What is Amazon Arbitrage?

Amazon arbitrage involves an Amazon seller sourcing a product from a retailer and then selling it on the platform for a profit. The key to generating profits with Amazon’s arbitrage business is to look for price differences on items with high demand potential so the arbitrageur can profit from the transitory price difference.

Aspect	Explanation
Definition	Amazon Arbitrage refers to a business model in which individuals or companies buy products from one platform (often a brick-and-mortar store or online marketplace) and resell them at a higher price on Amazon’s e-commerce platform. This practice takes advantage of price disparities, geographical variations, or supply and demand fluctuations to generate a profit. Amazon Arbitrage can involve both new and used products and is often facilitated by Amazon’s Fulfilled by Amazon (FBA) program, where sellers send their inventory to Amazon’s fulfillment centers, allowing Amazon to handle storage, shipping, and customer service. This business model requires research, sourcing, and careful management of inventory and pricing to be successful.
Key Concepts	– Buy Low, Sell High: The core principle is to purchase products at a lower price and sell them at a higher price on Amazon. – Arbitrage Opportunities: Sellers look for price disparities, clearance sales, or geographical variations that create opportunities for profit. – Fulfilled by Amazon (FBA): Many Amazon Arbitrage sellers use Amazon’s FBA program for storage and shipping. – Market Research: Extensive research is required to identify profitable products and trends. – Inventory Management: Managing inventory and pricing is crucial for success.
Characteristics	– Sourcing: Sellers source products from various suppliers, including retail stores, online marketplaces, and clearance sales. – Online Presence: Amazon Arbitrage sellers maintain an online presence on Amazon’s platform. – Dynamic Pricing: Prices of products may change frequently based on market conditions. – Inventory Handling: Some sellers use Amazon’s FBA program for inventory storage and shipping. – Competitive Landscape: The market can be competitive, with other sellers vying for the same products.
Implications	– Market Volatility: Prices and demand can be volatile, requiring sellers to adapt quickly. – Legal and Ethical Considerations: Reselling products must adhere to Amazon’s policies and relevant laws. – Inventory Costs: Holding inventory can tie up capital and incur storage fees. – Competition: Other sellers may engage in similar arbitrage practices. – Customer Satisfaction: Maintaining high customer satisfaction is essential for long-term success.
Advantages	– Profit Potential: Successful arbitrage can yield significant profits. – Low Entry Barrier: It’s accessible to individuals and small businesses. – Scalability: Sellers can scale their operations as they gain experience. – FBA Benefits: Using Amazon’s FBA program simplifies logistics. – Diverse Product Range: A wide range of products can be sourced and sold.
Drawbacks	– Market Risk: Prices and demand can fluctuate unpredictably. – Legality and Policy Compliance: Sellers must navigate Amazon’s policies and potentially legal regulations. – Inventory Management: Handling inventory can be complex and costly. – Competition: Intense competition can affect profitability. – Dependence on Amazon: The business model relies on Amazon’s platform and policies.
Applications	Amazon Arbitrage can be applied to various product categories, including electronics, fashion, toys, books, and more. It is particularly common in markets where price variations exist due to geographical or supply chain factors.
Use Cases	– Retail Clearance Sales: Sellers buy products on clearance from retail stores and resell them on Amazon at a profit. – Online Marketplaces: Products from online marketplaces may be sourced and resold on Amazon. – Seasonal Trends: Sellers identify and capitalize on seasonal trends by sourcing relevant products. – Liquidation Sales: Liquidation sales of excess or returned inventory can present opportunities for arbitrage. – Private Label: Some sellers create their own brands and use arbitrage techniques to expand their product lines.

Table of Contents

Understanding Amazon arbitrage

With the explosion in popularity of eCommerce, Amazon arbitrage has become an effective and sometimes lucrative way to make money online.

Under this business model, a third-party Amazon seller sources discounted products and then sells them for a profit in the Amazon marketplace.

Most sellers who utilize the Amazon arbitrage model buy products from retail giants such as Walmart and Target that are either on sale or in the clearance aisle, while others visit discount chains or mom-and-pop stores.

Irrespective of where the products are purchased, the key to this business model lies in finding products with a worthwhile price differential.

Profit margins tend to be higher when compared to traditional retailers because Amazon arbitrage sellers avoid third-party supplier and manufacturer costs.

That is, they buy direct from a retail outlet or market.

How to identify the best products for Amazon arbitrage

Amazon arbitrage may seem too good to be true, and to some extent, it is. Sellers who walk into this business model without conducting prior research may experience limited success.

With that said, here is how to make this business model work on Amazon.

Stick to successful categories

Products in the following categories tend to be most suited to Amazon arbitrage:

Sporting goods.
Books.
Home goods.
Kitchen items.
Tools.
Pet and party supplies.
Puzzles.
Clothing (including baby clothes).
Office supplies, and
Arts and crafts.

Note that the best products for Amazon arbitrage will vary according to the store, location, season, or trend.

It’s also worth noting that since product prices constantly change, so too will the profit margins.

Get ungated on Amazon

Amazon restricts some sellers from certain categories, subcategories, and brands. As a result, the seller needs to get “ungated” to expand their opportunities and sell in categories with fewer competitors.

This process is as easy as signing up for an Amazon Professional Seller account and making a formal application to have the restriction lifted.

Though, on occasion, Amazon does not accept requests for certain categories.

Visit stores and scan products

Once the Amazon seller account is approved, sellers can visit some of the stores we mentioned earlier and follow these steps:

Open the Amazon seller app and scan a product to see how much it is selling for and how popular it is. The app will also inform the seller of any products that are restricted for sale in the Amazon marketplace.
Use the information provided to determine which products to purchase. To do this, the seller can enter the buy price and the app will calculate profit after the purchase and fees are subtracted.
To find the most suitable products, the seller must look for the sweet spot of products with a desirable profit margin and a sales rank of 100,000 or under. Ideally, they should be able to make a minimum of $3-$5 per item or a 50% ROI.
Lastly, the seller uploads purchased products for sale on Amazon based on the target ROI or profit margin and the current price of other products on the platform. Under the Fulfilment by Amazon (FBA) service, the sellers send the goods to Amazon, which then handles storage and fulfills orders as they arrive.

What apps to use?

There are many tools and apps that you can use to track prices on Amazon; thus, make sure you can be notified or up to date on when those arbitrage opportunities come about.

Below are three of the top extensions and tools you can use to be on top of it.

Keepa – Amazon Price Tracker

This browser extension helps you track all the price changes of items on Amazon. So you can create a list of items with wider price variations, and understand where most arbitrage opportunities are.

Jungle Scout

Jungle Scout is another chrome extension that taps into a great research tool to understand the products with the most potential and, from there, understand where arbitrage opportunities can be prioritized as you might tap into wider demand, margins, or both.

Amazon Product Finder – AMZScout PRO

Another great tool is the Amazon Product Finder. This tool helps you find profitable products on Amazon, thus helping you prioritize your items list for arbitrage opportunities on Amazon.

Key takeaways:

Amazon arbitrage involves an Amazon seller sourcing a product from a retailer and then selling it on the platform for a profit.
Profit margins tend to be higher when compared to traditional retailers because Amazon arbitrage sellers avoid third-party supplier and manufacturer costs.
Amazon arbitrage can be simple, lucrative, and low-cost business model when new sellers take the time to conduct prior research. It is important to stick to tried and tested categories – at least at first – and become “ungated” to sell products from restricted categories in the Amazon marketplace.

Key Insights

Definition of Amazon Arbitrage: Amazon arbitrage is a business model where a seller sources discounted products from retailers like Walmart, Target, discount chains, or mom-and-pop stores and then sells them on Amazon’s platform for a profit. The key to success lies in identifying products with price differences that offer high demand potential, allowing the arbitrageur to profit from the temporary price disparity.
Advantages of Amazon Arbitrage: This business model has gained popularity due to the explosive growth of eCommerce. Sellers can capitalize on higher profit margins compared to traditional retailers by bypassing third-party supplier and manufacturer costs, purchasing products directly from retail outlets or markets.
Suitable Categories for Amazon Arbitrage: Certain product categories are well-suited for Amazon arbitrage. These include sporting goods, books, home goods, kitchen items, tools, pet supplies, puzzles, clothing (including baby clothes), office supplies, arts and crafts, and more. However, the best products for arbitrage may vary based on store location, season, or trends, as product prices constantly fluctuate.
Getting Ungated on Amazon: Amazon imposes restrictions on sellers, limiting access to certain categories, subcategories, and brands. To expand opportunities and sell in restricted categories, sellers need to get “ungated.” This involves applying for an Amazon Professional Seller account and formally requesting the removal of the category restrictions. Amazon may not accept requests for certain categories.
The Scanning Process: Once an Amazon seller account is approved, sellers can visit retail stores and use the Amazon seller app to scan products. The app provides information on product prices, popularity, and any restrictions on selling the product on Amazon’s platform.
Identifying Profitable Products: Sellers need to find products with a desirable profit margin and a sales rank of 100,000 or below. The goal is to make at least $3-$5 per item or achieve a 50% return on investment (ROI). By comparing buy prices with potential selling prices and factoring in fees, sellers can assess the profitability of each product.
Uploading Products for Sale: After identifying profitable products, sellers upload them for sale on Amazon. If they opt for the Fulfillment by Amazon (FBA) service, the sellers ship the purchased goods to Amazon’s fulfillment centers, which handle storage, packing, and shipping when orders are placed.

Related Frameworks	Description	When to Apply
Retail Arbitrage	– A strategy where individuals or businesses purchase products from one retail source and resell them at a higher price on another platform or marketplace, such as Amazon. Retail Arbitrage leverages price discrepancies, seasonality, or supply-demand imbalances to generate profits.	– When seeking opportunities to buy low and sell high by exploiting price differentials, inventory clearances, or market inefficiencies. – Utilizing Retail Arbitrage to source products at lower prices from retail stores or liquidation sales and resell them at a profit on online marketplaces like Amazon effectively.
Online Arbitrage	– A form of retail arbitrage that involves buying products online from one retailer or marketplace and reselling them for a higher price on another platform, such as Amazon. Online Arbitrage relies on price differentials, promotions, or inventory fluctuations to generate profits.	– When aiming to capitalize on price variations, promotions, or sales events across different online retailers or marketplaces. – Implementing Online Arbitrage to source products at discounted prices from online stores and resell them at a profit on platforms like Amazon effectively.
Amazon FBA (Fulfillment by Amazon)	– A service provided by Amazon that allows sellers to store their products in Amazon’s fulfillment centers, where Amazon handles order fulfillment, shipping, and customer service on behalf of the seller. Amazon FBA enables sellers to leverage Amazon’s infrastructure and logistics to scale their businesses and reach a larger customer base.	– When seeking to outsource order fulfillment, storage, and customer service operations to Amazon to streamline operations and focus on business growth. – Utilizing Amazon FBA to expand product offerings, increase sales velocity, and enhance customer satisfaction effectively.
Dropshipping	– A retail fulfillment method where sellers list products for sale on their online store without holding inventory. When a customer places an order, the seller purchases the product from a third-party supplier who ships it directly to the customer. Dropshipping eliminates the need for inventory management and upfront investment in stock.	– When aiming to start an online retail business with minimal upfront investment and inventory management overhead. – Implementing Dropshipping to test product demand, launch new product lines, or expand market reach without the need for warehousing or inventory management effectively.
Price Tracking and Analysis Tools	– Software tools or services that monitor product prices, promotions, and competitor activities across multiple online retailers or marketplaces, including Amazon. Price Tracking and Analysis Tools enable sellers to track market trends, optimize pricing strategies, and identify arbitrage opportunities.	– When seeking to monitor competitor prices, track market trends, and identify pricing opportunities across multiple online channels or marketplaces. – Utilizing Price Tracking and Analysis Tools to optimize pricing strategies, maximize profits, and stay competitive in dynamic markets effectively.
Inventory Management Systems	– Software platforms or solutions that help businesses track, manage, and optimize their inventory levels and supply chain operations. Inventory Management Systems enable sellers to monitor stock levels, forecast demand, and streamline order fulfillment processes, improving efficiency and reducing costs.	– When aiming to streamline inventory management, optimize stock levels, and prevent stockouts or overstocking. – Implementing Inventory Management Systems to automate inventory tracking, streamline order processing, and improve supply chain efficiency effectively.
Repricing Software	– Software tools or algorithms that automatically adjust product prices based on predefined rules, competitor pricing, or market conditions. Repricing Software enables sellers to remain competitive, maximize profits, and win the Buy Box on platforms like Amazon by dynamically adjusting prices in real-time.	– When seeking to automate price adjustments, remain competitive, and win the Buy Box on online marketplaces like Amazon. – Utilizing Repricing Software to optimize pricing strategies, increase sales velocity, and maximize profitability effectively.
Sales Rank Tracking	– The process of monitoring and analyzing product sales ranks or rankings on online marketplaces like Amazon. Sales Rank Tracking helps sellers gauge product popularity, monitor demand trends, and identify high-demand or trending products to capitalize on arbitrage opportunities.	– When aiming to identify high-demand or trending products to source for resale on online marketplaces like Amazon. – Incorporating Sales Rank Tracking to monitor product performance, forecast demand, and optimize product sourcing and inventory management effectively.
Keyword Research and Optimization	– The process of identifying relevant keywords or search terms that potential customers use to find products on online marketplaces like Amazon and optimizing product listings to improve visibility and search ranking. Keyword Research and Optimization enable sellers to attract more traffic, increase product visibility, and drive sales on online platforms.	– When seeking to improve product visibility, attract more traffic, and increase sales on online marketplaces like Amazon. – Implementing Keyword Research and Optimization to optimize product listings, improve search ranking, and enhance discoverability effectively.
Market Research and Analysis	– The process of collecting, analyzing, and interpreting market data, trends, and consumer behavior to inform business decisions, strategies, and product offerings. Market Research and Analysis enable sellers to identify market opportunities, understand customer needs, and make informed decisions to optimize product sourcing and pricing strategies.	– When aiming to identify market trends, consumer preferences, and competitive landscape to capitalize on arbitrage opportunities effectively. – Utilizing Market Research and Analysis to assess market demand, analyze competitor strategies, and optimize product sourcing and pricing strategies effectively.