Getting Started with Retail Arbitrage

She is dragging you to Marshall's anyway, might as well make it productive...

Welcome to the Amazon jungle, and let me be your guide.

Want to learn how to get started with selling on Amazon? Good, you’re at the right place. There are two main ways to get started with Amazon…

1. Launch a brand: This is hard. Like really, really, hard, but it can be worth it. While atypical, 7 and 8 figure exits happen all the time (I personally know 3 people who have exited for >$5M in the same category). A new industry of Amazon Aggregators has been launched and more than 3K new sellers sign up for the platform each day. Being a seller isn’t not for the faint of heart, however this is where the real money is made, and where we’ll spend the most of our time. Don’t be fooled, competition is fierce and you’ll need to be a Swiss Army knife operator to succeed with multi faceted skill set. A few things you’ll need to figure out are listed below, but before you panic realize that most people aren’t experts at all of these skills. I want’ when I started and you don’t need to be either — after a few months you’ll either figure it out, pay for some help (UpWork for creative, copy.ai for content, etc.) or you’ll realize this isn’t for you.

   • Product sourcing and contract manufacturing

   • 3PL / Shipping / Fulfillment

   • Branding - this is where you’ll live and die

   • Content Writing and Curation

   • Advertising / Performance Marketing

   • Entry level FP&A skills

2. The other is much easier, but with a lower reward. Reselling. As Prop Joe said in The Wire, “Shit is just bidness, String. Buy for a dollar, sell for two. That all it need be”. It’s that straight forward and where we are going to start our tour.

Sign up for an account:

Go to sell.amazon.com and sign up for a professional account. Yes - pay the $39.99 a month and get over it, if you can’t make it back then you have no business being here :). The sign up is pretty standard and annoying. The processing time to confirm your PII will slow you down, probably for a few days — Here’s what you’ll need to get started.

• Business email or your amazon customer account

• Credit Card

• Government ID

• Tax Info

• Phone Number for verification (NOTE: Don’t change this number. Use grasshopper or another VOIP service if needed, but changing your phone number can trigger warnings and account suspension. NOT WORTH IT.

• Bank Account for funds to be deposited.

What to Sell?

Now that you have an account, you will need to start populating your ‘store’ with inventory, and this where things start to get fun (NOTE: for this exercise, we are assuming that you will be reselling existing brands and items and not starting your own private label). 1st - download the Amazon Seller App - this is going to be how we identify if an item is worth selling. You will log in with your account credentials and the app will show you the nuts and bolts of your business; sales, inventory, customer service, case logs, etc. but that is all stuff we will explore down the road. Remember, right now we don’t have any product to sell and need to find some inventory….so we’ll go to the app’s most valuable feature, the camera icon. The icon is located in the top right of the app (in a red circle below so you can’t miss it) and turns the app into a functional scanner which will be how you find your opportunities and build your catalog.

Think about this process as if you were merchant or buyer and you were looking at prospective brands and items to bring into your store. Now, your natural inclination is going to be ‘go with your guy’, but the beauty of Amazon is that you don’t need to….let the data drive your decision making. We’ll cover BSR and a section below, but the lower the number the more units get sold and let the data drive the process.

Now this part sucks — go to TJ Maxx, Marshall, Home Goods, Walmart or any other discount store and start scanning. Let’s be clear, you’re going to look like a psychopath, but that doesn’t matter. We are trying to get paid, not look cool as we walk through a discount retailer. Start scanning everyone barcode you can find and check to see if the item is already listed for sale on the platform. Assuming the item is already listed for sales, you will see a screen like the one pasted below, and for the purposes of this example, we will be adding the FORITO thin keyboard cover.

Once you have clicked through on the correct listing, you need to find a few key pieces of information.

• #237 a/k/a Best Seller Rank a/k/a BSR - Also known as sales rank (in the top left hand corner) is a measure of how popular an ASIN (amazon version of a unique identifier) is with the category. BSR let you know if you know if you are hunting an ant or elephant…lower the BSR the bigger the opportunity. If you need to be more exact, Helium10 and Jungle Scout can give you a rock-solid estimate, but that’s a post for another day.

• Low Price - Better known as the ‘Buy Box Price’. This is the lowest (typically fully loaded) price to the customer, and is the price at which sellers will need to meet or beat to receive an order for an ASIN.

• Fees - Your expenses with Amazon only begin with the $39.99 professional account fee. Seller Commissions typically range from 5-15% for most categories and here is Amazon taking their 15% cut of your sales. You will need to factor this into your profit calculation.

• New Offers - the count of accounts selling this specific item in new condition. The more offers, the more competition.

The next step is to see if you can make any money once you fulfill the product. In order to measure your profitability, you will need to click the arrow carrot next to Gross Proceeds*. You will be met with the following screen:

For this example, we are going to assume that you will be fulfilling the order yourself (Seller Fulfilled). That means that you will be paying for postage through the post office or Fed Ex and being sure that you get the product to the end customer. You will most likely want to move to Amazon Fulfilled (FBA / Fulfilled by Amazon) or a 3PL fulfillment option — and yes, we’ll go through these in detail in another post. Now - time to make a decision - are you comfortable with a $2.94 profit margin per unit? If those margins work for you, buy the item and get ready to sell!

What else?

Once you buy the product, hit the “List” button in the bottom right corner, enter some additional information (enter a SKU for your internal tracking purposes, tell Amazon how you will fulfill the product to the end customer and provide an inventory quantity) and your listing will be live with~15 minutes.

Congrats, you are now competing in the marketplace! This is a big first step, but it’s the beginning, not the end of our journey.

BONUS:

This post was intended to get you familiar with how to get a listing set up through retail arbitrage, but there are a few things that you will need to consider before investing your heard earned cash into inventory…

• What happens if someone else has a lower price? —> You can either HODL and wait for the price to rise or cut your losses, lower the price and get your cash out and back into your hands (less Amazon’s 15% commission).

• How can I get more traffic to my listings? —> It’s a good idea to have an ad budget available to drive PPC traffic to your listings. Details will come in another post, but generally 10% of your sales should be reinvested as marketing spend.

• Why is packaging so expensive? - Use envelopes. Boxes are expensive!