Retail Arbitrage: Turn Shopping Into Your Side Hustle
While the name makes you sound like a stylish spy, that’s nowhere near the coolest part of this side hustle!
Are you looking to make some extra money in your spare time? With the current economic uncertainty, many people are interested in finding creative ways to generate income either to supplement their existing income or to make money without a traditional job.
While there are plenty of side hustle options, many of them require you to have specific skills or experience. It can be really frustrating to learn about great side hustle opportunities only to realize that you don’t have the background required for success. Any flexible side hustle that allows people to start making money quickly with no experience is worthy of your attention, and we’re going to take a detailed look at one of those options.
Today, we’re going to cover everything you need to know about retail arbitrage: what it is, how much money you can make doing it, pros/cons, and a step-by-step for getting started right now.
What is Retail Arbitrage?
While it may sound complicated or intimidating, retail arbitrage is actually a very simple concept. It involves buying items at a local retail store and selling them online for a profit.
Just to avoid confusion, I also want to define “arbitrage” here. The official definition of arbitrage is “the simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.” But this hustle is much less complicated than the word arbitrage makes it sound.
Typically, you’ll be purchasing sale or clearance items at stores like Walmart, Target, Walgreens, Home Depot, or many others. There are a lot of different websites and online platforms where you can sell the items, but Amazon and eBay are by far the most popular.
Retail arbitrage is something that can be done part-time as a side hustle, or it can be grown into a business that generates a full-time income and more. While it may start out as a side hustle for the sake of simply earning a little bit of extra money, it’s nice to know that a higher income potential exists in case you ever decide you want to scale up.
Retail Arbitrage and FBA
Fulfillment by Amazon (FBA) is one of the primary reasons why Amazon has been a longtime favorite of sellers. Through the FBA program, third-party sellers like yourself are able to send inventory to be stored in Amazon’s warehouses and then Amazon will handle fulfillment as orders are made. Instead of packing up a box and heading to the post office every time you make a sale, Amazon will handle those details for you (in exchange for a fee, of course).
Fulfilling orders can require a lot of time for sellers who are handling it on their own, so FBA allows sellers to drastically reduce the amount of time needed for this type of day-to-day operation of the business.
FBA makes it possible for small sellers to scale quickly and run much larger e-commerce businesses without all of the hands-on work that would normally be involved.
How Much Money Can I Make Reselling Discount Items Online?
With any side hustle or money-making opportunity, the question of “How much money can I make?” usually comes to mind almost immediately.
With retail arbitrage, there is really no limit to what you can make. It could be a good fit for someone who wants to make a few hundred dollars of extra money each month, and it’s also an option for someone who wants to generate a six-figure income.
While the majority of retail arbitrage sellers do it part-time, some have managed to turn a humble side hustle into a million-dollar business, so there is plenty of income potential.
Pros of Retail Arbitrage
With lots of side hustle opportunities available, here are a few reasons why you may want to consider retail arbitrage:
1. Anyone Can Learn to Do It
As was mentioned earlier, there are no specific skills or experience required in order to have success with retail arbitrage. That’s not to suggest that it’s easy or that it takes no effort, but anyone can learn to do it with a little bit of dedication.
In order to earn a profit with retail arbitrage, you’ll need to learn to find the right products to buy and resell. The good news is, it’s not that hard to do and you’ll learn quickly by simply jumping in and doing it.
The more you do it, the better you’ll get, but you don’t need specific skills to get started. Compare that to a side hustle opportunity like photography or offering music lessons where you’re simply not able to do it if you don’t have the right skills.
2. Relatively Low Investment to Get Started
If you decide that you want to get started with retail arbitrage, you’ll need a small amount of money to purchase your initial inventory. If you have the money to purchase more inventory or to purchase higher-priced items, that’s great, but it’s possible to start with a very small amount of money (even $100 or less).
If your startup capital is limited, start with whatever you’ve got and be willing to reinvest the money that you make from each sale.
Some other side hustles and business opportunities require a much more significant upfront investment.
With no specific skills being required and only a small investment needed, retail arbitrage is a realistic option for most people.
3. There are Always Plenty of Opportunities
There are opportunities for arbitrage everywhere, you just need to get some experience to know the best opportunities when you see them. There will always be items sold for different prices at different stores or online platforms, so the possibilities for retail arbitrage should remain strong.
4. It’s Flexible
You can pursue retail arbitrage as a side hustle whenever it fits into your schedule. Work as many or as few hours as you’d like.
5. Excellent Income Potential
Not every side hustle provides you with an opportunity to earn a full-time income, but retail arbitrage does. This is a legit business opportunity that can be as big or small as you want it to be.
Cons of Retail Arbitrage
Of course, like any other opportunity, there are some downsides as well.
1. Requires You to Constantly Find Products to Sell
In order to have success with retail arbitrage, you’ll need to constantly find new products to buy and resell. This can be draining for some people.
Some other types of business (we’ll look at one of these alternatives later in the article) involve building a brand and working to increase sales of one particular product or a line of products.
This is much different. You’re not trying to build a brand, you’re simply looking to find items from some other brand that you can buy and resell at a profit.
With retail arbitrage, finding the right items to buy will be a major part of the time that you spend working on the business and it will be possibly the most important aspect of the business. If you like to find great deals, retail arbitrage may be a good fit for you. If constantly searching for the best deals sounds exhausting to you, another side hustle might be a better fit.
2. Retail Arbitrage on Amazon Has Gotten More Difficult Over the Years
Although Amazon is an extremely popular platform for retail arbitrage, there have been a number of changes in recent years that make it more difficult than it used to be. Of course, increased competition from other third-party sellers is a factor here, but the bigger challenges come from Amazon’s policy changes.
Over the past few years, Amazon has taken a number of steps in order to protect the safety of customers and to crack down on counterfeit items being sold on the platform. These changes include things like restricting or limiting sellers in a growing number of categories and requiring approval or verification in order to be able to sell.
Amazon wants to know that sellers are legit, which is definitely in the best interest of its customers, but these changes can be hard at times for people who need approval to sell certain products. In some cases, getting approval to sell a product is simple, and in other cases, it’s not so simple.
You can see the category, product, and listing restrictions here.
3. Can Be Difficult to Grow and Scale
While it’s certainly possible to grow a retail arbitrage side hustle into something bigger, you may face some challenges related to scaling. These challenges can include things like:
- Finding enough items to buy and resell
- Managing all of the time required to do the shopping
- Logistical concerns related to processing large amounts of inventory
- Organization to stay on top of a large number of listings
Of course, any business opportunity will present some challenges and these specific challenges have been overcome by many other sellers, but just know that going from side hustle to full-time income isn’t as simple as being willing to invest more money in inventory.
How to Get Started with Retail Arbitrage
If retail arbitrage sounds like it may be a good fit for you, here are some practical steps you can take to get started.
1. Create a Seller Account on Amazon
Assuming you want to sell on Amazon, the first step is to create a seller account. You don’t have to sell your items on Amazon, but the FBA program is great, especially if you want to grow the business. Amazon also offers a seller’s app that makes it easy to see how much items are selling for on Amazon (which makes it easier to decide what products to purchase).
Amazon offers two different types of seller accounts:
- Professional - You’ll be charged a fee of $39.99 per month, regardless of how many items you sell.
- Individual - You’re not charged a monthly fee, but you will be charged a $0.99 fee for each item that you sell.
With this fee structure, the individual account is the lowest-priced option if you sell less than 40 items per month, and the professional account will cost less if you’re selling 40 items or more in a month.
It’s important to note that there are other fees involved with selling on Amazon. They also charge a referral fee for each item sold and the amount depends on the category of the product. In general, the referral fee ranges from 8% - 15%. If you sell your items via FBA, you’ll also have fulfillment fees that are assessed, and these fees vary depending on the size and weight of the item. Please read this page to learn more about Amazon’s fees.
Many new sellers get started with a personal account and then upgrade to a professional account once they are making more than 40 sales per month.
Amazon makes it easy to sign up for a professional account. Simply go to the seller’s landing page and click on the “sign up” button.
The option to sign up for an individual account is also on that page, but it’s a bit hidden. Scroll down below the fold and you’ll see a link that says “become an individual seller” (as shown below).
2. Find the Best Deals at Local Retail Stores
The next step is to start looking for bargains. If you like shopping, this is probably your favorite part. The difference between retail arbitrage and online arbitrage is going to brick-and-mortar retail stores vs. looking online for deals. There are pros and cons either way. While shopping online is more convenient, you may be able to find better deals locally. People all over the world can shop at the same websites as you to find items to resell, but not everyone will have access to your local stores.
Typically, you’ll be looking at sale and clearance items. Closeouts, end-of-season sales, and going-out-of-business sales can also present some great opportunities.
3. Scan the Items to See What They’re Selling for on Amazon
Amazon’s Seller App is an extremely valuable app for retail arbitrage (please note that this is different from the main Amazon app for making purchases as an Amazon customer). The app is available for iOS and Android and you can take your phone into a store and scan items to find some valuable data.
With the app, you’ll be able to see the current price that other sellers are offering on Amazon for that product. In addition to Amazon’s own app, there are also a number of third-party apps that serve the same purpose, but Amazon’s app is the easiest way to get started. You can always try some other apps in the future if you choose.
In addition to showing you the current selling price, the app will also show the fees associated with selling the item, which is essential information for the next step.
Another important feature of the app is that it will show you if you are qualified to sell an item. With many product categories being restricted or gated, you’ll want to be sure that you’ll be able to sell an item before you buy it. The app will show you a green checkmark if you’re qualified to sell the item that you’ve scanned.
4. Determine Which Products Offer the Potential for Profit
Use the information from the app and the price at your local retail store to determine if you can earn a profit. Start with the current price on Amazon, subtract the fees for selling, and subtract the cost you will need to pay to purchase the item. Does it leave you with any profit? If so, how much?
It’s recommended that you have a policy in place for the minimum amount of profit that you want to earn on each item in order to make it worth your time and effort. For example, you might choose to only pursue items that allow you to make at least $3 and at least a 25% return on your investment. With a policy like this, you can simply purchase the items that meet your criteria and pass on the items that don’t.
5. Buy the Items that Offer Profit Potential and List Them on Amazon
Some products will provide the profit potential that you’re looking for, and others won’t. One of the keys to having success is simply scanning and checking enough products. Don’t get discouraged if the first few products that you scan don’t offer any profit potential.
Once you’ve found an item (or a few items) that meet or exceed your criteria, it’s time to purchase the item(s) and get it listed for sale on Amazon.
One of the perks of the retail arbitrage approach as compared to other business models like private labeling is the fact that you don’t need to write a product listing or take photos. The items you’re buying are already listed on Amazon, so creating your listing is quick and easy.
If you’re going to be using the FBA program, which I highly recommend, you’ll also create a shipping label in Seller Central and enter the details of your shipment (like the number of boxes, as well as their size and weight). Amazon will tell you where to send it and all you need to do is package the items, print the shipping label, tape it on the box, and take the box to a UPS location (or have them pick it up from you).
Alternatives to Retail Arbitrage
While retail arbitrage presents a great opportunity, there are also some other business models that you may want to consider as well. Each of the options covered below has some similarities to retail arbitrage, as well as some significant differences.
Online arbitrage is essentially the same concept as retail arbitrage. The difference is that with online arbitrage, you’ll be sourcing items online instead of in local retail stores.
Shopping online can be more convenient and allows you to buy items from an unlimited number of websites, so you have far more possibilities. However, the best deals are often found in local retail stores, so there is a reason for doing your sourcing in-person rather than online. Also, anyone from anywhere in the world can have access to the same deals, so you may face more direct competition. Retail arbitrage may allow you to find deals that no one else is able to find.
If you’re interested in finding a business model for selling online, buying wholesale is an option that you may want to consider. You would be buying items in bulk at wholesale prices and reselling them online (most likely on Amazon).
This approach is similar to retail arbitrage because you’re looking for products that you can resell for a profit and because you’re selling products from a variety of different brands rather than creating and growing your own brand.
The downside to this approach is that profit margins tend to be very thin, so that means you’ll need to invest more money into inventory and have higher amounts of capital tied up in order to make money. However, it’s a proven business model that can work.
Private labeling involves creating your own brand or line of products (it could be a single product, doesn’t have to be an entire line of products). You find a manufacturer to create the product for you with your own logo or branding, and then you sell it online. This is an extremely popular approach for Amazon sellers.
Manufacturing is often done in China or other foreign countries and the profit margins for private label products may be higher than what you could get with some other types of business models.
One of the major benefits of private labeling compared to retail arbitrage is that you won’t need to constantly look for items to buy and resell. You’re focused on selling your own product(s) and growing your brand.
The downside to private labeling is that you’ll need to invest more money for startup inventory as compared to retail arbitrage. Of course, the details will vary depending on the product that you’re selling, but most private label brands need at least a few thousand dollars for initial inventory. My wife and I started a private label brand in 2015 and we had an initial investment of $4,000 - $5,000 for our first inventory order.
Flea Marketing Flipping
Retail arbitrage involves buying new products, but you can also apply the same concept with used products. As a flipper, you’ll go to yard sales, flea markets, auctions, estate sales, and thrift stores to find underpriced items that you can resell for a profit. Most flippers sell on eBay, The Facebook Marketplace, or other online platforms.
Like retail arbitrage, flea market flipping requires you to get out there and find products to buy and resell. If it’s not something you’ve done before, you might wonder how someone could actually make a profit with this, but there are loads of quality used items being sold for very low prices, and there is plenty of demand online for the right items.
Of all of the options covered here, flea market flipping actually has the lowest startup costs since you’ll be buying used items. You can start small with minimal investment and reinvest the money that you make to grow your business.
There is a lot to like about retail arbitrage. If you’re looking for a way to make extra money, take some time to consider the details covered in this article and decide if it may be a good fit for you. If so, follow the steps to get started and give it a shot. If it’s not the right option for you, maybe one of the listed alternatives would be a better fit. Good luck!
Have you ever tried retail arbitrage as a side hustle? Share your experience in the comments!