Thinking about retail arbitrage? So are we. Find out what challenges a client of ours faced trying to resell on Amazon, and learn about how Profit Bandit can help.
Amazon is changing so fast that it’s hard for sellers to keep up with it. A good case in point is retail arbitrage. Although it’s a topic that doesn’t come up in seller circles anymore, this business model continues to fascinate people.
One such person is a client of ours. After reading a popular book on retail arbitrage, they wanted to try it. They subscribed to the Pro merchant service and signed up to Profit Bandit. But when it came time to list, they realized it’s not that easy. Below are some of their questions.
Why Do I Need to “Request Approval”?
There are some things you can never sell on Amazon, such as tobacco and lasers. These are called restricted products. But more and more products have extra selling restrictions. Sellers tend to call these categories and/or brands “gated”.
You can tell an item is “gated” as soon as you try to list it on Amazon. First, you see the “Listing limitations apply” warning. Next, you’re prompted to “Request Approval”. Then they ask for invoices and letters from the manufacturer/wholesaler that prove you’re allowed to resell on Amazon.
Can Profit Bandit Help?
Profit Bandit comes with a clever feature called Restricted items alert. As pictured below, it gives you a sneak peek at the item’s listing restrictions. Simply scan a product’s barcode or enter it manually to see if you’re free to sell it on Amazon.
Note: You must first log into your Amazon account to see the listing restriction alerts.
As a scouting app, Profit Bandit is best used to help you decide what to buy for resale. It shows you competition, sales ranks, lowest price, and estimated profit for items that are already listed. So, it gives you everything you need to know before you buy.
Unfortunately, Profit Bandit can’t help you list new items. And it certainly won’t help you lift any restrictions. However, it can be used to check a listing for a product like yours, to see if its brand or category is gated.
How Did People Get Rich with Retail Arbitrage?
In its day, retail arbitrage was very profitable. Sellers bought stock by the pallet at auctions and clearances. Some only traded online, and many drop-shipped.
But buying in bulk meant they couldn’t check if the products were authentic. So, with bulk-buys came counterfeits.
Then Amazon started to ask for itemized invoices. Sellers who bought in bulk were no longer able to comply with requirements.
Also, wholesalers found other ways to dispose of overstock. Eventually, retail arbitrage fizzled out. Get-rich-quick schemes no longer worked.
The Future of Retail Arbitrage
In April 2016, we predicted that three factors would affect the future of retail arbitrage. Below we mention these predictions and how they came true:
- Itemized invoices would be the norm.
This now applies to everyone who sells on Amazon, including private label sellers. Invoices are checked. Contact information is verified. The supplier must back you up.
- Listing guidelines would be tougher.
Current condition guidelines are strict. One says an item is only new if the packaging is ‘intact’. But you can’t resell things on Amazon without checking that they’re genuine and complete. Unfortunately, if you open them, you may downgrade them.
- Brand owners would push out resellers.
Big brands are cracking down on resale. Thanks to Brand Registry, manufacturers and authorized sellers can remove and report resellers on a whim. Filing an appeal is time-consuming.
Should I Try Retail Arbitrage?
Back in 2017, we wrote a piece on the future of selling on Amazon. Our forecast was that more resellers would be forced to close up shop. Since then, we’ve seen a massive shift away from retail arbitrage and onto private label.
But this doesn’t mean you shouldn’t give it a go. Start with whatever’s just lying around on your bookshelf. As long as you sell 40 items a month, the Pro account pays for itself. Just remember to tick all these boxes:
- join arbitrage groups on social media platforms;
- keep up with the latest news on seller forums and Amazon-themed blogs;
- swap ideas with other resellers at trade shows, summits, workshops, and webinars;
- use a reliable scouting app like Profit Bandit;
- look up costs with the FBA Revenue calculator;
- compare fulfillment channels.
We shared this real-life example with you to talk about how people resell on Amazon today. If you’d like to know more about retail arbitrage, please don’t hesitate to get in touch via email or comments below. And don’t forget to subscribe to our blog for news, guest posts, and insider tips.