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This post is part of our continuing series on ways you can make money online. If you’ve spent any amount of time perusing online forums or discussion boards, chances are you’ve seen the popularity of retail arbitrage among new sellers. And for good reason! Many liquidation stores like Big Lots, Marshalls, TJ Maxs, Ross, Dollar Stores, Walgreens, even Target and Walmart often sell products at rock-bottom prices that are far lower than retail prices online. Sellers using retail arbitrage will purchase products at clearance prices and resell them online at a normal retail price to these customers. This model works, in large part, because many customers don’t have access to liquidation outlets. The goal of every seller using retail arbitrage is to shop, shop, shop! Stay on top of clearance and liquidation sales. Regularly check on unique, new products or accessories at local mom & pop shops. You’re buying in small quantities (at least initially) to test the product and see if you can make money. Some of the benefits of retail arbitrage include:
- You don’t need a website.
- You can leverage Amazon or Ebay’s huge marketplace for instant sales
- There are few startup costs except for your inventory.
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Unfortunately, there are a number of challenges:
- It’s difficult to scale your business since you’re always needing to shop for new products to put online. You will need to adapt and adjust to the market daily: what works today won’t work tomorrow .
- Not everything on the clearance shelf has enough margin left to cover Amazon/Ebay fees AND give you a profit.
- You don’t have the ability to return defective product to the wholesaler/manufacturer.
- Clearance or liquidation merchandise often has cosmetic packaging problems, precluding them from being listed as NEW on selling platforms.
- Amazon recently introduced new rules that make this business model more difficult. For starters, they prevent sellers from selling certain brands without express approval from the manufacturer. Some brands have entire departments of people dedicated to stopping you from selling their products! Amazon is also enforcing GS1 barcodes purchased from valid outlets so your barcode must now match your brand.
- If your customers complain and you are accused of counterfeiting, it can be hard to prove otherwise. Amazon will accept receipts in some cases to prove authenticity, however there are many brands and product categories that can get you into trouble. If you break the rules, that product may be restricted or your entire selling account may be suspended while your business is investigated.
Ebay doesn’t have the same restrictions as Amazon, making it a more viable place to sell items without the added worry of getting suspended or accused of counterfeiting. Needless to say, if you are going to sell products through retail arbitrage, just make sure you do your research first. If you’re unsure, try searching the brand name in online forums to see what comes up. If it’s an issue, there’s a high probability that someone else has run into a problem with it already and you can learn from their mistakes.
Have you visited our Freebies Resource Center? Continue learning about how to launch a successful online business with our FREE resources!
Product Business Models Part 4: Dropshipping
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