Amazon Arbitrage 101: Policies and Tips for Success

Confusion continues to swirl around the state of Amazon arbitrage. Is it still profitable? And probably more even importantly, does Amazon still allow it?

The short answer to both is yes. The heyday of retail arbitrage may be behind us, but that doesn’t necessarily mean it’s dead. It just means you have to carefully consider all of your options and, now more than ever, follow Amazon's policy to the letter.

In this article, we’ll discuss more of the strategy behind retail arbitrage and share some best practice tips.

What is Retail Arbitrage?

For those of you just starting out, here’s a quick crash course in retail arbitrage. It simply brings the “buy low, sell high” methodology to life. Sellers will buy products from one retailer and resell them on another platform for a higher price. Taking advantage of the price differentials between the different markets is where you get your money (minus all shipping costs and selling fees). By definition, traditional retail arbitrage takes place in physical stores, while online arbitrage occurs when products are purchased from websites.

The Benefits of Amazon Arbitrage

For many, retail arbitrage is the path of least resistance to selling on the Amazon marketplace. If you’ve been wanting to start an Amazon business but don’t have a lot of capital, it may be the most viable option.

Why? Amazon arbitrage sellers don’t need to pump money into a product or find a supplier. They have access to countless items, either locally or online, and can more easily test the waters than with other methods like private labeling, wholesaling, and drop shipping, which require higher upfront costs (but also typically have higher margins). Many sellers start out in retail arbitrage and expand into other areas as their business grows.

It’s also common to see retail arbitrage sellers employ Amazon FBA for its reduced touch points and Prime shipping eligibility. After all, the convenience of free, fast shipping is typically the driving force behind a customer purchasing on Amazon rather than running over to their local Walmart. If you’re not using FBA, consider Seller-Fulfilled Prime or, at the very least, get your orders out as quickly as possible.

What is the Amazon Retail Arbitrage Policy?

At this time, Amazon doesn’t have a system in place to outright prevent retail arbitrage. However, you must understand this fundamental concept before moving forward: not all products can be resold on the marketplace, so don't try and make it that way.

Certain categories and products are restricted. The emergence of brand gating has also shaped the current landscape of retail arbitrage and made it much riskier, although not impossible. You simply must accept the fact that if any of your items become restricted, you may be stuck with stock you are now unable to sell.

Being an unauthorized seller is a sure-fire way to land in hot water. And, chances are, Amazon isn’t going to ungate you since you don't have a set relationship with a manufacturer or supplier.

So what should you do to protect yourself? Here are four things to remember:

1. Choose your products very, very carefully. If you don’t have permission to sell it, don’t do it! Also, keep an eye out for potential counterfeit products. Definitely don't buy these.
2. Document your purchases. Keep a clear, organized paper trail of your products and where they came from.
3. List items in the proper condition. Be mindful not to damage any products that you purchase and list them correctly.
4. Carefully follow Amazon’s selling policies. Read and understand all of Amazon’s guidelines and monitor your Account Health for any red flags that pop up.

3 Tips for Selling Retail on Amazon

The retail arbitrage process itself is pretty simple: create an Amazon seller account (if you haven’t done so already), source your products in-store or online, list the items, and start selling! But before you get started, here are a few top tips to consider.

Pick the Right Products

While discontinued, clearance, and/or discounted products can be great finds, buying every sale item in sight isn’t going to get you far. Once you’ve determined that the item is a good contender (more on that next), be very cognizant of its condition, size (a key factor in FBA fees), and shelf life. Some sellers find more success with niche categories, trending items, or seasonal products. Popular categories have historically been home and kitchen, toys and games, and books.

Take Advantage of Amazon Arbitrage Software

Retail arbitrage sellers often develop a good eye for products, but that just isn’t enough. You need to verify if it’s worth your investment. There are numerous Amazon arbitrage software solutions available to help you with this, but the official Amazon Seller app is often recommended as the place to start since you’ll see your selling eligibility straight away.

If the item is eligible for resale, you’ll then want to analyze different data points like its current sales rank, anticipated FBA and shipping fees, cost of purchase and, of course, estimated profit. Most sellers aim for at least a 50% ROI.

Understand the Business Model

Yes, retail arbitrage can get you some quick cash, but it can also be a slow process. It may take some trial and error and a little (or a lot) of patience. Your best bet is to start small with a low budget and use your earnings to source more items. Continually evaluate your options and be able to pivot as the marketplace changes — because it inevitably will.