Retail Arbitrage. Is it dying?
If you want to skip this article and just trust me, I’ll cut straight to the point. Retail Arbitrage (RA) is NOT dying – it’s going to be with us forever, or at least as long as we have free markets where products can be privately bought and sold.
If you want to hear my reasoning in the briefest possible terms, read on…
First, for the sake of those new to online business, let’s define Retail Arbitrage.
Retail Arbitrage, or RA is the art & science of finding items locally on retail store shelves that you can flip and sell for a profit online (i.e. Amazon, eBay, Craigslist etc.). In “the biz” we call it “RA.”
While RA is just ONE of numerous ways to source profitable inventory (we teach over 50 strategies in our Amazon course for example), the fact remains that RA remains a very popular starting point for many online sellers.
It’s never been necessarily easy to do RA, but it’s always been simple to grasp the concept – which is perhaps why it’s been popular for a couple of decades. It’s also been a viable sourcing option for that same length of time. Along with many other experts in the online selling industry, I believe that RA will ALWAYS be an opportunity as long as there are relatively free markets in operation. I have no hidden agenda or secret reasons to prop up RA. Like I said, we teach 50 strategies for sourcing profitable inventory and RA is just ONE! If I’m wrong, and RA becomes unviable for my business, I’ll confess I was wrong publicly, and easily walk away from it – but I’m nearly positive that RA is NOT going anywhere but UP. I pay a team to do RA for me. The deals are out there and will continue to be.
I’ll make my case for the long term stability of RA below as briefly as I can. If you grasp the basics of economics and free trade (supply & demand etc.) it will really help this article to soak in. If the basics of economics are foreign concepts to you, it might not make as much sense, but I reserve the right to say “See, I told you so” in ten years either way.
First, a bit of history of the retail arbitrage opportunity:
RA first popped up on eBay as a viable way to earn a nice living nearly a couple of decades ago like I said above. Since that time, on eBay, Amazon and many other online selling platforms we’ve seen hundreds of billions of dollars of product move from retail stores to enterprising entrepreneurs like us and then on to Amazon or eBay and then of course finally to consumers.
An example of RA: Let’s say you are out shopping retail for yourself and you notice a large bin of products marked down 80%. You quickly check eBay and Amazon with one of the available apps – many of which are free, and you discover that many of the items are selling quickly online for much more than the discounted price available to you. Next, you buy the products (after asking for a deal of course), and then you flip them for a nice profit.
Sounds simple right? It really is.
There are those in the industry however who are predicting the end of RA as an opportunity, and I’m here to say publicly I think they are quite wrong on that point. Also consider that many experts who are predicting the death of RA have an easily identified agenda behind their premature announcement of RA’s demise. I on the other hand have no vested interest either way in the fate of RA except for the fact that I love free markets and would enjoy preserving that particular stream of income for myself – but I have many other sourcing and product creation concepts I both teach and utilize in my own business.
From where I sit, the only way RA will ever die is if free markets die while consumers are dragged in kicking and screaming at every step.
The supposed threats against RA are as follows:
Let’s discuss these three faulty theories one at a time as I offer a simple argument against each:
Competition is a reality of any biz opportunity. Of all the rationals given for the demise of RA, this one is the strongest from my vantage point, but on a scale of 1-10, the “competition” argument is maybe a 2 in regards to making me nervous. Free markets correct themselves naturally – and RA is the ground floor level of retail correction. As more people become aware, more competition will be in the picture. That’s how business works. It’s not new, but so few people are willing to do the work and put in the time. The truly motivated among us are a rare breed and they will continue to thrive with this model.
More good news for RA sellers: eBay has been in the picture for 20 years now and you’ll still only encounter a handful of people in your community who “get it”. If you ask 1,000 people on the street if they know how to do RA, you’ll get 1,000 confused looks…or 999 1/2 confused looks. This entire trend is STILL in its infancy – as is “online shopping” which still only represents a tiny fraction of total retail activity. In other words, the hottest trends in retail shopping history are still the equivalent of babies in diapers. Those announcing the “death” of any Internet business trend are almost certainly doing so with an agenda that serves their own purposes.
Further evidence in support of RA is this:
RA is an “entry level” activity for many/most serious online sellers. It’s how you get your feet wet. Those who do it well typically move on…leaving plenty of $10 widgets that can be flipped for $50 on Amazon or eBay. Make no mistake – this can easily put $100K per year in the bank for a part time effort, but still, it’s only a starting point. Serious sellers use RA as a launching point, and then often move on to slightly more complex models like wholesale or private label (both of which we discuss in our courses by the way).
#2 Grumpy Brands
A quick note about brand owners.
Mistakes by brand owners and retail channels are opportunity for RA sellers. Brand owners and retail outlets take on a lot of risk when they make and ship a million widgets all over the retail channels. Inevitably, they make, order or ship too many or too few – almost every time. Inevitably they price the products too high or too low. This “over/under” pricing and ordering game creates massive online opportunity for those of us in the RA game. In spite of Amazon’s attempts to stay on top of it all by getting in the buying game themselves, you still have a massive advantage if you are willing to scan a few prices at local retailer and spot the “winners.” This will not be going away…ever.
Many brands are refusing to allow their stuff online though, or they want to work directly with Amazon and somehow cut out the RA sellers.
That may sound like bad news for RA sellers, but from a big picture vantage point I see nothing but opportunity unless the brand goes ONLY with Amazon and refuses to sell through any traditional retail channels. In that rare instance, the RA opportunities for that particular brand are indeed dead. This model represents only a tiny fraction of Amazon brands however.
Next, the law is on our side. Once you buy something you own it and can sell it. If Amazon or eBay won’t let you for some reason, there will always be other options if the deal is good enough. If a brand sells via retail and you get it for a great price, there WILL be a way to sell it for a profit. Ebay has been fighting and winning battles on this front for 20 years, and now Amazon is in the fight too (to defend RA). Sure there are some exceptions, but in general we are winning (aka Free Markets are being protected). The worst case scenario is that you may not be allowed to call it “brand new” (we’ll address that in point 3), but you can still sell it as “like new.” Remember – shoppers aren’t stupid. If Amazon for some reason sides too often with brand owners on this point and allows ONLY retail level pricing on Amazon.com direct from brand owners, how do you think Amazon’s hundreds of millions of buying customers will respond? The answer: They’ll start shopping somewhere else where they can save some cash – which is exactly where the RA sellers will follow. In other words, the pressure to keep the inventory flowing in at the cheapest possible prices is on AMAZON, not on us. Amazon will never care about what price brand owners want to assign to their products. Amazon cares only about getting as many as possible quality product options at the best possible prices in front of their customers.
If Amazon were to suddenly stop offering this discounted merchandise (which WON’T happen), someone else would fill the gap. The free market will continue to win until laws are passed that shuts it all down (and then God help us all because that’s the death of free markets.) We’ve heard a bunch of these other arguments since the early 2000’s with eBay when it was supposedly going to start preventing retail arbitrage in the early 2000’s. Predicting trends is fun, but right now it’s business as usual from my vantage point.
#3 “new” vs. “used”
This is an easy one to refute. While I could write a lengthy chapter on the topic I won’t.
Again, consumers and free markets save the day and WE (as RA sellers) benefit.
Here’s what I mean. Let’s suppose for a moment that Amazon creates a new product category called “like new/purchased retail” and forces us to use it as RA sellers. Why would they do this? They might do it to make their “brand owners” happy, to guarantee perfect retail boxes as much as possible, and by doing so force RA sellers to distinguish truly “brand new” items from items purchased retail and “flipped”. In other words – the same exact products in the same exact boxes, but categorized differently on Amazon.
This may sound like bad news, but again, supply and demand wins in the end.
Shoppers will find and buy the better deals even if Amazon tries to hide them. Smart shoppers (there are a lot of them) would quickly realize that there is rarely if ever a difference between the categorization of “new” vs. “like new/purchased retail”. They’ll take the better deal.
Don’t believe me? Here’s a test.
You have a chance to buy a bright clean widget in a perfect box for $50 or get one with a dented corner on the box for $30. With all other things being equal EXCEPT the seemingly irrelevant condition category, which price will you choose? Some consumers will pick the higher price -sure. That’s just goofy human nature, but as smart shoppers learn that the category “like new/purchased retail” is just as good as “new”, they’ll begin to go where the deals are. That means WE WIN in the end as RA sellers.
And for the sake of being thorough, let’s assume that Amazon no longer allows brands to be sold on their site unless they are direct form a manufacturer. How long will it take word to spread that the real “deals” are back on eBay or elsewhere? In other words, the pressure is on AMAZON to keep RA alive – and they will do so even if they don’t like RA sellers for some reason. Their buying customers will DEMAND it.
Bottom line: RA is NOT going anywhere anytime soon. Keep on scanning! The same can be said for OA. The deals will always be there for those willing to do the work.
With tens of thousands of Amazon selling professionals in our readership base, we are positioned well to keep tabs on bigger trends effecting sellers. Right now, there seems to be a slightly higher than usual number of suspensions happening. It’s scary to get a notice from Amazon saying that they’ve suspended your selling privileges.
While the odds of a permanent suspension are very slim IF it’s handled correctly, it is still a scary process to go through.
If it happens to you or someone you know, we are here to help as much as possible. Please know that the majority of suspension can be overturned if handled properly.
Here’s what we are doing about the suspension trend in our community:
The best selling (and continually updated) book “Silent Sales Machine” has been about online income diversification from day one. Our entire community is built upon the premise that multiple income streams online are better than one because reliance on any single "big boy" website like Amazon is risky. Get the book on Amazon, or at SilentSalesMachine.com
Finally, if you or someone you know is suspended on Amazon please send proof of that suspension to us and we’ll get the suspended seller free access to our latest course from ProvenProductPartnering.com as our way of showing support and helping them be aware of the need for income diversity with Amazon. We’ll also direct them to an expert who can advise them and assist with reinstatement.
Are you new to selling “physical” product on Amazon or eBay?
After having helped thousands of sellers succeed on those two platforms, I have some of the most universally ignored, yet entirely sound advice you’ll ever get about succeeding on those platforms.
Here’s the tip:
You make your money when you buy your inventory – not when you sell it.
If you want to begin successfully selling physical product online, that should be your mantra. That statement doesn’t seem to make sense until you understand that RESEARCH is what makes you a winner in this game. It’s all about being as certain about your results as you possibly can be BEFORE you commit to buying any inventory that you hope to resell.
This simple tidbit of advice has steered many of our students away from disaster. I can’t stress enough (especially for newbies) the importance of learning to do proper research before buying inventory. We get clients all the time who unfortunately poured piles of cash into 1,000 units of a widget before they met us. They poor souls were SURE they could move their “great deals” later at a high profit margin.
Most often these gullible newbies were told in a course (not our course!) that the secret to riches was in going “all in” in a single product and then marketing like crazy (aka SEO, feedback tricks, ppc ads etc.). That model DOES work…about 10% of the time. If you are really paying at tenting you’ll note that a 10% success rate is just about enough “success” to keep the “big launch” wheels turning – with course after course promising riches following the same mostly broken model.
If you want something more predictable, steady, proven and reliable however, I suggest you heed my advice.
Success selling physical product is NOT about creatively marketing inventory after you’ve poured your money into buying a pile of it. Instead, success awaits those who cautiously purchase ONLY the items that they KNOW will sell – and sell quickly, profitably and predictably. Slow and steady incremental growth is the battle plan. Quick hit, overnight riches based on one large inventory buy is a path to nowhere.
To be clear, if you buy the wrong inventory, you can’t rely on being bailed out by:
…any other “trick” to get you out of the situation.
We tell all newbies to go “a mile wide and an inch deep” when starting out buying inventory – that means don’t buy more than a handful of anything until you are REALLY good at this game. Don’t pour all your cash into a single type of product unless and until you REALLY know what you are doing (that can take years for some people – while others catch on quickly).
To learn how to properly and predictably enter the game in a much lower risk fashion, check out the number one course in the world (yes, I’m biased) on the topic of selling physical products online: ProvenAmazonCourse.com
If you want to spend thousands lining the pockets of experts who are only excited about their fat affiliate commissions, while learning the same things that we teach around here in superior, proven, time tested courses that cost 1/10th the price tag – that’s fine, but after you read this blog post at least you’ll know the full story from my perspective.
In this blog post I’ll make a simple case as to why you should consider an alternative to the “big launches” and stick with the long time proven courses with long term established communities and experts instead. Save your cash for inventory!
Consider the ProvenAmazonCourse.com (the “PAC”) course in this case if you are ready to learn how to sell on Amazon.
Are you eager to jump into Private Labeling? Check out ProvenPrivateLabel.com (by the way, you get BOTH courses in one place -> ProvenAmazonCourse.com for under $300)
Or, don’t buy ANY course and just get going with one basic idea than anyone can use (one of the multiple strategies we teach inside our PAC course) – here’s an 8 minute video I made that’s getting great feedback so far. It shows you how to get started selling on Amazon at virtually no expense at all:
One of the unfortunate risks associated with depending on any of the “big boy” websites like google, youtube, eBay, paypal, and yes our much beloved Amazon is the fact that they hold all the cards.
Seemingly on a whim they’ve been known to press the delete button and flush away a sellers account in a moment. Usually a severe rule infraction has occurred, but not always. Usually justice is done in the end (accounts restored), but not always. In spite of the seeming injustice of it all, we are forced to conclude that it’s just part of the game right?
Sure, playing by the rules doesn’t hurt, but the rules are always shifting about and Amazon (and all the other big boys) are fickle partners at best. It’s a cat and mouse game that many old school eBay sellers from the early 2000’s can easily related to. I know of exactly zero big time eBay sellers from the early 2000’s who slept soundly each night with the secure thought in mind “eBay has my back – it’s all good.”
Our solutions to these issues:
1. The best solution to such risks is to establish multiple streams of income. That’s why our community is built on the “C.E.S.” model (each letter in CES is a different biz model I’ve built, and my team and I teach those models to others.) The three models work great together and compliment each other while operating independent of each other. My $5 “Silent Sales Machine” book has details (sold on Amazon)
2. We have content coming out soon that will show you how to have multiple Amazon selling accounts and ELIMINATE the risk of being “shut down.” I can’t say more about it just yet, but it’s 100% legit. A note about this never before revealed training: No Amazon trickery or policy violations are occurring with this strategy. You’ll have a “why didn’t I think of that” reaction initially, and then the success story of our case study students will blow your mind.
While you may not get the feeling that Amazon, eBay, Google or Youtube have “got your back”, our community, my team, and I sure do. We aren’t a herd to be toyed with – we are tight nit community of creative entrepreneurs who simply roll on when circumstances shift.
Stay tuned for the release of these great training courses and much more of what we have in store for our ProvenAmazonCourse.com community – we are here for YOU.
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UPDATE ONE DAY LATER: In a crazy twist of irony, the same day I published this article my own youtube account was suspended! Get the detail – click here to see how we are managing the youtube suspension.