Learn how to arbitrage on Amazon for FREE

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✨ Post actualizado el 24/04/2024 por David Costarrosa

Learn how to arbitrage on Amazon for FREE
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Are you looking for new business models to keep squeezing the most out of your Amazon seller account? Have you ever heard about arbitrage on Amazon and how to succeed with as little investment as possible?

Amazon is much more than an online retail giant. Its business units and different selling programs extend far beyond the portal we all know.

Just to name a few, we can mention everything from its affiliate program, print-on-demand products, Amazon Ads, Amazon Prime or Amazon Web Services, to its streaming service Amazon Prime Video or a drug retailer such as Amazon Pharmacy.

In this case, I want to focus on selling physical products through the Amazon FBA system. By the way, and in case you haven’t seen it yet, a little while ago I launched a step-by-step Amazon FBA mega course so you can learn how to sell with this system.

But back to the main focus of this article, in this mega guide I will teach you what Amazon arbitrage is and how you can get the most out of this business model to generate high profits with the lowest possible investment.

What is arbitrage on Amazon?

Arbitrage on Amazon is a business model where the main objective is to make a profit through the purchase of products from different brands, at a discounted price or via an offer, to then sell them within the Amazon platform.

To give you a more concrete example, let’s suppose that Walmart launches a 50% discount on selected products for Mother’s Day. The objective would be to take advantage of this discount and make a bulk purchase of stock of these discounted products and then sell them through Amazon.

Explaining it this way makes it seem very simple, but through this mega guide you will learn the different ways to do it so you can maximize your profitability.

Is arbitrage on Amazon legal?

Now that you know what arbitrage is, the next question most people ask before they get started is whether or not it is a legal business practice.

While there are many brands and even individuals who claim that arbitrage is an illegal activity, none of that is true.

The moment you buy an original product legally and with its corresponding invoice as a backup, that product becomes your property and you can do with it as you please.

What can happen on Amazon is that some brands are very defensive over their products and do not accept that someone can use their name to make a profit.

In this case, Amazon may suspend your account because they consider you an unauthorized reseller.

My advice?

In the case of globally recognized brands with a strong presence on Amazon, do not buy a large number of products from just one of them, but buy small quantities from different brands.

Keep in mind that large companies have distribution agreements signed with different distributors throughout the world, so trying to sell 150 of the same products from a single company can be disadvantageous for you because you do not have a distribution contract.

In other words, as long as the quantities are small, you will have no problem in implementing this business model.

Regarding this, I recently interviewed Ricardo Dominguez on my YouTube channel, who invoices several million dollars a month on Amazon under the “Wholesale” business model, and who recommended Amazon arbitrage as one of the most interesting ways to get started on the platform.

What are the best categories to get started with Amazon arbitrage?

With Amazon arbitrage, there is no better place to get started than with the categories with the highest probability of success.

Therefore, although each has its own nuances and secrets to discover, here is a table with the best niches so you can save a lot of time searching.

CategoryWhy start with this niche?
Sporting GoodsThey offer a stable demand throughout the year thanks to the different seasons and needs of each of their fans.
BooksThey have a wide and diverse market thanks to the fact that books of all genres are available and sold on Amazon.
Household ItemsOne of Amazon's star categories, it also has year-round demand and the possibility of taking advantage of the different seasons.
KitchenwareSimilar to household items, kitchen products are an interesting variant thanks to the fact that there are always new utensils and gadgets to take advantage of and set trends. In addition, the target audience is very broad and that is another differentiating factor of this category.
ToolsFrom professionals in the maintenance sector to those who carry out construction work or even for everyday use in the home, tools also form part of our everyday life and that is why this is another of the categories we recommend you look into to get started in Amazon arbitrage.
Pet suppliesThere is an emotional factor at play here. We know full well that the pet niche is one of the largest on Amazon because it is the owners themselves who are willing to spend a lot of money on their little life companions.
ToysThis is a category with a lot of potential and an ideal place to start on the road to Amazon arbitrage. This is mainly due to the fact that you have a wide variety of products for different ages and you can make the most of the pre-Christmas season. However, we do not recommend starting with baby toys.
ClothingAs statista, rightly confirms, Clothing is among the top 3 categories on Amazon. That's why by taking a look in its subcategories you will find several products with interesting selling potential.
Office suppliesWhether for the office or even when working from home, everyone uses office supplies. That wide applicability makes this category one of the most interesting when starting out in arbitrage. In addition, you can take advantage of the fact that they are usually products that are constantly discounted at local stores.
Arts and craftsWithin this category, you can take advantage of niches such as bricolage, drawing, sewing or DIY (Do-It-Yourself) items, with a lot of growth over the last few years.

What is retail arbitrage and what is online arbitrage?

While any article you find about arbitrage on Amazon will tell you about the 2 typical ways to do it, I will show you, besides those, other ways that will make a difference and that I am confident will be very beneficial for you.

Retail arbitrage or physical stores

Retail arbitrage is nothing more than the example I mentioned above. You go to a department store, such as, for example, Target, which is running an offer or a sale on products and you buy a number of items there and then sell them on Amazon.

Usually you can take advantage of a good discount over 40% to have a good margin to work that product online.

Online store arbitrage

This form of arbitrage is one of the most popular within this business model. In this case, the objective is to take advantage of the sales that many online stores carry out during a short period of time in order to get the necessary stock.

You can even use the Amazon platform itself and take advantage of sales for Amazon Prime subscribers or browse the Lightning Deals that are updated daily to find interesting prices that you can take advantage of.

💡 Tip:

I recommend creating an alternative email where you subscribe to most of the big online stores to keep an eye out for the sales they offer on a daily basis. Keep in mind that many of them run deals that are only available for 24 hours.

Difference with Wholesale

Many people confuse arbitrage with wholesale, but the difference between the two models is significant.

While, as I explained above, arbitrage consists of buying items from retail stores, with the aim of selling them on Amazon at a higher price; it is considered wholesale when you buy directly from a manufacturer or a large-scale distributor.

In other words, it is not a purchase from a local store that sells its products to the end customer, but the purchase is made from that store’s distributor.

What are the different ways to find products?

Discounts on different platforms

Above I explained the 2 most common ways to arbitrage products to sell on Amazon.

However, we are going to be a bit more specific. So, I will add other strategies that I usually use and that I encourage you to start implementing to get a jump in quality and differentiate yourself from other people doing this work.

Arbitrage on Ebay

Ebay was, during the beginnings of ecommerce, the king of online sales. With the rise and subsequent development of Amazon, its popularity has declined but, nevertheless, there are still a significant number of sellers who offer their items with great discounts that you can take advantage of.

Like Amazon, it has a Deals section where you can find products discounted up to 30% off their original price.

Arbitrage in Walmart

Walmart, is the largest supermarket chain (also called supercenters) in the United States. According to an article published in Statista’s blog, it has more than 4,700 stores throughout the country among its supercenters, local stores and discount stores.

It is also a favorite destination for entrepreneurs looking to take their first steps in Amazon arbitrage due to its wide variety of products and large discounts.

One of the advantages of its portal is that it links the IP address of your laptop or cell phone with the store closest to your home.

That way, you can buy products from the stock of that store and coordinate a time to pick up your order without having to go inside the supercenter.

You can also choose from the general stock of all stores and receive your order at your home address, but with a delivery time of up to 7 days from the date of payment.

Arbitrage in small local stores

In this case, what I recommend you do is visit the local stores near your home or in your city in order to find distinctive products that are often only sold in that store.

Here I am talking about the typical small stores that are manned by their owners and where you can find real gems at very affordable prices because it is not a store with lots of daily traffic or a high monthly turnover.

Arbitrage on Etsy for handmade products

Etsy is another of the fastest growing marketplaces in recent years. Unlike Amazon or Ebay, it is focused on small local sellers and handmade products i.e., products made by skilled artisans.

Products like these have seen exponential growth not only in the physical world but also in ecommerce, so it is vital that you can leverage this trend to get your hands on unique products from Etsy sellers and tap into them via the Amazon platform.

Advantages and disadvantages of arbitrage on Amazon

While arbitrage on Amazon is one of the great business models of today, it is important that, before you start, you can have a clear understanding of its main advantages and disadvantages in order to analyze whether it is the right type of business for you.

Advantages Disadvantages
This model does not require a large initial investment, since, as it involves discounted products, you can purchase products for between 30% and up to 70% or 80% less than their original price.
The learning curve when starting this business model will take time, energy and money.
In the case of Retail Arbitrage or local stores, you will find products that are not offered online but in many cases the seller simply wants to free up space in the warehouse and decides to liquidate a certain amount of products in stock.
Searching for products, whether online or through physical stores, will take up a lot of your time. You must optimize it as much as possible.
By storing your product at home, you will have greater control over your inventory.
In addition to shipping products to Amazon's warehouses, you will need to have space at home to store the surplus you have purchased, especially in preparation for the Q4 peak season, unless you have a back-up warehouse such as Beeping to manage your merchandise.
Having that stock will allow you to sell the product and ship it quickly, thus achieving greater customer satisfaction and, above all, keeping Amazon happy.
The time it takes Amazon to make your items available for Amazon FBA. Sometimes it takes up to 30 days.
You will also be able to check the quality of each of your items and review the packaging so that it arrives at its destination safely and professionally.

Searching for products through software

As always in the world of ecommerce, there are some programs or software that allow you to shorten the time it takes to search for products and you can apply them both when doing online arbitrage and when doing retail arbitrage.

Keepa

Keepa is the number one tool for arbitrage on Amazon. This Chrome extension will allow you to track the sales and price history of an Amazon product in order to analyze the different variables and times of the year to be able to offer it on the platform and get a higher profit.

Helium10

Helium10 is my favourite tool for finding profitable products and opportunities on Amazon. Through this excellent software you will receive all the information you need to know if the item you have found on offer has the potential to become a winning product.

Remember that in this blog you will find my Easy definitive guide to Helium 10 to make the most of all its benefits.

Amazon Seller App

The Amazon Seller App for mobile will also be of great help when you find yourself bargain shopping in physical stores. With it you will be able to scan the barcode of the products you see in stores and know whether or not they are within Amazon’s catalog.

It is available for both Android and iOS.

Jungle Scout

Jungle Scout is another excellent tool to complement the work of the Amazon Seller App. With the Google Chrome extension you can check if the product you have scanned with the App is currently being sold on Amazon, as well as its sales history for the last 5 years.

With all that information you will be able to perform a complete analysis and decide whether or not the product is potentially worth investing in.

OAXray

OAXray is one of the most effective tools for online store arbitrage. The way it works is very simple. You can enter any online store and scan a page of products to see which of them are in the Amazon catalog.

You can export the information obtained by the tool to a spreadsheet to gather all the detailed information about each of the products it has found.

Although it is a paid software, it has a trial period of 7 to 10 days.

Tactical Arbitrage

Tactical Arbitrage is another great tool that can be used to conduct online arbitrage.

Unlike OAXray, this software allows you to scan an entire category of an online store and offer you several alternatives. In addition to the Online Arbitrage package, you will have 2 other options available including Flip Pack and Wholesale and even a Full suite option that includes all 3 packages together (Online Arbitrage + Flip Pack + Wholesale).

One of its most outstanding features is that, you can find out if a product is sold exclusively on Amazon. That is, it cannot be sold through arbitrage. This option is very interesting because it will save you money and a lot of headaches.

Prohibited products and restrictions

One of the fundamental issues that you should be aware of before buying merchandise to sell on Amazon, is the list of prohibited products and categories with restrictions.

Regarding prohibited products, the first thing you need to know is that it is not possible to sell replicas or products that belong to a trademarked brand with intellectual property rights. In other words, if in a store near your home you get 15 replica Spain soccer jerseys, you must be sure that they are authentic products and that the sports shop is an official distributor to avoid problems when posting the product on Amazon.

You should also stay away from medical products, alcohol and others that might pose some kind of danger to the buyer. Amazon does not like that and you will rapidly find your account under the microscope.

Regarding the restricted categories, it is very likely that in order to add a product in some of them you will need prior approval. This is because it is a sensitive or highly demanded category where Amazon performs special controls.

Restrictions on categories and products (this list applies to selling in the US)

  • Alcohol
  • Animals & Animal-Related Products
  • Art – Fine Art
  • Art – Home Decor
  • Automotive and Powersports
  • Composite Wood Products
  • Cosmetics & Skin/Hair Care
  • CPAP Cleaning and Disinfecting Devices
  • Currency, Coins, Cash Equivalents, and Gift Cards
  • Dietary Supplements
  • Drugs & drug paraphernalia
  • Electronics
  • Explosives, Weapons, and Related Items
  • Export Controls
  • Food & Beverage
  • Gambling & Lottery
  • Hazardous and Dangerous Items
  • Human Parts & Burial Artifacts
  • Jewelry & Precious Gems
  • Laser products
  • Lighting
  • Lock Picking & Theft Devices
  • Medical devices and accessories
  • Offensive and Controversial Materials
  • Other Restricted Products
  • Pesticides and Pesticide Devices
  • Plant and Seed Products
  • Postage meters and stamps
  • Recalled Products
  • Recycling electronics
  • Refrigerants: Ozone-Depleting Substances and Substitutes
  • Subscriptions and Periodicals
  • Surveillance Equipment
  • Tobacco & Tobacco-Related Products
  • Warranties, Service Plans, Contracts, and Guarantees
  • Upholstered Furniture, Bedding, & Other Quilted Products

If you want to dig deeper on this point, you can find more information directly in Amazon’s Policies.

Analyze the competition

As in any business, competitor analysis is a fundamental part of knowing if the product you have chosen has the necessary sales potential to make your investment worthwhile.

In the case of products selected through arbitrage, the first thing to consider is whether they are items that have a history of sales on the platform.

Keep in mind that you are making an investment and need to recover it as soon as possible, for that reason it is not advisable to start this business model with products that are not yet sold on Amazon or that have hardly any sales per month.

In my course on how to sell on Amazon FBA, I gave a concrete example with a barbecue. There you can see all the analysis work you will have to do before investing in a product step by step.

User reviews of the product

One of the reasons why Amazon has managed to impose itself as it has in the world of ecommerce is because, in 99% of the cases, the customers decide for themselves. No one more than Amazon takes the famous phrase “The customer is always right” so seriously.

Therefore, it is very important that when you select a product to sell on Amazon that you take into account the rating it has on the platform. 

Because no matter how good the price you have found or how big the discount you get if you buy in bulk, none of that will have any value if that product does not have a good review within the Amazon catalog.

To give you an example, here are 2 items from the catalog:

Example: Closet

Portable closet

This closet has a rating of 4.1 stars. This means that the product not only sells, but customers like it. This is a good example of a product that you can invest in without any problems.

Example: Portable wardrobe

Portable wardrobe

This product has only a 2.6 star rating. Clearly, this is a sign that it is a low quality product that does not deliver on its promise and does not satisfy customers.

How to compare prices and calculate profit

Pricing strategy is one of the most important points when it comes to arbitrage on Amazon. For that reason, it is best to use the Amazon FBA calculator to know accurately if you will make money or not before investing in a certain product.

You should keep in mind that one of the main objectives of arbitrage on Amazon is to be able to sell the stock you buy as quickly as possible. To do this, you need to have very competitive prices and, of course, be cheaper than the competition.

Once you have chosen the product and verified that you can sell it at a lower price than your competitors, use the Amazon FBA Calculator to find out exactly what your profit margin will be.

To help you get the most out of it, here is the guide I have written on how to use each of its functions.

Is arbitrage on Amazon profitable in 2022?

One of the big questions you might be asking yourself is whether this business model is profitable and suitable to start with today.

My answer is a resounding… Yes!

I consider arbitrage as an excellent business model that can serve as a gateway to Amazon.

Undoubtedly, it has some limitations and these have to do with the type of products you find and that, in addition, you have to be continuously monitoring different promotions or opportunities, because when it comes to clearance items, you can not ensure that you can continue selling a winning product beyond a certain time.

However, it has a fundamental advantage and that is, first of all, the low level of investment you need to start. Also, keep in mind that over time you will improve your search methods so it will be more and more profitable.

And the point that I consider most important, it represents a real learning opportunity in terms of business and a business model that will allow you to learn all the secrets about how to move within the Amazon platform with the aim of being able to set up your own physical product store with your own stock.

Arbitrage Amazon Spain vs. Amazon USA

Spain VS US

While you can arbitrage on Amazon Spain without any problems and with great profits, it is true that it is a different story in the United States.

Mainly because there is a cultural issue in that American citizens are accustomed to this type of activity. In addition, sales are much more aggressive than in Spain and you can get a wide variety of items at incredibly low prices.

The U.S. population is very consumerist and spends a lot of money shopping online. Just to give an example, according to the Census Bureau of the U.S. Department of Commerce, annual e-commerce sales in the U.S. in 2021 reached 511 billion dollars.

While in Spain, sales last year reached almost 58 billion Euros. In other words, this is a little more than 10% of the US total.

Based on this significant difference, it is also important to note that in the United States you have at your disposal a large chain of stores that constantly renew stock through big sales, such as Walmart, TjMaxx, Ross, Target, Carter’s or Macy’s.

In Spain, this practice rarely takes place, beyond the sales that El Corte Inglés, Conforama or IKEA may offer. Here you will have to really have your wits about you and find prices and products in online stores such as Fnac or Wallapop, or in small local stores and handmade products.

To delve a little deeper into this, here’s an interview I conducted with Aitor Ferreira, one of the few exponents of Amazon arbitrage in Spain.

Aitor lives in Madrid and has worked with this business model for 7 years.

I am sure that his experience and the different tools and strategies he has provided in the interview will be of great help to know a little more about how this type of business works in Spain.

In addition, in his YouTube channel you will find different videos and experiences that he has been collecting throughout his career as an Amazon arbitrage seller.

Difference between arbitrage and other business models on Amazon

Wholesale purchase of stock to sell

This is perhaps the business model most sellers use.

The goal is to search for a winning item using the various tools and software on the marketplace. Then buy that product in quantity and use Amazon’s warehouses to get the package to the end customer quickly.

In my course How to sell on Amazon FBA step by step I show you the right way to do it with the lowest possible investment and using the excellent Helium10 tool to find the winning product.

Dropshipping

I personally have a very special affection for this business model. It has allowed me to enter the world of ecommerce and, in addition, to get to know China from the inside. With all its structure and ways of managing.

In this case the goal is to buy products from a wholesaler and sell them through Facebook Ads, Tik Tok Ads using Shopify or Woocommerce as online stores. Unlike selling with stock, you have no control over the product as it is the wholesaler who sends the item to the customer.

The great advantage of this business model is that you don’t need stock or a warehouse to get started, but shipping times and not being able to check the quality of what you are buying has made Dropshipping very difficult to scale and a very short term business.

Private Label

The private label model is also widely used on Amazon. One of the most common ways to implement it is through a wholesale purchase, for example on Alibaba, where you ask the supplier to include your logo on the product.

Another way, which in my opinion is the best, is to bring the stock directly to your warehouse and then package it and put your brand logos on it yourself. This way we can check one by one the status of each product and have a better control over the stock.

Here is a mega video I have made showing you step by step how to create your private label, choose the product and start your project with minimal investment.

Handmade Products

This business model is ideal for craftspeople and retail business owners because it’s all about handmade products. Amazon has a special program called Small Businesses in which it grants a series of incentives to sellers who want to offer their products.

Print on Demand

This business model is similar to dropshipping but the main difference is that you design your own products.

It also includes items such as mugs, t-shirts, pictures, sweatshirts, etc. The objective is to be able to make a personalized gift that often includes the name of a person or a special date inside the product or package.

This differs from dropshipping where the product is sent without any type of personalization or gift card.

It is also a very popular model on Amazon and even the American company itself has decided to develop it through its Merch By Amazon program.

Why do many people fail to arbitrage on Amazon?

As with any business venture that you embark on, the beginning is often difficult. You need to have a logical learning curve that everyone goes through when taking their first steps.

While arbitrage on Amazon is a profitable business model, you need to be clear about some issues so you can avoid failure.

Do not raise false expectations

This point is very important. Keep in mind that every business needs a maturation process and that at the beginning you will have obstacles to overcome in order to achieve maximum profitability.

Perseverance

Another very important aspect to succeed with this business model is to be persistent. Be persistent in your search, browse physical stores or use online store software until you find the perfect product to start with.

Lack of information

This point is also key because if you do not have all the necessary information about the product you are going to sell as well as concrete data that certifies that the product is being sold on Amazon, it is very likely that your business will fail.

Profit margin

In this area it is very important that you focus your attention not on the amount of products sold, but on the amount of money you earn with each one of them. The goal will be to get the highest possible profitability with the least amount of products sold and not the other way around.

Automation

Once you have gained some experience, you need to start working on an automated sales system so that your main focus is on finding opportunities and not so much on customer service or packaging and shipping the products. For that you will need people to help you.

Failure to buy the product

In this article I have shown you a few different ways to find products, and it is very important that over time you sharpen your eye so that you fail as little as possible. And if you still feel that this is a weak point, you can always count on the support of a software like Helium10 that will make things much easier for you.

Rapid expansion

This is another key point. Many people find 2 or 3 winning products and start investing large amounts of money neglecting all aspects of the chain. Be very careful with that and make every step on solid ground.

Stopping learning

If there is something you should know about ecommerce, it is that you learn something new every day. What is new today is old tomorrow. You should always keep your mind open and take 1 hour a day to learn a new strategy, to follow a new YouTube channel or to read a related book. Every minute invested in learning is worth it.

Concluding remarks

Arbitrage on Amazon is a great business model. In this article you have learned how to get started and how to develop a strategy to take that first step. Along the way, you will encounter bumps and stumbling blocks that will allow you to progress towards a stable, long-term business.

Keep in mind each of the tips I have shared with you and, above all, perseverance to achieve your goals little by little.

Contenidos 📋
If you are doing arbitrage on Amazon, you need a logistics operator like Beeping.

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