:
What’s next? Well…
Rinse and Repeat
It’s time to repeat this process on the next item, and the remainder of the items in clearance section.
When starting, I recommend scanning as many items as possible.
As you gain more experience you will likely will be able to avoid scanning certain items that don’t appear viable for resale.
Go through the process of determining an item is viable for resale.
You can quickly move to the next item for any items that don’t fit your buying criteria.
As soon as an item doesn’t fit one of your criteria, move on to the next item.
The biggest problem I’ve noticed is:
How to price items they purchased. Should they price low or high?
Pricing the items you bought via retail arbitrage
Now, that we have some items that we want to sell, we need to list them for sale and price them.
When selling on Amazon using the Fulfillment by Amazon program, I recommend pricing at a similar level to the other Fulfillment by Amazon sellers on the listing.
Let’s take a look at an example:
To get to this screen, view all of the available offers for the product.
This can be done by clicking the link that says “used & new (#) from” that will display on just about every product for sale on Amazon. The # field fills with the number of sellers on that particular listing.
Now for the screenshot above, you can see that I filtered the view for only prime eligible items, and items in new condition.
I recommend filtering the view to match the condition and fulfillment method of the item you are pricing.
For the item in the screenshot above, I recommend pricing between $41 and $41.41 if you are looking for a quick sale.
Here’s the deal:
How to Price Your Amazon Products
When pricing your items, I don’t recommend pricing below the offers you are competing with.
Pricing below your competition can often start a chain reaction of lowering prices, and can quickly erode margins.
On the more aggressive side, I recommend matching the lowest price of the same fulfillment method. On the more conservative side, I’d price between $0.01 and 1% higher than the lowest price of the same fulfillment method.
As a bit of a side note, if you are willing to wait awhile for the item to sell, I would price the item between $46.52 and $49.95 in this example.
The reason for this is there are a few different “gaps” in the prices these items are selling for.
Whenever I’m pricing an item I will look for significant gaps in price between the offers, and if there’s a decent gap, then many times I will price at the higher end of the spectrum to see if I can make some additional margin on the product I am selling.
Pricing is something that you will definitely get a better feel for as you gain more experience selling on Amazon, but these general guidelines should be a good starting point.
How to Ship Your Items to FBA Warehouses
I have a full blog post that discusses, step-by-step, how to create your first Amazon FBA shipment. I definitely recommend reading this article if you need help with shipping your items to Amazon.
Best Way to Learn More
We have a huge blog post that helps you start an Amazon business! 7,000 words that guides you through all the steps involved from creating a product listing to figuring out taxes.
Ryan offers a step-by-step course to help you learn how to sell on Amazon with retail arbitrage.
The course is designed to help you build your business from scratch to making $1,000+ in profit per month. It will walk you through everything you need to do to become profitable in step by step detail. You can learn more and checkout the course HERE.
Throughout this post we’ve covered what it takes to get started with retail arbitrage. I’d like to close with a few tips and thoughts from someone who has gone through the process before.
The first thing that I would say is that if trying retail arbitrage sounds good to you, give it a shot!
You can test the retail arbitrage strategies that are laid out in this post in just a few hours, and going through that process should be eye opening.
Some people love it, and others can’t stand it. If you dedicate a few hours to it, you’ll know how you personally respond.
The other main thing that I would say is to set realistic expectations. Selling on Amazon, particularly via retail arbitrage, takes some work on the front end.
If you are going to go for it, be willing to put in the necessary work on the front end. The effort can definitely pay off.
So go out there and give it a shot! I’ll be in the comment section waiting to answer every single question you have!