How are Retail and Online Arbitrage Different in 2020 vs. 2015?

This is a guest post by Jimmy Smith, 7-Figure Amazon Seller and Co-Founder of Replen Dashboard and Replen Course Creator. 

Over the last 5 years of selling products on Amazon, we have heavily focused on Retail and Online Arbitrage. For those of you that don’t know what Retail and Online Arbitrage is, the basics are that we purchase items from a retail store or online site to sell on other platforms at a higher price. We choose to use Amazon as our main platform since that is where the majority of buyers are. My wife and I have built our operation to be almost completely hands-off and we currently employ 12 people to prep, ship, and shop for our products. We consistently sell over $120,000 per month with a healthy profit margin around 15% after ALL costs and we steadily increase our sales. In that time, there have been many changes. In this article I want to share what we are doing in our business to continue to grow and scale for 2020 and beyond by going through what has changed since we started our business.

Clearance has Dwindled – Focus on Replenishable Products

When we started in 2015 our main sourcing strategy revolved around going to retail outlets and searching for everything in the clearance aisles. We only were buying items that were deeply discounted so that we could sell them on Amazon at a higher price. We believed this was the only way to make arbitrage work. While this is still a viable sourcing strategy, it is not the best one. For starters, most major retailers know this is happening and instead of deeply discounting the products, they price them at a point where you can’t make much (if any) money on Amazon. Second, this model is more difficult to grow and scale since you consistently have to find new deals and always be on the hunt.

What we focus on currently is replenishable products (replens). What this means is that instead of scanning barcodes with our Amazon Seller app on our phones to find the listings, we type in the product we are searching for using the Seller app and look for “hidden” listings. Ones that other sellers aren’t finding. They are hidden to sellers only scanning UPCs since most of these listings don’t use the original UPC because they could be bundles or multipacks that have a different identifier. When searching for these replens we are buying full-price off the shelf from national and regional stores. This gives us consistency and reliability to our sourcing methods. We know that week after week we can go back to buy those products and send them into Amazon.

We actually have a course on this very subject at provenamazoncourse.com/replens.

There are More Restrictions

Amazon has come under more and more scrutiny from big brands and major media outlets for allowing anyone to sell their products on Amazon. Because of this, they have restricted many categories to new sellers and some of the major brands as well unless you have an invoice from a distributor, manufacturer, or wholesaler. Many people choose to get “ungated” from these restrictions by finding a distributor for that category or product and sending it to Amazon. Be careful doing this because you can easily waste money on a brand or category when there are plenty of other products that are wide open for new sellers. Only go through this process when you KNOW that the cost of ungating and your time will yield big money making opportunities. Otherwise, you risk losing your time and money on something you won’t be selling much in anyway.

More Data/Software for Buying Decisions

When just starting out 5 years ago, many decisions were made based on Sales Rank and Review count for the products we were looking at. Additionally, managing your inventory was nearly impossible unless you were able to build a complicated spreadsheet to know when and how many products to purchase. Since then, many companies have come out with products/services for Amazon and eCommerce sellers that take away a ton of guess work.

For example, instead of relying on Sales Rank data which is only based on that product at that specific period of time, we use Keepa to analyze the sales rank history of that product. This gives us a much better understanding of what the product historically sells at for speed of sales as well as the Buy Box Price.

Also, for managing inventory, Replen Dashboard now exists to specifically help arbitrage and wholesale sellers be able to automatically know when and how many of their products they need to repurchase. It goes strictly off of your sales data and connects to your Amazon account so all of the info is up-to-date and extremely accurate. This tool alone saves our businesses at least 10 hours per week with the amount of products we are able to manage in the software.

More Competition

Back in 2015 Amazon was like the Wild Wild West. There was competition but it was not as abundant so arbitrage on Amazon was much easier due to the lack of product availability on the platform (simple supply and demand). Since then, hundreds of thousands of new sellers have come on to the platform increasing the competition and lowering prices (which is better for the consumers). This is why focusing on replenishable products is so important. These products are much less likely to get saturated quickly (unlike clearance products) because they take more effort, skill, and patience to find.

More Price Fluctuations

Due to the increased competition, pricing continually fluctuates for arbitrage and wholesale sellers. Using Keepa charts and Replen Dashboard you can make much better decisions about what to repurchase in your business because these two software programs give you competitor pricing data so you don’t make bad buys.

More Opportunity for Growth and Scale

Since there weren’t as many people selling on the platform 5 years ago, there were less businesses created to help Amazon sellers specifically. Due to the rapid growth of the selling platform (and eCommerce in general), many different services have sprung up to help sellers be able to easily scale their business. One of those services are Prep Centers. These businesses will take in all of your Online Arbitrage, Wholesale, and Private Label products, prep them for Amazon per their guidelines, and ship them for you. Some even process returns, do Merchant Fulfilled orders for you, and work with multiple selling platforms like Shopify and Walmart.

This allows sellers to be able to quickly scale their business, without having to hire in-person employees to handle all of these tedious, time-consuming tasks. The prep centers you want have flat-rate pricing and don’t nickel and dime you for everything like polybags, bubblewrap, boxes, etc. The best one we’ve found to date is Down South Prep & Fulfillment out of Alabama.

More Products on Amazon

Because of the rise of sellers and attention that Amazon receives, there are TONS more products on Amazon’s platform than ever before. This gives arbitrage and wholesale sellers much more opportunity to be able to find products they can profitably sell on the site. When people say “arbitrage is dead” or “FBA is dead” they clearly haven’t tried hard enough. The opportunity is more abundant than ever.

Ability to List on Multiple Platforms

Due to Amazon’s popularity, many more platforms have sprung up over the years as well as software programs to help you cross-list your items. This gives Amazon sellers more options to grow and scale their business. Be careful with the cross-listing software programs though as some 3rd party sites don’t allow you to ship an order on their site and have it fulfilled by Amazon. Make sure to read the TOS before doing this.

Readily Available Cash Flow 

One complaint from any Amazon seller is the lack of available cash flow since they hold onto your money for a while. Since 2016, Payability has been able to bring that capital back into the hands of Amazon sellers. This gives them the ability to grow their business much faster since they will have more cash on hand at all times.

The biggest take-away over the last 5 years is that the opportunity to grow your income with arbitrage continues to get better and better. If you would like to learn about the best way to do arbitrage then go to provenamazoncourse.com/replens and if you would like to figure out how to manage your arbitrage and/or wholesale inventory, check out replendashboard.com.