A few weeks ago, I asked sellers interested in retail arbitrage whether they would buy a particular electronic item or not based on their own sourcing strategies. I asked you to do the research yourself, check out CamelCamelCamel, the product reviews and anything else you might think would help and see if this is an item you would like to purchase for resale. Many of you tried this little exercise and 17 of you even commented on what you would do.
It was so interesting to read everyone’s opinions about what they would do. Some said they would pass completely, while others said they would buy them all. Each of you had your own fascinating reasons why you decided to pass, buy all, or buy some.
Here’s the item we looked at:
- Product: Adonit Jot Pro Fine Point Stylus – Silver
- ASIN: B00931DHKM
- Clearance price at Target: $3.94
- Total available for sale: 20
I’ll let you in on what my step-by-step thought process was on this item and then I’ll tell you what I’d do if I found 20 of these little stylus pens on clearance at Target for $3.94.
Retail Arbitrage Process Explained
1. Use a Scanning app
Scan the item with your preferred seller scanning app (I use Profit Bandit). Look at the FBA competition and the current sale rank or Amazon BSR.
2. Check Amazon
Since most scouting apps return incomplete information, click through to the Amazon sales page to check out the possible competition you may be facing (Profit Bandit provides a quick link to the item’s product page). On Amazon, you can see the full picture.
3. Research on Keepa
Research the item’s Keepa graph. For those of you who don’t know about Keepa, it’s a very useful website that attempts to track both prices and sales ranks for millions of items on Amazon. Keepa is not perfect, but they usually do a great job of giving us a good picture of how often an item sells and what the lowest sales prices are at any given moment in the past.
4. Look at the Item’s Sale Rank
A rank under 1,000 is usually amazing, except that many times when scouting apps return a Consumer Electronic sales rank, it is actually returning a sub-sales rank. Be sure you know if the rank you are seeing is the rank for the full category or the sub-category.
5. Check Customer Reviews
To get a better idea about how often an Electronics item sells on Amazon you can always look at the customer reviews. Customers rarely leave a review of an item they bought on Amazon, so when an Electronics item has many reviews, then it means that it’s sold rather often.
6. Check Recent Customer Reviews
Be sure to check how recent the reviews are. Just because a DVD player has 1000 reviews, doesn’t mean that it’s a good idea to buy that DVD player for the purposed of resale. 99% of the reviews could have come before 2007, with only a few reviews here and there since then. You want to find frequent, recent reviews.
7. What About Bad Reviews?
I never look at how many one-star reviews an item gets when making a buying decision. Am I just asking for a refund? Maybe… but from my experience, people are more prone to leave negative reviews than positive ones. Even if I see a lot of negative reviews, I’m not scared.
8. Do I Compete with Amazon?
This is often a difficult decision. If Amazon is a seller of an item I’m sourcing, then I need to ask myself, “Do I match Amazon’s sales price or price the item lower?” If I price to match Amazon’s price, then I’ll have to wait for them to sell out before I get the sales (or maybe they’ll share the Buy Box with me from time to time).
Amazon could have only five in stock… or they could have thousands. If I price lower than Amazon, then I’d be getting a lower return on investment (ROI).
9. Possible Future Competition
When doing retail arbitrage on Amazon, it’s a good thing to consider that other resellers may be finding the exact same thing you are. Retail chains often clearance out the same items, so it’s possible that if you find five of an item, 100 other people also might be finding five at their local store, too.
To some, this may seem like an overwhelming process that might not be worth the time. For me, the fact that there are 20 of these stylus pens on clearance at Target makes it worth the time. And honestly, once you do this process enough times, it becomes second nature and really only takes a minute or two.
Getting as much information as you can on a possible product to resell is a good thing, but don’t let all the information paralyse you.
There will rarely be an item you find that will pass 100% of your buying criteria. This process takes time, but the more you do this, the more you will understand what works best for you, and what aspects to give less weight to when it comes to your buying decisions.
Ok, back to the stylus. For some, this is a no-brainer… buy them all! For others, this is a no-brainer… pass! How can that be possible? Well, we all have different criteria for what works best with our business model.
Some of us are at a stage in our business where we can handle the risk a little better than others, while others might not be ready to risk $80.00 on buying all of these styluses. This is why I’m never worried about scouting in the same store as another reseller. What he would pass on might be what I’d buy.
What is Retail Arbitrage?
Retail arbitrage is simply buying products from one retailer and reselling them another (usually Amazon, Walmart or eBay) for a profit.
Check out the nine-step guide to retail arbitrage on Amazon below from an experienced reseller.
Is Retail Arbitrage Legal?
Retail arbitrage is legal in the US and the UK. The US Supreme Court ruled that a retailer cannot stop someone from reselling their products as long as the products have been acquired legally.
However, you should avoid sourcing counterfeit products and selling branded products that are only to be sold through authorised resellers.
Retail Arbitrage on Amazon (9-Step Guide for Sellers)
Ok, so I’ll finally get round to sharing with you what I’d do with this possible retail flip.
1. Check Potential Profit With Scanning App
I scanned the item with Scoutify. The item is ranked 215,544, and the lowest FBA seller is Amazon selling it at $29.96. The app does the math for me and states that if I match the lowest FBA price, then I’d make a profit of over $18 per item.
2. Check Amazon
I clicked through to the Amazon sales page to check out the possible competition. The lowest FBA price is indeed Amazon at $29.96. I also confirm that there is only one other current FBA seller, selling it at $29.99.
3. Check Keepa
I looked at Keepa and it looks like in the past year there have only been about 4-5 sales.
4. Look at the Item’s Sales Rank
Currently, the sales rank is 215,544.
5. Check Customer Reviews
Currently, this Stylus Pen has over 1700 reviews. If over 1700 people left a review for this item, then it’s safe to say that it’s at least sold 1700 times, and most likely more.
6. Check Recent Customer Reviews
It looks like there were only two reviews this year so far. Most of the bulk of the reviews were from years ago.
7. What About Bad Reviews?
There are occasional bad reviews, but plenty of positive reviews. If I sell all 20 of this item, then maybe one will be returned. I’m ok with that one return, with the possibility of making almost $18 per stylus.
8. Do I Compete with Amazon?
Amazon has not been in stock for a long time, so this is nothing to worry about now.
9. Possible Future Competition
There are 20 of these stylus pens on clearance at Target. The good news is that it might be possible that you could go to more Targets and find even more. The bad news is that if this item is on clearance at every Target, then many other resellers will also find these and join you in selling. More competition and the possibility of that competition lowering prices are something to consider.
So what would I decide to do? Personally, I would not buy them all.
The positives
- The ROI is incredible.
- There are plenty of very recent reviews to suggest that this item sells often.
- Amazon is not in stock and has not been in stock for a long time.
The deal breakers
- With so few recent reviews, this item doesn’t look like it sells often enough.
- With the Keepa graph only showing around five sales in the past 365 days, I don’t want to put my capital in this item that might not sell very often.
Video: How to Do Retail Arbitrage on Amazon With RepricerExpress
Final Thoughts
So there you have it. Remember, there is no right or wrong answer. I’m not telling all of you who wanted to pass on this item that you are wrong. We all have different Amazon business models and risk tolerance for sourcing. Continue to do what works best for you, and occasionally try something different.
Interested in automating your prices on Amazon and eBay to give you more time to find arbitrage opportunities? Check out our free 14-day trial of Repricer, no credit card required. This is one deal you can’t afford to miss out on.
