What is arbitrage, and what could it mean for your Amazon Business is Amazon’s wholesale … More? Here’s a quick run-through of the many opportunities third-party seller can take advantage of as they carry out their arbitrage on Amazon.
Arbitrage is a unique type of reselling activity whereby the reseller researches the product sale price prior to purchase, and works with an infinite number of sources rather than a handful of suppliers. The merchandise is usually paid for with cash upfront, the reseller is not required to place minimum orders, and the resale usually takes place within hours or days from the time of purchase, rather than months.
There are two types of arbitrage. The conventional type is called It’s the practice of buying pro… More, and there’s also an increasingly popular version called The practice of buying products f… More. If you’re considering this type of trade, you should be aware of the subtle differences and similarities.
Retail and Online Arbitrage Differences
For retail arbitrage, the source is a brick and mortar shop, such as a retail chain, an outlet store, or even a neighbor having a yard sale. The reseller spots an item and handles transportation and warehousing for it. By contrast, the source for online arbitrage has an online presence, which means resellers can time their purchase and sale to minimize logistics costs.
Similarities Between Online and Retail Arbitrage
‘Arbitragers’ generate more sales for the source retailers, occasionally buying in bulk, at liquidations, during sales or when there are sell-offs. But while they temporarily increase demand for a product on the source market, they only buy what they need, when they need it. They also increase the supply of certain items on the target market, but these tend to cause unforeseen price fluctuations that harm competitors, as they sell fast and cheaply.
The Future of Arbitrage on Amazon
Arbitrage Threats for Amazon Sellers
Rumor has it there are several ideas in the pipeline to offset the tremendous advantage that arbitrage has over conventional third-party selling activities on Amazon:
- ‘Arbitragers’ may be required to provide itemized invoices for items sold in ‘New’ Products can only be listed on Amazon if… More – rather than the bulk invoices they typically receive – just as any other Amazon seller does when an item’s authenticity is questioned.
- Brand owners may insist that arbitrage stock be described as ‘Like New’ or ‘Purchased Retail’, because it’s being bought and handled by an intermediary before it reaches the customer; therefore not new.
- Trademark owners, manufacturers or designers may intervene to stop Amazon sellers from selling items sourced via arbitrage, and even try to have reseller accounts suspended to protect their price points.
However, Seller Coach Jim Cockrum argues that Amazon singling out arbitrage items could have the opposite effect, with customers choosing ‘Purchased Retail’ for its immediate availability and unrivalled price.
Advice for Amazon Sellers Interested in Arbitrage
Whatever type of arbitrage you’re interested in, we advise you to:
- Start small and invest only as much as you’re willing to lose, until you figure out what kind of turnaround time and volume you can handle.
- Find out all there is to know about your items, especially trademark status and trade requirements, making sure they are authentic, and that you don’t need to be an authorized seller to trade them.
- Hire as much staff as you need to scout not only for both quick selling items, but also for replenishable sources and sustainable stock with fixed buying prices.
As you can see, there’s no better time to turn to arbitrage to boost your turnover. After all, if you can’t beat’em… But keep your eyes open for those trademark overnight Amazon policy changes, and take any stories of spectacular sales through arbitrage with a pinch of salt.
Melanie takes an active interest in all things Amazon. She keeps an eye on the latest developments, and keeps Amazon sellers up to speed