Retail Arbitrage App, Pros and Cons, and How it Works in 2021

Retail Arbitrage App helps you make money and beat your competitors. I bet you like the idea of making money online and still be the big guy doing that. If this is you, then we’ve got a post for you.

This article covers the retail arbitrage apps you might want to know about to get you started. Read to the end of this article to find out which you might want to try out.

What is Retail Arbitrage?

Retail arbitrage is a simple concept: First, you purchase a product from a local retail outlet that is selling it at a low price, then you sell that same product at a higher price, thereby flipping it for a profit.

You can sell items via marketplaces like Amazon, Craigslist, Facebook Marketplace, eBay, Jet, Walmart.com, and many more.

Although there are lots of options available to retail arbitrage sellers, Amazon is one of the best places to sell for those who are just getting started with this business model. 

The reason for this is that Amazon allows you to do something called “FBA”.  Or, “Fulfilled by Amazon”.

Amazon FBA is a great program because it allows you to purchase products and then send them directly to Amazon for fulfillment.  This means no need to handle emails, calls, or even returns from customers. 

Although retail arbitrage may sound like it’s the same as regular retailing, it’s not.

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How Does The Retail Arbitrage App Work?

As you have seen from the description above, retail arbitrage is a very simple yet potentially lucrative concept. And it’s one that’s businesses of all sizes can use regardless of the types of products they sell.

Here’s an example of how retail arbitrage works:

Say you come across a sale at Target, where there are men’s leather wallets offered at a significantly discounted price of $15 when they normally go for $30. This may be either because the store is clearing old stock, or it might be due to seasonal discounts.

Whatever the case, if you can invest some cash into purchasing 20 units or so, you can then sell them through an online marketplace for a couple of dollars less than the product’s original retail selling price. 

Doing a little math here:

Wallet Original Cost:  $30

Wallet Purchase Price on Clearance:  $15

Listing Price on Amazon: $28

Revenue From Each Unit:  $28 – $15 = $13

Amazon FBA Fee: $0.99

Profit (After Costs/Expenses): $12.01

Multiply by 20 Units for a Total Profit: $240.20

And all of this happens without you having to deal with wholesalers, suppliers, or manufacturers.

This is the main difference between normal retailing and retail arbitrage. You are purchasing directly from the retail store, and while this can sometimes cut into your profit margins, it’s often an easier process than trying to source products via suppliers.

Because of this low cost of entry, retail arbitrage is the perfect way for most people to get started as sellers online.

Does Retail Arbitrage App actually Work in 2021?

Yes, you can earn a very nice profit with retail arbitrage in 2021. Retail Arbitrage Process Explained

1. Use a Scanning app

Scan the item with your preferred seller scanning app (I use Profit Bandit). Look at the FBA competition and the current sale rank or Amazon BSR.

2. Check Amazon

Since most scouting apps return incomplete information, click through to the Amazon sales page to check out the possible competition you may be facing (Profit Bandit provides a quick link to the item’s product page). On Amazon, you can see the full picture.

3. Research on Keepa

Research the item’s Keepa graph. For those of you who don’t know about Keepa, it’s a very useful website that attempts to track both prices and sales ranks for millions of items on Amazon.

Keepa is not perfect, but they usually do a great job of giving us a good picture of how often an item sells and what the lowest sales prices are at any given moment in the past.

4. Look at the Item’s Sale Rank

A rank under 1,000 is usually amazing, except that many times when scouting apps return a Consumer Electronic sales rank, it is actually returning a sub-sales rank. Be sure you know if the rank you are seeing is the rank for the full category or the sub-category.

5. Check Customer Reviews

To get a better idea about how often an Electronics item sells on Amazon you can always look at the customer reviews. Customers rarely leave a review of an item they bought on Amazon, so when an Electronics item has many reviews, then it means that it’s sold rather often.

6. Check Recent Customer Reviews

Be sure to check how recent the reviews are. Just because a DVD player has 1000 reviews, doesn’t mean that it’s a good idea to buy that DVD player for the purposed of resale. 99% of the reviews could have come before 2007, with only a few reviews here and there since then. You want to find frequent, recent reviews.

7. What About Bad Reviews?

I never look at how many one-star reviews an item gets when making a buying decision. Am I just asking for a refund? Maybe… but from my experience, people are more prone to leave negative reviews than positive ones. Even if I see a lot of negative reviews, I’m not scared.

8. Do I Compete with Amazon?

This is often a difficult decision. If Amazon is a seller of an item I’m sourcing, then I need to ask myself, “Do I match Amazon’s sales price or price the item lower?” If I price to match Amazon’s price, then I’ll have to wait for them to sell out before I get the sales (or maybe they’ll share the Buy Box with me from time to time).

Amazon could have only five in stock… or they could have thousands. If I price lower than Amazon, then I’d be getting a lower return on investment (ROI).

9. Possible Future Competition

When doing retail arbitrage on Amazon, it’s a good thing to consider that other resellers may be finding the exact same thing you are. Retail chains often clearance out the same items, so it’s possible that if you find five of an item, 100 other people also might be finding five at their local store, too.

To some, this may seem like an overwhelming process that might not be worth the time. For me, the fact that there are 20 of these stylus pens on clearance at Target makes it worth the time. And honestly, once you do this process enough times, it becomes second nature and really only takes a minute or two.

Is Retail Arbitrage Legal?

Retail arbitrage is legal in the US and the UK. The US Supreme Court ruled that a retailer cannot stop someone from reselling their products as long as the products have been acquired legally.

However, you should avoid sourcing counterfeit products and selling branded products that are only to be sold through authorized resellers.

Retail Arbitrage App

Amazon Seller App

One of the best things about this app is it’s free. And if you’re already a registered seller on Amazon, you can start using it right away. If not, you’ll have to sign up for a seller account first.

Once you’ve downloaded it, you can start scanning products right away (or do a manual search) and uncover:

Product price

FBA fees

Approximate profits

Best sellers rank

Total number of sellers

Official Amazon category

However, it does come with a few downsides.

It won’t show you taxes or customs fees, so you only get an estimate of profitability.

You won’t be able to integrate it with eBay, Google, Keepa which can make it tough to match it with the product’s price trends and history.

You might have a tough time working out the maximum ROI because it’ll only show you the lowest price on new items.

Available on:

Google Play

iTunes

Amazon

2. Scoutify

Let’s get the biggest downside out of the way first so we can start raving about all of its great qualities: you have to sign up for the whole package.

But it’s one of those cases where you absolutely do get what you pay for, and boy, do you get great features. (Because of its cost, Sellers with a high monthly volume should go for it, as you need an Amazon Pro Merchant account).

You’ll be able to integrate with third-party apps, which means you can sync it with keepa and camelcamelcamel.

They work in taxes so you can get an even closer final price number.

You can scan with Bluetooth.

There’s a shopping list that keeps a history of your purchases so you always stay on top of them.

You get access to InventoryLab, which means you have reporting, sourcing, and bookkeeping tools available to you.

This is probably the best scanner app out there in terms of quality and features, but if you’re not completely sure if it’s right for you, they have a free monthlong trial.

Available on:

Google Play

InventoryLab

3. Profit Bandit

This scanner app also requires a paid subscription, but it’s affordable and doesn’t compromise on being able to research items in real-time.

That upside is huge: you can make the best decisions possible because you have the most current information at your fingertips. Plus, its lower cost makes it a great entry point for lower volume sellers.

Available on:

Google Play

iTunes

SellerEngine

4. FBAScan

If you’re ever in a reception/wifi black hole, this app has you covered by switching between live search and local database modes. It has all the information that other apps do (FBA prices, sales ranking, type, image, weight, title, etc.), but the data/wifi-independent feature makes it standalone.

Available on:

Google Play

iTunes

ASellerTool

5. ScanPower

This one will set you back the most financially, but it will also put you ahead the most with the best and most accurate live data from Amazon. If you operate best on the go, this app is worth taking a second look at.

And if you need information whilst out and about but want to send it back to your desktop to mull over later, this app lets you do that, too. Another neat feature is the ability to create 2D barcodes so when you ship your items, it’s already there and you don’t have to worry about it.

Available on:

Google Play

iTunes

ScanPower

The Pros & Cons of Retail Arbitrage App

Below are some pros and cons you might want to look out for before installing a Retail Arbitrage App

THE PROS of the App

1. One of the main advantages of Retail Arbitrage is the benefits you get when you use the business model in conjunction with Amazon. Even though it may seem unlikely, there are still several products that are not available on Amazon through the supply chain agreements that are traditionally used.

That means, as a third-party seller if you are sourcing the products from elsewhere and selling them on Amazon’s platform, their range of products and product base widens.

Each one of these products that are sold by the third-party seller also earns Amazon a cut, making you a source of revenue for their platform, which means that you are a valuable asset to them and that they generally work really hard towards keeping your business by providing you some great benefits for using the platform.

2. The threshold for a person to become a Retail Arbitrage seller is relatively lower than any other business. Think about it, a person could get started with $100–$200 as the capital for arbitraging.

Also, if you are only making a few sales a month for some extra cash, Amazon won’t charge you a subscription fee. But if your stream of income becomes a viable one (more than 40 sales in a month), then you also have the option to upgrade to the Profession Seller Account from the Individual Seller Account.

This low capital, low expense, and minimum risk aspect of arbitraging is what makes it extremely attractive to resellers.

3. Retail Arbitrage serves as a gateway to private labeling. Most Retail Arbitrage sellers gravitate towards using Amazon’s FBA services due to its ease of use and benefits and thus end up using the Amazon Seller Central Dashboard.

So once resellers get the hang of how the system works, they end up creating a brand selling under a private label, which is a more stable and scalable way of creating an online business.

4. A few things that sellers pick up while using the Amazon Platform include how to create an Amazon Seller Account, how to use it, how to get around the dashboard, creating the best shipping strategies for getting products to the Amazon Fulfillment centers, how to label products.

How to price products, how to link their bank account to their seller account so that they can accept payments, how Amazon prime works and all the challenges that come along with setting up an actual business.

These are some important skills to learn in order to run a business smoothly in case you want to build other businesses in the future.

What reselling really teaches you:

1. Entrepreneurship

Let’s kick it off with the fundamental stuff. If you buy things to resell, you have entrepreneurial spirit in you. Many people won’t even be aware they have it, until they spot their first opportunity. So much comes with this: process development, optimising efficiency, time management, delegation. It doesn’t end.

2. Dealing With Disappointment

You will lose money on some products. That’s just how it works. When you’re completely new, you’re going to make mistakes. They hurt. But then you get over them, because you learn from them, and adapt your strategy to ensure it doesn’t happen again.

Even seasoned resellers lose money on products – ones they buy but can’t sell or get returned in an unsellable condition. It’s all just fuel to make more profit from your next haul.

3. Communication

Whether it’s through negotiating a deal at a boot sale or well-crafted complaint responses on eBay, you’re going to have to build your communication skills to get anywhere with reselling. If you don’t think you’ve got what it takes now, it’ll come.

4. Customer Service

Following directly on from the last, customer service is something many overlook in this field. eBayers know the kinds of questions, requests and abuse you can receive. Keeping cool and professional is the name of the game with customer service, and you will be put to the test here.

5. Bookkeeping

It doesn’t matter if you have accounting software to cover part of the task, you will have to learn to some degree how to manage your books. If you want to take more control of your incoming finances, expect to have to learn how to be more savvy with the outgoings too.

6. Buying And Merchandising

Forecasts. Trends. Stock maintenance. You know the game. It may take you a while to develop long-term strategies for your online shop fronts, but you will feel like a king when you’re able to see the future regarding retail cycles.

7. Organisation

Mess = stress. The more you have things ordered and planned, the more easily you can make your reselling bit on the side pay off for you. Process documents may be too much for your needs, but having set structures for incoming and outgoing stock makes life easier.

8. Investment

Probably the most important of all. If you take anything away from a little reselling, let it be that you’re more confident to put money behind something that you think will return you greater sums in the future.”

THE CONS of the App

Retail arbitrage is not a scalable business model for several reasons. While it’s a low-risk venture when you are just starting out, it does have a certain amount of risk when you start to sell more and scale-up.

1. With Retail Arbitrage, you don’t really have any ownership of the product that you are selling which, in turn, hampers your profit margins as you have limitations put on you.

Due to the popularity of some products the original retailers may have buying limits, which means that in order to buy more stock than you are allowed to, you will have to start asking others to partake in buying stock for you, which in some cases might cost you as people might ask for a cut.

Other costs may become applicable – traveling to multiple retailers to purchase stock will take up time, effort, and fuel. So while finding a product that serves your purpose well is already a difficult task, then trying to source the right amount to stock your inventory is another headache.

2. Another major hurdle when using online marketplaces, especially Amazon, is the fact that certain products might be “brand gated” and you will need permission to sell them. Brand gating is essentially getting a brand’s permission to resell the product online.

If the product is brand gated then there is a chance that you will not be able to sell it on Amazon and will have to look at alternative marketplaces, such as eBay, which effectively narrows down your customer base and, in turn, your revenue too.

3. As mentioned earlier, Amazon puts its sellers above all else. The platform provides something called “Brand Registry Protection” – The new conditions on the platform states that private labels and brands have a larger extent of control over their product listings.

This means that they can gate the products, report other sellers who are purchasing their stock, and selling it online through Retail Arbitrage, leading to the reseller being branded as an unauthorized seller or someone who is selling counterfeit products.

4. Obviously, this would result in the reseller’s Amazon account being flagged and taken down. The rules keep getting more strict when it comes to protecting brands and private labels, therefore arbitraging is becoming even more difficult and risky.

The Return on Investment (ROI) can be quiet low as the margins are smaller. As a reseller, everyone before and after you gets a cut:

The manufacturer, the wholesaler, the retailer/seller, any other middleman, and even Amazon. With private labeling. however, you can decide what your cut in the profit is which means you have a higher return on investment.

5. You risk losing a lot of money if your inventory isn’t good. Some products may be on sale because of recall issues or because they have some sort of defect that you may not know of.

Sometimes large stores know when a newer version of a product will be out and therefore have products on clearance to clear the stock. As an unsuspecting reseller, if you buy such a product, the chances are that you might have to face a huge loss.

As simple as Retail Arbitrage may seem, in reality, there is a lot of hard work that goes into it.

While with Private Labeling and creating your own brand, you have the power to automate processes in different verticals and you have full control over how things function, to have any consistency or control over the Retail Arbitrage process, you need to have an extremely hands-on approach.

Now that you’ve seen how lucrative it can be selling items from your local stores on Amazon, use the information in this article to start your own small business with very little risk and build it up to create a reliable source of income for yourself.

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