Amazon Retail Arbitrage Guide: Reselling on Amazon

Last Updated on december 21, 2024 by Ewen Finser

Amazon retail arbitrage has always existed in some form or another since the beginning of Amazon’s third party seller platform. The last 3 years have accelerated the trend massively.

Why? Supply chain fluctuations.

Starting with the pandemic & continuing to this day, supply chains are….well… just whack.

This is an environment prime for arbitraging the the mistakes made by large multinational corporations.

In this guide I’ll explore what it means to arbitrage on Amazon, some legal ramifications, how to source products and some other related ways to earn money. 

What is Amazon Retail Arbitrage?

Put simply, retail arbitrage is the art of finding price inefficiencies in local markets and between “online” and “offline” marketplaces.

Amazon retail arbitrage just refers to doing this with the specific goal of selling into the massive demand engine of the Amazon marketplace.

In practice, this often looks like finding high demand products at local brick & mortar businesses, then selling them online on Amazon.

Is Amazon Retail Arbitrage Legal?

The practice itself of retail arbitrage on Amazon is not illegal.

Buying and reselling items for profit is a fundamental principle of retail and is legally protected in many jurisdictions.

However, there are certain factors and considerations that I personally considered (and recommend others do as well) before jumping in headfirst. Namely:

• Brand and Intellectual Property Rights: Some brand owners might have exclusive agreements with certain retailers or have restrictions on who can sell their products. In such cases, selling these products without their permission could potentially lead to legal issues, including claims of counterfeit or infringement of intellectual property rights.
• Amazon’s Policies: Amazon has its own policies that arbitrage sellers must adhere to. For instance, sellers need to provide proof of authenticity of the products they are selling. Failing to follow these policies may result in suspension or banning of the seller’s account.
• Omzetbelasting: Depending on the jurisdiction, there might be tax implications associated with retail arbitrage. It is important for sellers to understand and comply with sales tax requirements in the regions they are operating in.
• First Sale Doctrine: In the United States, the “first sale doctrine” under copyright law allows the reselling of copyrighted items without the copyright owner’s permission. However, this does not apply to certain products protected by patents or trademarks.

Where to Find Products to Resell on Amazon?

The general answer here is that almost anything new and still in it’s original box can be sold online. Some categories like Books, CDs, cassettes, vinyl, etc.. also are great used. Wherever you can find these items tends to be an option! 

But these are my top recommendations based on experience:

• Big Box Stores: Believe it or not, some of the best arbitrages I’ve found are with big box stores like Target, Walmart, Lowe’s, Home Depot, and the like. Almost every physical retail store has a clearance and closeout section. These items are often discounted significantly based on LOCAL reasons such as clearing up shelf space or maybe items just aren’t selling as well in particular locations. Since Amazon sells nationally (and globally), you can find some great gems this way. Hot spots are anything marked “clearance” or clearance isles or sections of departments. That said, some of the most reliable (repeat) arbitrages are items that are regularly sold at a lower price as compared to the marketplace you are selling on.
• Alibaba: This is a goldmine for Amazon resellers. It’s a global trading platform where you can find manufacturers and suppliers from all over the world. You can purchase items in bulk at low prices and sell them for a profit on Amazon.
• Wholesale Markets: These are great places to find products at discounted prices. I usually go to local wholesale markets as well as online platforms like Groothandel Centraal en Wereldwijde merken.
• Liquidation and Closeout Sales: When businesses close down or want to get rid of old stock, they often sell their products at a fraction of the original price. I often check websites like Liquidation.com en Closeout Central for such opportunities.
• Garage Sales and Flea Markets: These are fantastic places to find unique items and bargains. I’ve found some rare and vintage items that sold for a high profit on Amazon.
• eBay: eBay is another online marketplace where you can find products to resell on Amazon. I often look for items that are underpriced or in bulk.
• Thrift Stores and Charity Shops: These places are filled with hidden gems. I’ve found brand new items with tags still on and antiques that have sold for a great profit on Amazon.

• Grocery Items: The main caveat here is that you need to be APPROVED to sell in this category on Amazon, but often you can find great local deals on non-perishable goods that are in demand or priced higher on Amazon. This takes advantage of geographic differences in product availability AND the fact that some people just prefer ordering from Amazon (maybe they get cashback, don’t have local options, etc…). 
• Other Online Stores & Marketplaces: While this can be tougher to find huge arbitrages (like with offline to online), many online stores have seasonal sales, promos, or closeouts similar to physical stores. Often this might be buying up multiples of items that historically support higher prices on Amazon and then waiting for prices to go back up.

Other Places to Retail Arbitrage On

You might be thinking that Amazon retail arbitrage is saturated. For some markets and well-published verticals this is certainly true.

So where else can you SELL arbitraged products similar to Amazon?

• eBay: Many Amazon arb’s also work well on eBay, particularly for collectible items or rare / time sensitive pop culture items (like sneakers, etc..).
• Walmart: Walmart is quite similar to Amazon, even having a similar program to FBA (called WFS). There’s also a fair amount of products that are unique arbitrages to Amazon that are not available on Amazon. Either way, if you are already sending arbitrage products to Amazon via FBA, it’s an easy add to include WFS as well. Side Note: There’s also situations where I intended to sell products on Amazon, BUT pricing changed and it’s no longer profitable. Having a backup like WFS is great for these situations.
• Mercari: Mercari is another “decluttering” marketplace, but also has room for pro arbitrages. Like Amazon, you can sell pretty much anything on Mercari from video games to fashion.

• Poshmark: Poshmark is a similar platform, but specifically targeting used clothing and fashion items.
• Depop: A newer marketplace, Depop is specifically an option for reselling clothes online. This does include clothing accessories like hats and shoes (a popular arb target), so don’t write it off completely if you aren’t arbitraging clothing items just yet.
• Decluttr: Decluttr is primarily for used or secondhand items, but worth it if you are arbitraging thrift shops and secondhand stores.

The Best Tools and Apps for Amazon Retail Arbitrage

Ok, so if are looking to get started with retail arbitrage, I’ve created a list of the best tools to get started with.

I’ll start with the bare basics for those on a budget. I’ll also include a tier for really helpful tools to make getting started that much easier and then a final tier of tools you’ll want eventually once you have a steady stream of products.

“Just the basics” for Getting Started

• Seller Amp App: This is essential for seeing sales rank data, sales velocity and quickly calulating expected margins after fees (among many other useful features). This is the one software app I feel you NEED to have as it also comes with a mobile scanning app to read barcodes quickly in stores.

• Boxes: I’d recommend an assortment of flexible boxes to start, 12x12x14 and 14x14x16 or something similar. For just getting started you can actually order these on Amazon, but once you are up and running getting bulk pricing from a source like Uline is often more cost effective.
• Poly Bags (required for clothes): If you are reselling any clothing items, you’ll need to poly bag them (a special type of thin plastic adhesive bag). You can also find these on Amazon in various sizes. If you don’t know quite what you’ll be arbitraging just yet, I’d recommend getting a variety pack like this.
• Access to Printer: You’ll need to print shipping labels and sometimes prep individual items and you can use a standard office printer for these tasks. You’ll just need to also clear tape them to the boxes when shipping, otherwise check out my “helpful tools” below if you can splurge on a legit label printer like the Rollo.
• Packing Tape: Een goede value pack of scotch packing tape is perfect to get started. Anything less will be too flimsy and it’s important that it’s transparent tape!

Other Helpful Tools to Get Started Faster

• Rollo Label Printer: If you want to make your life a LOT easier, investing in a Rollo printer was key to the earlier scaling of my operation. It’s not cheap, but saves some tedious prep work and is specifically made to print a variety of shipping labels. Very easy to use & portable (there’s even a wireless version).

• Compatible Adhesive Laser Print Labels: If you go with the Rollo (or other) label printer, you’ll also need to get compatible adhesive labels. I’d recommend at a minimum getting the shipping labels like these and optionally also getting the individual item labels for when it’s required.
• Sellerboard: Sellerboard is a great third-party tool to track progress. Due to Amazon’s delayed payments and various fees, you can quickly lose sight of your actual (vs projected) profit margin. This is a really helpful tool, particularly as you scale (data becomes critical).

Tools to Eventually Get Once you Have Traction

• Tactische Arbitrage: If you are going heavy into online arbitrage, TA is a great suite to auto-scan popular (and some niche) marketplaces for Amazon price discrepancies that meet your pre-defined criteria for profitability and other factors.
• SmartScout: SmartScout is a really nice new discovery for me and a great tool for anyone looking to reverse engineer what’s selling well. By using their seller map you can find “footprints” of third party sellers who may be wholesaling or arbitraging. U kunt read my full review of SmartScout voor meer details.

Ok, so next

Amazon Arbitrage vs Dropshipping

Amazon Arbitrage is different from dropshipping in that you typically handle inventory with Amazon Arbitrage, whereas dropshipping specifically is about NOT handling any inventory.

If you do not have the ability to ship product to Amazon (FBA) or directly fulfill (FBM), then dropshipping is a better fit.

A sort of “middle ground” is if you can set up a 3PL or third party packer relationship (for online arbs only) where you send all of your orders.

Amazon Arbitrage vs Wholesaling

Wholesaling is different than pure arbitrage in that you are typically setting direct brand wholesale distribution on Amazon or working with a wholesale supplier (typically less margin).

Many Amazon sellers start with arbitrage and move into wholesaling once they have a track record and can afford to make larger, bulk orders.

6 years ago I was a broke college kid making $15/hour.

This year I broke $10M in sales with my Amazon wholesale business.

This is my story: pic.twitter.com/obCMuQdxlP

— Corey Ganim (@GanimCorey) July 9, 2023

The best wholesale businesses are ones with unique, hard to replicate relationships. This is effectively the “moat”.

Some genuine wholesale suppliers even expressly forbid selling on Amazon.

Amazon Arbitrage vs FBA

This is a tricky one because when most operators say “I do Amazon FBA” they are referring to sourcing and selling their own products directly, as a branded item. The confusing part is that Amazon Arbitrage also can use the FBA program, in fact most do.

But for the purposes of understanding industry jargin, theirs a whole cottage industry of Amazon sellers leveraging FBA for “Amazon-first” (often Amazon only) brands that they are managing the entire supply chain from the source, often in China or overseas.

The advantage of Amazon FBA is that you have a real deal brand which typically comes with higher margins and a potentially more passive model (you don’t have to constantly be sourcing new products).

The Disadvantage with Amazon FBA is that it can be a huge capital sink. As many sellers found out during the pandemic, most of your businesses cashflow engine can sometimes be stuck on an ocean liner. This makes the cashflow conversion cycle a bit less attractive compared to Amazon arbitrage where the only time contstraint is sending product to Amazon (or directly selling via FBM).

Common Mistakes to Avoid with Amazon Retail Arbitrage

While I really like Amazon arbitrage as a straightforward way to make money and start hustling, there ARE some quick ways to lose your shirt.

These are some of the beginner traps I wish I had known going into it:

• Not Paying Attention to Sales Rank: Early on, you might find some great spreads where items are selling for a significantly higher price on Amazon. That’s a good first step, but they key thing to check is the SALES RANK. An item that doesn’t move (sell) or moves slowly can tie up “cost” for months and actually put a damper on growth, even if the eventual sale is extremely “profitable”. I try to find the highest venn diagram of low sales rank (lower = selling more quickly) and profitability. I’d almost always rather a 30% margin selling in days vs a 150% margin selling in 6+ months, particularly if I know the 30% margin product can be acquired in bulk and/or repeated frequently. Seller Amp even puts this into a nice projected days to sale number based on sales rank + competing seller listings.

• Not Checking Sales History: A “too good to be true” item often has some sort of sales history anamoly. For example, the item could just be temporarily out of stock but historically has short periods like this but then inventory spikes up. Another fools good mirage could be an item that’s just out of date and on a steady decline with few sales. I find this is often the case with older “editions” of things.
• Competing Against Amazon Directly: It’s not an automatic no for me, but it’s generally not a game I want to play. If Amazon holds inventory directly they’ll eventually squeeze you. Remember, this is the company who’s founder famously said, “your margin is my opportunity”.
• Buying Too MUCH inventory: If you find what you think is a winner, it can be really tempting just to load up on that one item. This isn’t a bad thought, BUT first it’s important to do a small test order to validate your assumptions. For me, this often means purchasing 3-5 units to see how they actually sell on Amazon before doubling down with 10+. The sales “tools” are wrong often enough to make this an important check.
• Not Understanding Cash Conversion Cycle: This concept refers to the idea that cashflow and profit are two related, but different items. Even a profitable Amazon arbitrage operation can run into a cash crunch because Amazon doesn’t pay out immediately. Then, if you are seeing strong growth, it can be easy to burn through cash re-investing into new inventory without waiting to get some payouts from Amazon.

Is Amazon Arbitrage Worth it?

My bottom line on Amazon Arbitrage is that it definitely CAN be worth it. Particularly if you have $500 – $1,000+ to seed your initial tests, you can scale fairly quickly.

It’s probably one of the fastest ways I know of today to quickly get started with Amazon AND just get a legit hustle going.

The one thing to keep in mind is that while you CAN systemize parts of your operation (and some operators have), if you are JUST relying on abritrage (not wholesale), it can be a time intensive process.

Sourcing products and even pouring over spreadsheets takes time and energy.

The very nature of arbitrage means that each arb only lasts for so long until someone else sees the same opportunity.

Personally, I like this business model as a side hustle and gateway into wholesaling on Amazon (a more defensible and scalable model). If you want to get started with Amazon in general, arbitrage can be a great way to dip your feet in just enough, without risking significant capital on developing or sourcing your own branded products.