Is Specialty Retail A Good Career Path – Retail arbitrage is an e-commerce business model centered around buying discounted inventory from offline and online retailers and then reselling it online for a profit.
Sounds like easy money, right? There is a catch. The real cost comes in the form of time, effort, and resources required to go back and forth between retailers, look for discounts, and increase sales. All of this includes listing items online and navigating the logistical complexities.
Is Specialty Retail A Good Career Path
Therefore, anyone following the retail arbitrage model should be passionate about bargain hunting. In this post, we look at some of the best places and ways to source arbitrage products. But before we do that, it is essential to answer some basic questions.
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At first glance, the above description seems to apply to the wholesale e-commerce model. Wholesalers buy a product in bulk, assume the cost of storing and transporting that product, and then sell it at a higher price.
With retail arbitrage, buying in large quantities is rare. Instead, most retail arbitrage companies “pre-sell” products to coincide with current discounts or sales.
For example, a local clothing store is offering a big weekend sale on athletic shorts. You list these exact items directly to the storefront of your choice (usually Amazon, eBay, or your site) at a marked price.
Once you’ve reduced your costs and reached a critical sales point that proves demand for the product, you physically buy those items from the retailer. They then process and ship to customers, pocketing the profits.
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Smart sellers can also stack this strategy with dropshipping for more efficient logistics. Dropshipping, as we’ll explore below, eliminates the need to physically receive products.
Many variables can hinder profits for retail arbitrage sellers. We’ll look at practical solutions to those pitfalls later in the post. First, answer some difficult questions.
You’re not the first person to be suspicious of retail arbitrage as a sustainable business model. Surely this practice violates some terms of service or law somewhere, right? How can it be legal to make a living product for profit?
Retail arbitrage is very legal in the US. The model also has some legal safeguards to ensure that big brands cannot threaten resellers to stop their operations.
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This law, known as the first sale doctrine, allows people to sell new goods. The only stipulation is that resellers must have legally purchased the goods in question.
There are some exceptions to this law when it comes to selling counterfeit or bootleg goods, but retail arbitrage ventures need not fear the forces of breaking down their doors.
Additionally, many marketplaces such as Amazon and eBay allow retail arbitrage on their platforms. Either way, it’s always a good idea to stick to the terms of service wherever you sell.
One of the challenges with retail arbitrage is that there are many variables beyond the seller’s control:
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For this reason, this model can be intimidating to those impatient to dig through bargain bins and persist through frustrating starts.
Retail arbitrage is a sustainable business model for those willing to put in the work. It may be necessary to sell smaller items to reinvest those profits in larger items.
However, it is possible to make several hundred to several thousand dollars per month with retail arbitrage without significant scaling or hiring.
Furthermore, many scanning tools (including those provided by Amazon for free) are available to resellers. These tools make it easy for sellers to take a picture of a barcode and immediately see their potential profits.
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In short, thanks to the speed and capabilities of mobile devices and online tools, there has never been a more profitable time to get into retail arbitrage.
While bringing in $500 a day (not unusual for a motivated reseller) is good money for one person, it’s less than a round trip to Wal-Mart or smaller firms.
These retailers find it more valuable to move products in bulk than to worry about matching each reseller on eBay.
Not all products are well-suited to flipping. Here are some of the best categories for retail arbitrage. Next, we’ll look at the best places to source items in each of these categories.
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Regardless of the store, all items on clearance are often the best bargain products. In general, the clearance rack should be one of the first places you go in any physical store you visit as part of your sourcing strategy.
The best arbitrage counters for retail are items under $20. It’s perfect for discounts, bulk buying and profit on everything in the health and beauty category.
Home decor, appliances and home maintenance items are among the top candidates for resale. This is due to their ubiquity at nearly all big-box retailers (making them a staple of the clearance rack), steady market demand, and mid- to low-range prices.
You will quickly see that some of the most profitable categories have steady demand throughout the year. Clothing is naturally a basic human need. Even in a recession, people still buy clothes.
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Furthermore, almost every major retailer has a clothing department. This steady demand and low price tag combined with frequent sales make clothes and shoes some of the best retail brokerage products.
Sporting goods are one of the few types of products that are not essential but appeal to a mass population. Men, women, children, casual sportsmen and weekend warriors all need sports equipment.
And it doesn’t necessarily have to be a physical sport. It could be for an outdoor hobby like hiking, fishing or camping.
Because sporting goods have such a wide range of prices, you’re likely to make a much bigger profit if you start a big sale from a large-scale retailer like Bass Pro Shops or REI.
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Demand for toys remains relatively constant, but skyrockets during the holiday season. Intermediary sellers should study general discount patterns and take advantage of this seasonal change, especially on toys that are in high demand or at risk of stock-outs.
Here are some of the top retailers (both online and offline) to buy the above mentioned products. Most of them have daily or weekly newsletters with discount opportunities. Be sure to sign everyone up to stay up-to-date and increase relevant sales quickly (more on that below).
Many stores or locations in this category check many boxes at once. Almost all have clearance accounts, multiple product categories and different locations. These factors make them prime places to hit first when you’re just starting out.
Dollar stores (especially ones like Dollar Tree that run $1 off everything) are great places to source products for on-the-go. However, they have recently gained a reputation in the flipping community for having some “gated” or restricted items. Gated items are products that are banned by most marketplaces such as eBay or Amazon.
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Malls and outlet stores have many retailers that you would never find driving down the street. These “specialty” stores often have hidden gems that can run you a pretty penny. Plus, it has the added benefit of hitting a dozen retailers in multiple categories in a short amount of time.
If you’re not a frequent patron of the clearance store, don’t worry. These retailers are not staples of your typical American shopping trip. However, they are excellent for retail arbitrage.
Just Google “(your city) liquidation store”, and you’re sure to find 3-4 major locations to check out. Most websites display all or most of their inventory, saving you the hassle of going to a store.
Wal-Mart is a prime location for clearance rack hunters. Especially when it comes to big-ticket items like sporting goods and toys. However, you’ll want to be well aware of which products are included with your platform of choice. For example, all LEGO products are strictly prohibited on Amazon.
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Arming yourself with a little knowledge and a scanner app can save you hours of frustration clearing the shelves of this giant retailer.
Home Depot has a deceptively wide range of products that go beyond the home repair and home maintenance categories. They run sales on everything from grilling equipment to garden tools to home decor.
Home Depot isn’t likely to display their clearance items as prominently as Wal-Mart, so check online for deals before your visit. You can also talk to a manager to quickly spot current sales and discounts.
One of Target’s most prominent features is the discount section, usually located at the store entrance. This small area has a wide selection of discounted “first-come, first-serve” items in many different categories.
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It’s not uncommon to find stationery, toys, and small accessories to match the holidays or back-to-school season.
Thrift stores are one of the best sources for retail arbitrage products. Thrift store bargain hunting requires patience and diligence, but it’s not uncommon to find one in a million at your local Salvation Army or Goodwill.
In addition to having items in almost every category imaginable, most thrift stores are often open to (even encouraging) bargains. This is especially true if you are a known customer and have purchased many items
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