Geoffrey Giraffe is dead.
You’ve probably heard the sad news from Toys R Us already, and if I’m the first one to break it to you, I’m sorry.
Some brief history, Toys R Us was born in 1957, and then went public in 1978. They continued to mesmerize children for almost 50 years before finally being purchased in a leveraged buyout in 2005 to avoid bankruptcy.
The news broke last week when the company officially announced that they were going out of business and would be liquidating their entire North American operations.
What does that mean?
For Toys-R-Us, it means they will be forced to sell their products for pennies on the dollar.
And for us? It means that if you’re the type of person who can see opportunity in chaos, you can capitalize on the upcoming liquidation prices to make some serous dough.
This article will show you EXACTLY what you need to know to profit from the upcoming arbitrage opportunities and will equip you with all the tools & strategies you need to take action today.
But to put things in context, let’s first ask….
Who killed Geoffrey Giraffe?
There were so many forces at play in this company’s demise that it’s hard to pinpoint just one, however when you see how they all acted together, the whole picture becomes quite clear.
First suspect: Bain Capital
Now it would not surprise me if Toys R Us was purchased for the express purpose of being dismantled and sold off piece by piece. But how did it happen?
In a word: debt. Basically the company was held as collateral as it continued to pay down it’s SIX B-B-BILLION DOLLAR loan. Yeah, that’s a lot of debt.
Needless to say, they couldn’t keep up with their payments and then one final event sealed their fate. I’ll get to that in a moment, but let’s not forget the other culprits…
Second suspect(s): Video games, Netflix, YouTube, and Free apps via smartphones & tablets
The face of entertainment has changed. Many kids are playing with electronic devices now, and when it comes to novelty you can’t beat free, with an endless variety.
There is no doubt that YouTube & the free app market took a massive chunk of children’s attention away from physical play things.
Video games are a billion-dollar industry and let’s be honest, how many parents are guilty of using Netflix as a low-cost babysitter?
If attention is the currency of our time, Toys R Us lost the attention war.
The market shrugged.
Third suspect(s): Walmart & Amazon
Having a toy supermarket was a big deal in its own time, but with the convenience of getting about the same selection of toys in the same building that you do your grocery shopping, then it’s obvious to see how Walmart took constant stabs at our boy Geoffrey Giraffe.
What’s worse than that? How about the convenience of never having to leave your home at all, and getting it delivered to your doorstep in 2 days via Amazon?
Ouch. And what’s worse is that there is even more to this story—for years Toys R Us actually leaned on Amazon to handle most of their ecommerce operations. By the time it was clear that Amazon was displacing them in the online marketplace, it was too late.
In this regard, they lost the e-commerce wars.
Then we come to the final nail in the coffin.
What was the straw that broke the giraffe’s back?
The Final Deathblow: Disney’s Star Wars Merchandise Glut
Star Wars toy collectors have been irritated ever since Disney acquired LucasFilm. Don’t get me wrong, George Lucas knew how to monetize his universe, but Disney has ratcheted up the marketing to the next degree.
There’s only one problem…
…the toys aren’t selling as expected.
What was once a rare, epic event – a new Star Wars movie – has gone the way of a long-running sitcom, or even worse, the Transformers franchise.
Will I live to see “Star Wars 45: The Sith Are Misunderstood?” Perhaps. Will there be a new Star Wars release each year until the day you die? Certainly.
So with billions in debt, a shrinking slice in a changing market, and a failure to adapt fast enough in the e-commerce game, they couldn’t take the weight of a million Rey figures just sitting on their shelves.
It was the final push off of the cliff—Toys R Us had spent hundreds of millions on toys for a franchise that didn’t hit it’s sales projections.
Not only has Disney killed Admiral Ackbar (I will never forgive you), but they’ve also taken out Geoffrey Giraffe as well.
How can you benefit from this giraffe slaying? And what tools will you need?
Now after you wipe away your tears, realize that the concept of flipping a product isn’t new. Also called arbitrage, it’s simply buying a good at a discount in one market and reselling it in another higher-paying market for a profit.
For a basic run-down of arbitrage, check out this article.
When Sports Authority went out of business, arbitrage sellers made a killing by buying products at a crazy discount and then listing them on Amazon.
Amazon buyers are great, they don’t mind paying retail price as long as they get their product quickly, and without hassle.
And a lot of people like Ben, got their start in e-commerce through practicing retail arbitrage. Opportunities are everywhere since stores discount products all the time. But when one goes out of business, now THAT is the motherload!
So don’t let this opportunity pass you by, you can definitely do this. You just need to be prepared.
Before you get started, know that the east coast stores will be discounting and shutting down first. It’s important that you call your local Toys R Us, ask for the manager, and then ask when they’ll begin marking down products. If the manager isn’t there or isn’t available, ask when to call back. Just find out.
At most west coast locations merchandise is still marked full price, so call first before heading over.
So let’s start!
Gift Card Discount Websites to Use for Toys R Us:
Note: Toys ‘R’ Us will only be accepting gift cards for the next 30 days at limited locations, be sure to call your local store first to confirm if they’re accepting them.
Use CardPool to increase your profit margins at Toys R Us by finding specials like these.
21% Savings/Profit Margin upfront!
You can go to cardpool and buy discounted gift cards. Especially when margins are already super thin, finding great deals like these on gift cards can give you an edge over the competition.
It will also allow you to purchase more inventory and afford a scanning app if you want to pay for it.
Another site that’s good to check out is GiftCard Granny.
Depending on how much you want to spend at Toys R Us you can’t go wrong with multiple options for discounted gift cards. Get them before they’re gone (and while Toys R Us is still accepting them)!
And up next we have the tools of the trade…
Retail Arbitrage Scanning Apps to Use at Toys R Us (Best to Worst):
Our pick for simple and effective scanning App is Profit Bandit. The App pays for itself with one great deal on a discounted gift card. It’s only $9.99 per month for unlimited scans. The App also check on multiple marketplaces.
Profit Bandit Benefits:
The app searches across different platforms, and helps you calculate profit Over 15 factors, including weight, Amazon fees, your cost of goods, shipping rates and more go into calculating your estimated Amazon profit.
It’s a robust scanning app that rivals profit bandit and does more for your business as a whole than Profit Bandit. Scoutify is much more than a scanning app.
The reason we have it at number two is because they offer a free 30 day trial to use their App but afterwards is $49.99/ month.
Might be a bit steep for most beginners.
If you want, sign up for the free trial and get out there to start scanning. It’s an awesome tool but perhaps a bit too much for someone starting on a budget.
Price: Free for 30 Days then $49.99/month
Now the reason why this one is at number 3 is because you can only use it to sell on Amazon.
It won’t show you the prices on other selling platforms. If you only want to sell products on Amazon and don’t want to pay for a scanning app then this is the one for you!
The other two scanning apps up top offer more, but this one will serve you well if you don’t want anything besides profitability on Amazon.
Product Criteria for your Toys’R’Us Sourcing:
To make things easy, we’ve included everything you need to know on our Retail Arbitrage Cheatsheet.
What makes a good arbitrage product?
- High Profit Per Unit: $7 minimum profit per unit
- High Profit Margin: Stay between 3-5x your cost, but 2x your cost is the absolute minimum
- Low Best Seller Rank: Lower best seller rank = lower your risk + faster it will sell (a very low BSR might indicate you should buy higher quantity of that product)
- Average Size/Weight: Small, light, and simple to ship
- Great Condition: You want products that don’t have damage and are in good condition
- Classic Brands: Focus on toys that are widely recognized and bound to sell
Most arbitrage products will not have all of these qualities. The more your product adheres to this checklist, the better the opportunity is for you…
Classic products & brands to look for:
You are going to want to pass on the fidget spinners. What you’re looking for are widely recognized toys that will never go out of style.
Classic board games are the prime example that comes to mind. There is also:
And that’s not all. I’m sure you can think of some of your childhood classics that still stand strong today.
Before we get into the selling strategy, let’s talk about….
Products to avoid:
If you’re using a scanning app to sell products specifically on Amazon, avoid the ones without a best seller rank (BSR). No seller rank can indicate a lack of sales history, though go with your gut since you can always sell your goods on eBay, Craigslist, or elsewhere.
Also avoid products that are heavy, bulky, and expensive to ship to minimize over all costs (especially if you sending products into Amazon FBA).
And finally, stay far, far away from the Star Wars merchandise glut. These things were produced by the container load and lurk unsold in warehouses by the pallet, so be wary about toys from the most recent movies. If you do find characters from the original trilogy those should be a safer bet.
Brands to Avoid selling on Amazon:
Look, the truth is that you don’t need to remember what these brands are.
You can either print out the Arbitrage Cheatsheet to make sure that you avoid these brands or you can use any of the scanning apps.
Any one of the scanning apps will tell you if a product that you’re scanning is restricted from the Amazon platform.
But also remember that these restricted brands only apply to Amazon, they protect a handful of big brands to keep counterfeiters off their site.
So you can sell those products on Ebay or Facebook Marketplace with absolutely no restrictions. Amazon is the biggest, but not the only successful marketplace to sell on.
Best Online Marketplaces to Sell Quickly with Retail Arbitrage:
To make it super easy for you, we’re providing you the top 3 marketplaces that you can use to create an account and start selling.
But before we dive into marketplaces, let’s talk strategy.
Selling Strategy: What to do with your inventory
Ideally you want to start selling your inventory immediately.
A mass liquidation like this lowers market prices for toys, so its important to be the first to act.
What do we do when the market for certain toys gets saturated though?
That is the beauty of Q4 ecommerce sales, the toys that don’t sell immediately can be held and sold in the months leading up to Christmas. The majority of all online retail sales are made in the last few months of the year, so keep that in perspective.
So sell what you can ASAP, but if sales begin to slow after a month don’t fret, just hold those goods for the fourth quarter of the year.
And try and make sales on every platform you can. Some are better than others, but don’t pigeonhole yourself to just one marketplace.
Amazon is the best pound for pound platform because generally products sell higher on Amazon but there is a limit on brands. Leverage the other platforms to maximize your potential profits.
Amazon Costs: Sign up fee: $39.99
- Baby Products (not including Baby Apparel) – 15%
- Electronics Accessories – 15% for items under $100
- Toys – 15%
- Videos, DVDs, and Blu-Rays – 15% (Requires Gated Approval)
- Video games – 15%
- Video game consoles – 8%
Remember: Before feeling overwhelmed trying to keep up with the selling fees, costs, and whether you product is profitable. Every one of the 3 applications we mentioned above calculate profitability for you.
If you want to learn more, read: Creating an Amazon Retail Arbitrage Business
And if you need help listing products on Amazon for the first use our Quick Start Amazon FBA Guide
Again, to make it easier for you we’re providing you with the costs associated with selling on the specified platform.
When we’re sourcing for products we’re looking for a 50% profit margin. That way you don’t lose your gains on fees. As long as you’re sourcing high margin items then these fees won’t eat at your profit.
Account Cost: It’s free to open an eBay account
The Facebook marketplace is relatively new and limits you to your local area. However there is a ton of people in your local area which makes it worth a shot to look at.
If you can find a great deal on certain electronics or accessories that can’t be sold on Amazon then it’s worth a shot to try Facebook Marketplace.
You don’t lose anything by selling things on here. With 1.3 Billion active users, there has to be local people in your area doing some shopping.
Cost: Completely Free
Tying it all together
So that was a lot if info, but really the process is simple as:
- Call your local Toys R US, find when they are beginning their markdowns
- Get yourself a scanning app along with our Retail Arbitrage Cheatsheet
- Do the work and buy some killer inventory
- Resell immediately or hold until the Christmas season approaches
This is a HUGE opportunity and time is of the essence, take action now before the products start to disappear.
To make things super-simple for you I’ve put together a printable Retail Arbitrage Cheatsheet to take with you while hunting for hot opportunities!
And as a super-awesome bonus, you’ll also get access to our Retail Arbitrage Mini-Course that will show you:
- How to open your Amazon account
- All about getting the buybox on Amazon
- Steps to list your first product for sale on Amazon
- Create your first FBA shipping plan
- Prepare your products for FBA
- How to manage your inventory
- Lists of pro-tools and much, much more!
Now I’m going to be honest, arbitrage has been getting harder on the Amazon platform. But, the concept of arbitraging goods in general will always exist.
There will always be prices differences across different markets. So the overall opportunity of flipping products isn’t going anywhere any time soon.
However this chance to cash in on a store-wide liquidation will eventually expire, so you only need to do the work, and show up.
If you’re smart you can see the opportunity and won’t waste it like those who talk a big game about hustling, but never get off the couch to make it happen.
And I assume since you’re on the StartupBros blog, you’re not that kind if loser. ; )
So if you’ve been looking for a way to generate some capital to start your business, or just want to make some extra green to pad your pocket, then this is your chance.
Besides, how many people who are reading this will actually take action on it?
Now get out there and make it rain, for Geoffrey’s sake.