I'm sure you've heard of multiple online entrepreneurs who have made millions selling products on Amazon. Wouldn't it be awesome to learn how to do what they did to make that kind of money?
The hardest part is learning how to start selling on Amazon and where to begin. First off, there are multiple ways to sell on Amazon, whether you have inventory sitting in your garage, or whether you don't have any inventory at all. One of them is through what's called “retail arbitrage”.
Here I'm going to show you what retail arbitrage is, and how you can utilize it to your advantage to start making the big bucks on Amazon.com.
Making Money On Amazon With Retail Arbitrage
For those of you who don't have the extra money to go and buy thousands of dollars worth of inventory and store it at home until it's sold (that's IF you sell it), probably the easiest and most cost effective way to start selling on Amazon is through retail arbitrage.
What is retail arbitrage?
Don't let the term intimidate you, it sounds kind of fancy and sophisticated, but its not.
Retail arbitrage is simply taking advantage of price differences between different selling markets.
For example, you could go shopping at your local grocery store and find a pack of Huggies diapers that are selling for $7.99 for a pack of 50. You think that's an awesome deal and decide to check how much its being sold for on Amazon, and soon find its being sold at more than double the price at $18.99 and is a top selling item.
Wow, you've got a little extra cash, lets buy 10 packs and sell them all on Amazon for a profit. You pay roughly $80 for 10 packs of Huggies diapers, and you can then turn around and sell them on Amazon for $190 ($19 sale price x 10 packs = $190 gross profit).
You have just witnessed the concept of retail arbitrage.
By simply finding products from a retail store that are selling for a higher price online, and taking advantage of the price difference to make a profit, is retail arbitrage in a nutshell.
How to make money on Amazon with retail arbitrage
There are a few things you need to have in place before you go purchasing the whole clearance item rack at Walmart. Here's a few things to do first:
- You need to have an Amazon sellers account. You can have a free version, or a paid version for $39 per month. The free version will deduct $0.99 per product you sell from your sales profit.
- Download the Amazon sellers app for your smart phone (you will see why further down)
- Choose a specific target industry to start off with that you are knowledgeable about or enjoy (this makes things easier to start out, you can expand your categories as you grow)
Once you've reviewed the above list of bullet points, you're ready to begin.
4 steps to sell on Amazon using retail arbitrage
When I started selling on Amazon, I wish there were a few things I knew how to do before starting, such as how to utilize the Amazon FBA (Fulfillment By Amazon) program, and how to sell products and ship them off myself. Below you will find a step by step process explaining how to do this:
Step 1 – Find a profitable product to sell
The best places to find profitable products are local thrift stores, or a big box store like Target or Walmart Supercenter. Thrift stores is referring to stores that sell used items donated by the local community. For this example lets start with Walmart Supercenter.
You need to have the Amazon seller app downloaded first. Once you do, head to your nearest Walmart Supercenter (or similar store if you don't have one near you), and head on over to the clearance isle.
Simply browse the products on clearance, and pick one you can afford to purchase 10-20 of. With your Amazon seller app, you will have the ability to scan the product barcode or even the product itself and Amazon will scan their entire inventory to find an exact match.
Once you've scanned it, you will see how much it is selling for on Amazon. A good rule of thumb to determine if it is a profitable product, is using the 30% rule. If the product at Walmart Supercenter is priced at 30% or less of the price it sells for on Amazon, you've found a winner.
Step 2 – List the product on Amazon
I got confused with this when I was first starting. There are a few things to know when listing products on Amazon.
You don't need to make an entire new listing on Amazon to list your product using retail arbitrage. Why? Because it's already listed and you will just jump on the list of sellers selling that product.
Ever wonder why there are multiple sellers to choose from when you buy a product on Amazon.com? Some have higher prices than others, and some offer Amazon Prime services and others don't. That's because once the product is already listed once on Amazon, all the other sellers selling that product just use that listing and show up as an additional seller of that product.
This would be a different scenario if your product is not being sold on Amazon currently. In that scenario you would need to create a new listing from scratch. This is done if you are wanting to purchase product from a wholesaler, and brand your product with your own business name.
Step 3 – Determine how you want to ship your product when sales come in
There are two ways to process new orders that come in.
The first option is simply printing off the shipping labels from your Amazon seller account after a sale comes through, and packing it up and dropping it off at your nearest UPS store. This is pretty easy to do but can be very time-consuming if you have a large amount of orders coming in each day.
The second option is by using the Amazon FBA service offered for Amazon sellers. Rather than shipping the product yourself each time a sale comes through, you simply create an FBA shipment order within your seller account. Amazon will walk you through the steps of info they need to prepare your shipment.
Once you've completed the Amazon FBA shipment within your Amazon seller account, you can then print off the shipping labels that Amazon creates for you, and then drop off all your purchased product at a local UPS store. Your product will be sent to one or multiple of Amazon shipping warehouses. When an order comes through, Amazon takes care of the shipping and customer service for you for a small percentage of the sales price. Awesome!
When you're starting out it may be easiest to ship the product yourself until you begin to get a large amount of sales each day. Once you start picking up with the sales, then I'd for sure utilize the benefits of Amazon FBA services.
Step 4 – Get paid
Amazon pays you each month from the sales you make, minus any expenses they charge (such as the $0.99 fee per product sold for free seller accounts, or $39 for pro seller accounts, and any FBA fees if used).
You can see your account balance each day as sales are processed. You will get paid each month directly to your bank account you listed within your Amazon seller account.
How much can you make selling on Amazon?
As mentioned in the beginning of this article, there are plenty of people making millions per year selling on Amazon. Now I don't think they are doing all of that through retail arbitrage, but I do know that is where a lot of major sellers get started, and some may even just do a little bit of retail arbitrage along with their other selling models.
The key is to find a good product that has a high selling rank on Amazon, and then find out where you can buy that product for dirt cheep and take advantage of the price difference. If we said we could make even just $3 per product through retail arbitrage, and sold 5 products per day, that's $450 per month of extra income.
Get that going and build up a small reserve of money to start buying product from wholesalers or using a drop shipping method, and you will be well on your way to a high income online business.
Other ways to start selling on Amazon without any startup costs
One of the most profitable ways to make money utilizing Amazon's marketplace is through the Amazon Affiliate Program.
The Amazon Affiliate Program is an affiliate marketing program that is free for anyone to sign up for. Anyone that has a website or a blog online can simply get a unique link to a product on Amazon, and insert that link on their website.
As your website visitors click through to Amazon via that link, you get paid a commission of any purchase made from that customer for the next 24 hours. There are affiliate marketers making a full time income with just a few hours work each week.
Not sure how affiliate marketing works? Learn how to get started with affiliate marketing for free using Amazon's affiliate program and multiple other affiliate programs for free with the ultimate guide to affiliate marketing.
Want To Make The Most Of Your Money?
Get exclusive content for FREE! The best tips and tricks to make the most of your money, exclusive to email subscribers only!
Great information here. I never thought about selling on Amazon. I wonder how many products I have come across that I could have made a profit on if I had just looked it up online while at retail stores!?
I am definitely bookmarking, I will no doubt come back to reference this.
I’ve always wondered why there were so many different sellers on Amazon, and now I know why. They were probably using retail arbitrage too! A lot of people say you can make a killing on Amazon, and I am starting to believe them now that I have read this.
I will have to sit down and read that e-book too, glad to have come across this.
Thanks, Jacob. Best of luck!