Retail Arbitrage or Online Arbitrage What is best?
As explained in an earlier article there are about 4 options to choose from, when you’re talking about selling on Amazon.
However in this article, we’re going to pick two and compare them, retail arbitrage and online arbitrage.
Let us start with Retail Arbitrage.
With Retail arbitrage you step into your car and visit a retail store , like Walmart or Home depot.
Once you’re there you have to walk through the store, check clearance isle for great bargains and see if the product sells for more money on Amazon.
The way it works in a nutshell, is you need to have a scanner app with which you can scan the barcode and sometimes even the product itself
You can use the FREE Amazon seller app, or a paid app like Profitbandit, FBAScan, Scanpower and Scoutify.
But when you just get started, you really shouldn’t look at any paid solution and try to keep costs as low as possible.
And yes the FREE Amazon seller app can be super slow at times, but it works.
The biggest issue with retail arbitrage, is not so much the apps or the methods you use.
It is often a certain awkwardness when you walk into an isle with a mobile phone in hand, scanning products.
Especially if it takes long and you can’t find anything, you might get the feeling everyone is watching you.
Just ignore that feeling, you’re there to do business not shopping and once you get into that mindset, this awkwardness will blow over.
Another issue of retail arbitrage is the overhead.
Now unless you do it when you are already going to the stores, you have to drive out to several stores and spend a lot of time to find products.
And depending on the distances, how often you do it and how much time you spend on it, it can feel almost like another job.
The upsides are however, that you pay no shipping costs and because retailers want you to come to their stores, the deals are often better than you find online.
And an often overlooked point, is that at some point when you grow big enough you might build a relationship with the store manager.
So that when product comes in, they can notify you, as they know you’re good for a lot of fast revenue.
And the faster they sell out, the better it is for that person as well (career wise).
Now if you don’t live in the United States, or simply live too far off from any of the super mall areas, then you’re “condemned” to Online Arbitrage.
And that may not be such a bad thing, if you know what you’re doing.
Online Arbitrage is basically a form of arbitrage, where you find products online and see if you can sell it at a higher price on Amazon.
A lot of people online and that can be on social media as well as YouTube, tell their followers/viewers it is easy money.
And that is a misconception you should do away with.
Because you need to know and do a lot of research and understand a lot of concepts, which are not obvious from the outset.
It is however a lot more convenient than retail arbitrage as you can do it from the comfort of your home.
The deals are generally speaking not as attractive, as you would have with retail arbitrage.
As said before this is because retailers rather have you come to their stores, simply because they know that people who come in for the bargains, tend to spend a lot more than they initially planned too.
And you do spend more when you are at a physical Walmart, instead of their website.
Whether it is as simple as a cup of coffee, or buy something for your home.
The numbers in this case do not lie.
So with that in mind and looking at it from a pure cash-flow perspective, I do wonder if the better deals compensate for the higher spending that goes into retail arbitrage.
In both cases the profitability of your business depends on how well you document and manage costs.
With retail arbitrage you have to quantify the overhead and money that goes into fuel and maintenance of your car (depending on size of your business).
With online arbitrage it is mostly the recurring costs like subscription services on software that destroy profits of your business.
Especially in the beginning when you’re low on capital.
Later on it is what you spend on VA’s that you have to look out for.
So although it seems like a cop out answer, when you would ask me:
“What is better retail arbitrage or online arbitrage?”
I would have to say that it depends on your personal preference.
If you don’t mind going out on a regular basis to go to a Walmart and scrounge through the aisles and hate sitting behind a desk.
Then retail arbitrage is for you!
However if you are okay sitting behind a computer screen crunching numbers with a nice cup of tea and absolutely dislike or even hate going into some mall, then it may be better to just stick with Online Arbitrage.
Just don’t forget that even though it is in the comfort of your home, you still have to do the work.