Updated: Jun 29
Retail arbitrage means buying products cheaply and selling them at a higher price. Retail arbitrage takes advantage of the fundamental truth that price is not always essential in decision-making. People tend to buy the most readily available product rather than search for a cheaper alternative.
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What is Retail Arbitrage?
So, you have decided to set up a retail arbitrage business. Good for you! But you’ll still need to choose your product(s), find suppliers, open an online store, and secure a merchant account with Amazon before you’re ready to start earning real money
Don’t worry, though; we’re about to cover all of that and more!
Now, if you are reading this article, then you are probably someone who does their research and is maybe considering setting up an arbitrage business.
If that is the case, keep reading.
While running an arbitrage business, you have to be vigilant about many things. The most important thing to remember is that it is hard to make money in an arbitrage business. To make money, you need to sell stuff at a high markup. This task becomes somewhat challenging because you need to source the product somewhere that will provide you with a discount.
Fortunately, the rise of wholesale search tools like Alibaba and AliExpress has made finding inexpensive overseas suppliers as easy as doing a Google search. Plus, manufacturers in China make a point of catering to American expectations.
I highly recommend taking a look at what’s available on these platforms.
Any supplier you find on AliExpress will also offer dropshipping.
We’re not going to focus on dropshipping in this article, mainly because we’re already written extensively on the topic; so if you want to learn more about dropshipping, be sure to read: How to Make Money Dropshipping on Shopify
What to Look for in a Good Retail Arbitrage Opportunity
Retail arbitrage can work for almost any type of business. The fact that customers don’t always focus on price means that retailers can sell their products with the promise of competitive prices and high quality.
On top of that, retail arbitrage is relatively low-risk. Most product costs are low, so the risk is relatively small.
The main drawback to retail arbitrage is that the products have to be bought and resold quickly. If the product is seasonal, then wholesale prices may be cheaper.
However, for businesses selling products that do not have a long shelf life, retail arbitrage can be an effective way of increasing profits.
If you are thinking about starting your own retail arbitrage business, then there are a few things that you need to consider.
Finding Cheap Products
The easiest way to find cheap products is to search for cheap product brands. To search for cheap product brands, you can use tools like Google Trends. If you look at Google Trends, you will see that Google generates graphs based on search queries.
Another great way of sourcing cheap products is by going to Alibaba or AliExpress. These websites allow you to search for product manufacturers overseas and source your products directly from the factory to maximize your profit margin.
You can also walk into any Walmart, flea market, or swap meet and look for deals.
Once you find the product, you will need to consider whether or not there are any barriers to you selling it.
For example, some products have seasonal demand. Such products include winter clothing or BBQ grills. Note that these two particular products are in demand at opposite times of the year.