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You are here: Home / Categories / Great Business Ideas / Selling on Amazon / Is This The End of Retail Arbitrage?

Is This The End of Retail Arbitrage?

By Jim

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:

  1. Competition: This theory says that so many of us are doing RA that the opportunity will soon die or become unviable. The same argument has been around for about 15 years.
  2. Grumpy Brands: Brands are being protective of their goods & price points and some are now going direct to Amazon – which they HOPE will make it harder for us as RA sellers to find and sell profitable brands online (aka – cut out the middle man)
  3. The “new” vs. “used” goods debate: This is a continuation of “grumpy brands” argument. Brands want to force us as sellers (often in cooperation with Amazon) to call otherwise brand new RA products something less than “brand new” once we pull them off the shelves.

Let’s discuss these three faulty theories one at a time as I offer a simple argument against each:

#1 Competition

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.

Filed Under: Selling on Amazon, selling on eBay, Uncategorized

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Comments

  1. Dave C says

    August 26, 2015 at 8:35 am

    This is great stuff Jim.

  2. Viola says

    August 26, 2015 at 3:23 pm

    Thanks Jim as always you give info that is clear and easy to understand.

  3. Serena Y. Lee says

    August 28, 2015 at 5:18 pm

    Glad to hear your thoughts on this, Jim. Thanks for sharing!

  4. Barb says

    September 5, 2015 at 6:56 pm

    This is very insightful. I would love to take advantage of all of this opportunity, but have not figured out how yet.

    • Jim Cockrum says

      September 5, 2015 at 7:29 pm

      Check out provenamazoncourse.com

  5. Lee Giezentanner says

    September 13, 2015 at 5:13 am

    I appreciate the depth on this topic. I’ve been reading how others are trying to scare RA sellers that the end is near, and your logic is very sound. Thanks!

    • Jim Cockrum says

      September 13, 2015 at 6:45 am

      Thanks! We’ve been teaching inventory sourcing for over a decade. We’ve figured out a few things around here.

  6. Russ Tanner says

    January 28, 2016 at 3:15 pm

    Thanks for the great article. I’m new to RA. Until last week, I had never heard of it. I’ve been reading articles and watching YouTube videos that are for RA, against RA, and everything in between. It can be hard to cut through the crap and get the real story. I feel like this article was pretty genuine. I have a full time job. But my wife has time during the week to do something like this – assuming 1) it’s still a viable way to make money, and 2) I can convince her that it’s legitimate.

    • Jim Cockrum says

      January 29, 2016 at 11:52 am

      I promise it’s legit- I pay people to do this for me for a living! This stuff works!

      • Russ Tanner says

        January 29, 2016 at 1:38 pm

        I was talking to my wife about it. She’s interested in doing it. But we really don’t know any of the mechanics of how it works or how to do it effectively. Do you offer a course or do consulting to get people started? Thanks.

        • Jim Cockrum says

          January 29, 2016 at 2:21 pm

          ProvenAmazonCourse.com – it’s the best selling course in the world on the topic! There’s many other ideas in there as well for expanding your Amazon selling business.

          • Russ Tanner says

            February 3, 2016 at 9:51 am

            Jim, I’m on the edge about buying the course. I’ve been watching a bunch of videos by Jordan Malik and bought a course on Udemy.com. I’m been lured into schemes before and I’m really cautious. My wife is skeptical and I’m trying to convince her that I feel it’s legitimate and a great opportunity and not just another scam. I have a friend that is really tightlipped about what he does for a living. But putting the pieces together, I think it has something to do with Amazon FBA, private labeling, eBay, etc. He lives in a $6 million dollar house on the beach. Whatever he’s doing, it’s really good at it. I’m not looking for a get rich quick scheme, but I am looking for something I can sink my teeth into and really run with – something that has a lot of financial opportunity. I read about success stories like Brett Bartlett and wonder if that’s one in a million or if it’s literally achievable by anyone, with the right information and work.

          • Jim Cockrum says

            February 3, 2016 at 11:12 pm

            If there’s a more legitimate and wide open business opportunity in the world that is riding a bigger mega-trend wave than this I’m fully unaware of it. We give lifetime money back guarantees on our courses. Try to find ONE complaint ANYWHERE online from a customer who BOUGHT something from us and felt “ripped off” in the end. You won’t find one. Keep in mind – we’ve been doing this since 1999 and have taught tens of thousands of people. That’s my entire pitch on the subject. God bless-

          • Russ Tanner says

            February 4, 2016 at 3:11 pm

            I wasn’t meaning to come across as negative. I’ve had a few bad business experiences in the past and it can be hard to tell whether something is legitimate or not.

          • Jim Cockrum says

            February 4, 2016 at 3:29 pm

            I didn’t take it as harsh at all – I get it. YOU (and people like you who have been burned) are exactly who we target in our community. Sometimes life has to beat us up a bit before the right teacher comes along. I want nothing but your success ultimately.

          • Douglas says

            January 20, 2017 at 6:13 am

            Hey Russ, just a random guy here wondering if you tired the Proven Amazon Course and how it’s working out for you?
            I wish you all the best.
            Douglas

          • Paul Olah says

            March 7, 2016 at 7:54 am

            Hi Russ, my name is Paul and I just recently bought the ProvenAmazonCourse on 3/2/16. I am not new to selling on ebay infact I started selling cars on ebay in 2000 and my wife has been selling anything and everything on ebay. I like the idea of selling on amazon using FBA, I wont have to ship items when sold. One of the reasons I got the course is to have a quick learning curve. I was actually drawn to the offlinebiz program as I do marketing consulting and copywriting for sales and marketing. But I wanted to get the PAC for my wife so she can go back to making 400-500 a week from home. I want to make more money online but have a more consistent income and PAC looks like it fit the bill. One of the things that I like is the product sourcing info, the thing is we had done some of them but over time just stopped doing them. You would think we would be like we already know this, but it was nice to see these things are still working and well. One of the very powerful and boasted benefits is that the people who buy the course and work it are also major contributors to additional ways to source, make money, goldmine niche tactics, etc etc. I will say that this is a very good course and you will not be disappointed in it at all. We also learned a lot of new ways to source. I know I will also get the offline biz course also. I am of the mindset that if I learn just one thing that helps me make more money that its a jackpot. There is one idea in here about fiverr and I am going to implement it today, that alone will make me the course money back. Even if it is only one sale a month of $25, the course will be free in 12 months. I expect it to do much better than that but its just an example. Plus he offers a money back guarantee. I tell you all of this because I would hate to see you not get all of great stuff in this course and have the ability to sleep at night knowing you and your wife can take care of your family and not have to rely on a job. You can also teach your kids to be free, I do. I taught my kids to make money using their brain not their backs. FYI. I do not know Jim Cockrum and this was unsolicited, I just felt your doubt in the post. Good luck and I hope you get it.

  7. Jim Cockrum says

    September 19, 2016 at 8:59 pm

    During the last 3 months of the year (called Q4 or 4th quarter) there will be many great toys that will be very profitable. With careful research and buying you can do great stuff!

    My partner started with $400 just a few years ago and now has an 8 figure business on Amazon. The opportunity is there!

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