Online Arbitrage vs Retail Arbitrage on Amazon: Full Beginner’s Guide

While the influence of the COVID-19 pandemic is yet to slow down, more and more people are becoming interested in launching an online retail business. Besides, online merchants have increased interest in cracking into online arbitrage on Amazon for extra cash flow. 

AMZ is one of the go-to places to engage in OA. Due to the pandemic quarantine restrictions, the demand for online products has attracted merchants across the globe to explore Amazon FBA online arbitrage. This article will examine how AMZ arbitrage works, what is better online or retail selling, and how you can start using it to boost opportunities for your business.

What Is Arbitrage on Amazon?

To put it short, Amazon arbitrage is the procedure of purchasing goods and reselling them on the marketplace to profit. It is just like any other type of arbitrage, only that the platform for reselling is Amazon.

The source of the items may vary, from actual brick-and-mortar retail stores to other online retail platforms.

If you wish to be technical, we refer to Amazon FBA retail arbitrage business as purchasing goods from physical shops, while online arbitrage indicates buying them from an online store. If the goods are resold on AMZ, it is called Amazon arbitrage.

Online Arbitrage And Retail Arbitrage: What Is The Difference? 

Definition

As described above, online arbitrage is the process of buying products from one e-commerce retailer and selling it in another marketplace. So, what is retail arbitrage? Alternatively, retail arbitrage refers to purchasing goods from one market and reselling it to another market at higher prices on Amazon.

Platform

Whereas online arbitrage means buying goods from other e-commerce retailers, retail arbitrage involves buying goods from other physical retailers. 

Convenience

Online arbitrage provides better convenience and minimizes logistic costs if those goods can be delivered to one’s location. Otherwise, retail arbitrage isn’t as convenient as shoppers have to visit brick-and-mortar shop locations. 

Online and Retail Arbitrage: What Are The Similarities? 

Arbitrage merchants get more profit than source retailers, usually purchasing in bulk, during revenue, during liquidation, or when sales happen. But as they temporarily increase demand for items on the sourcing market, they buy in bulk what they need. Thus, it often raises the supply of the target market of such products, but then it results in unexpected price swings that influence competitors as these sell on Amazon cheaply and quickly.

Amazon Retail Arbitrage vs. Online: Which Is Better?

It looks like an endless discussion to determine whether online or retail arbitrage is better. But, of course, you also might have your personal opinion on which method is more beneficial for you. Yet OA on the platform turns out to be the leading business form, according to most e-commerce merchants, as more people have a growing interest in it.

What to Choose: Retail or Online?

With both the advantages and disadvantages of online and retail arbitrage provided, you may ask which is the best approach for AMZ product sourcing.

If you prefer the convenience, time-saving, and pricing benefits OA offers, then it’s a perfect choice. Nonetheless, RA may also be beneficial, and it’s a time-tested item sourcing method used by successful merchants.

What is excellent about AMZ selling strategy is that you don’t need to confine yourself to one approach. So long as your investment returns are good, why not leverage both of them?

How To Get Started With Online Arbitrage? 

After we have defined retail and online arbitrage, here is a quick guide for beginners. Feel free to check the following steps on how to do online arbitrage: 

Step 1: Think of goods you want to resell. Please ensure that the products you wish to buy are offered for less than their price on Amazon. 

Step 2: As soon as you find the items, you can try reselling them on the Amazon marketplace, purchase the inventory and have them delivered to the FBA warehouse or your inventory. 

Step 3: When the items are in your storage facility, list the products online for sale and fix the price to ensure healthy profit margins. 

Is RA legal on Amazon? The best thing about Amazon arbitrage is that you can use both methods to generate sales. Besides, there are no restrictions on employing retail and online arbitrage, as long as you abide by the Amazon retail arbitrage policy. 

Nonetheless, more and more merchants concentrate their efforts on OA for Amazon FBA because it is much easier to get and ship products this way. As a result, third-party sellers don’t need to waste time and money scouring brick-and-mortar best stores for discounted items.

Arbitrage on AMZ: Useful Step-by-Step Tips and Tricks

Look for AMZ restrictions and guidelines.

Before buying a product, whether from digital or physical retail shops, ensure to verify whether the goods are not restricted. It would be better to check AMZ categories and product restriction rules.

Pick the proper item.

Don’t simply purchase every discounted product you see; estimate the resale value. Consider the marketability of this product as well as the prevailing client trends. 

Estimate profit margins

When selecting inventory items, always consider the possible profit margin of each item. As much as possible, check for goods that can provide you with at least a 50% profit margin. Feel free to use SellerSonar’s free calculator to estimate potential fees and profits. 

Practice correct documentation

Always document the arbitrage purchases. Keep organized and transparent information about your inventory goods, including place, date of purchase, and product condition. It will come in handy if problems relating to the item arise in the future.

Benefit from Amazon selling tools

You can simplify selling tasks by using an AMZ seller app. This service will scan product barcodes and promptly provide relevant item information and FBA commissions.

Apart from this solution, you can also use Amazon listing monitoring tools to help you with optimizing your product pages and much more. In particular, SellerSonar helps monitor the prices of your AMZ competitors and sets pricing drop notifications to get a chance always to suggest the best prices.

5 Hard Truths Why FBA Sellers Fail with Amazon OA 

Here are our top five reasons sellers fail with Amazon OA. Look at this AMZ arbitrage list and review your business operations and mindset.

Wrong expectations

When newbies begin doing online AMZ FBA arbitrage, their expectations might be that success will come promptly and easily. It might happen because of successful merchants’ false communication within online communities. However, we must warn you that the learning curve is too sharp at the start of any business.

Merchants who persist through challenges of finding profitable goods at the start get their rewards later.

Lack of information and emotional choice

The information that the Amazon platform provides doesn’t lie. On the contrary, they give us all the data we require about items; therefore, we should use it to our advantage. Nonetheless, we should never presume anything or resort to emotional judgment while Internet arbitrage. “I would buy it” or “I suppose it must sell” isn’t the key to long-term success.

Chasing sales and revenues rather than profit

If you check the sales screenshots online, they do not give the entire true story. Nobody knows the profit margin, and it’s a trap to chase the revenue number. All merchants should concentrate on profit and not get sucked into competing with other platform users racing to the lowest price.

Lack of investment

You need to invest in your company and brand. It can be via your team, resources, or different third-party services. SellerSonar is a perfect example. Investing in this metrics monitoring service is far more significant than trying to track everything yourself. Set up Amazon notifications and monitor changes in any product listing without connecting the Seller Central account.

Poor money management

Without proper money management, you won’t be successful long-term. It’s the most fundamental business principle. So start writing down your expenses and staying clear on your outgoings to avoid falling short of cash. Cash is king in business.

Final Thoughts

Well done! You’re on the way to becoming an Amazon seller on the platform! 

The key to success in any reselling business is constantly hustling, looking for new products, and monitoring product listing for the slightest changes. 

Get out there and find some products for OA on Amazon. And SellerSonar will take care of the rest.