Retail Arbitrage – Flipping Products With Amazon FBA

Have you ever heard a about any of the legendary eBay millionaires? One of a select group of people who would cram their houses full of bits and bobs that they bought cheaply and are selling for a profit on Ebay. Turning junk into cold hard cash.

Well, Amazon is the new Ebay and it is filled with even more opportunities to make money than there ever was in those early Ebay years.

Amazon is taking over the world. It has got the point where a lot of people just go straight to Amazon, search for what they want and buy it. Never bothering to look elsewhere. They’re thinking:

“Even if it is a bit cheaper elsewhere I’d probably still use Amazon, so why waste my time shopping around?”

99% of the time this makes sense. But sometimes, just sometimes that item you’re buying is a lot cheaper elsewhere. So much cheaper that you can buy it and relist it on Amazon and make a profit even with all the fees involved.

The best part? You don’t actually need to hold any stock. Once you’ve purchased it, you send it to an Amazon warehouse (through a system called Amazon FBA) and they will take care of the order processing and customer service.

Skeptical? Well in this post I’ll be your guinea pig and try out some Amazon FBA retail arbitrage.

I have a lot of experience with Amazon FBA (I have a table tennis business that has been running for a while, we currently have the number one best selling table tennis bat in the UK) but this was the first time we had ever tried doing some straight up retail arbitrage.

Finding Products

The concept is simple: find a product that is currently listed and selling on Amazon but that we can buy for much cheaper. But how do we go about finding these products?

Based on my experience with Amazon I knew that in order to make a profit any item we purchased needed:

  • To be under half the price that it was listed for on Amazon.  The fees quickly add up so to make any money we need a really good margin.
  • To have at least a few reviews and a ‘decent’ seller ranking on Amazon. We didn’t want to be holding on to stock for a long time so we would limit ourselves to items that were currently already selling well.
  • To be not too bulky. If the item is too big the storage and postage would quickly become too expensive.

After a bit of thought, we came up with two ideas for finding these items. We could contact wholesalers and get a wholesale discount, or we could find clearance offers at other retailers.

The latter sounded easiest and wouldn’t require a massive minimum order, so we started hunting. After a bit of searching, we came across an app called Idealo.

amazon retail arbitrage

It was exactly what I needed. An app full of hundreds of items on offer that told you the price each item is on different websites – including Amazon. We just had to click through each one till we found one that fit our criteria.

The His and Hers Board Game

One of the items we found looked perfect. The His and Hers board game.

On the Debenhams website it was on a clearance sale at £9 each. But at Amazon it was for sale at £24.5. That’s a big difference.

It also looked like it was selling well on Amazon. It had 60 reviews and was ranked about 9,000 in ‘Toys and Games’. That’s a popular category and my guess was that a 9,000 ranking would equate at least one sale a day. That was a guess, but it was an educated one based on the items we already sell on Amazon.

Everything was looking positive, so the next step was to get into the nitty gritty and work out if we could make any money from this arbitrage. Amazon has a handy FBA calculator which will calculate for you how much it will cost you in fees per sale.

retail arbitrage

So according to this calculator the cost of one of the board games being sent from the Amazon warehouse to the customer is £5.85.

Now a big note for anyone in the UK. VAT. If you’re a normal person you won’t be registered for VAT. Which is good and gives you a huge advantage against other businesses. It means you won’t need to give 20% of the sale price to HMRC. But on the downside it does mean that those referral and fulfilment costs aren’t quite correct. They don’t include the 20% VAT.

So the costs would be:

£5.85*1.2 = £7.02.

But remember, that is just the costs of sending it from the warehouse to the customer. There are a few other costs we need to think about.

  1. The cost of sending the product from you to the Amazon warehouse. I originally estimate this as £1.5. This is really going to have to be a guess I’m afraid, but it can be an educated one and as you do more and more items you will get a better idea.
  2. Wastage/returns. Historically my return rate is about 1%, so let’s assume 2% to be safe. That means we need to factor in another 35p cost for wastage and returns.

When we eventually ordered four of these games, the shipping to Amazon was £5.08. So £1.27 each.

Now we have all our costs:

£9 for the board game + £7.02 in fees + £1.27 in shipping + 35p in wastage = £17.64

If we slightly undercut the current cheapest seller and sell at a price of £24 that is £6.34 profit per board game.

There is one other cost you need to think about that depends on your Amazon seller plan. There are two plans you can choose from, the Pro account at £25 a month, or the basic plan which cost 75p a sale. Go for the basic one until you’re selling 34 items a month, at which point the Pro works out cheaper. Once you start selling a lot of items this cost becomes pretty negligible.

Great, this board game looks like a good deal (and it also it reminds me of the ridiculously sexist board game they designed on The Apprentice)! We purchased four for £36 with free delivery to my flat.

 

retail arbitrage

Repackaging and Sending To Amazon

Sending the items to Amazon proved to be really easy.

We unpacked the package and checked each of the four board games for damage.

After signing up to Amazon Seller Central, we added a new product. The whole process only took a few minutes as Amazon already knew all the dimensions and details of the His and Hers Board Game.

retail arbitrage amazon fba his and hers add product

We then created the shipment, which simply involved specifying how many we planned to send and following a few steps.

After the four board games had arrived at my address we checked unpacked them and checked for damage.

Back on Amazon Seller Central we came to a choice about labelling. Each item needs to be labelled. The label includes information not just about the product but also about the shipment and seller so that Amazon can keep track of who all the stock in their warehouses belongs to. You can either pay Amazon 15p an item to do it for you or you can label them yourselves. We chose to do the labelling, in which case Amazon give you an A4 printout of the labels.

We do a lot of Amazon labelling so already had plenty of print-ready label paper. I normally purchase these Blick 63.5×38.2 Label Paperat £9.46 for a 100 sheets. That’s 0.45p a label.

We just put it in the printer and stuck one label on each board game.

Back on the seller central on the final page we were faced with this:

 

amazon fba retail arbitrage

Amazon sorts out the shipping for you. If you accept their charges it will give you another label to print off. The label is a different size to the ones for the individual board games. We use these unbranded print-ready sheets at £5.99 for 100 sheets or 1.5p per label.

We put the four board games back in the same package they came in and stuck the shipping label on the packaging. To send it we found the closest UPS drop off location. Mine happened to be about a one minute walk from the flat. We dropped it off and about a week later it appeared in our Amazon seller account.

And that’s it. You then wait until someone buys your product while busily hunting for the next in the meantime.

My Conclusions

Even just doing that test of four items for only about £20 profit, it was clear there is a lot of potential to scale and make a decent income from Amazon FBA retail arbitrage. It didn’t take long to find a few items that fit our criteria and a quick Google search will find anecdotes of people make six figures a year from it.

But it’s not for me and I won’t be doing anymore.

As a business, it didn’t excite me. It is a pretty straightforward time for cash business and is not particularly creative. Personally I prefer to spend my time creating my own brands and building a much more passive income style business, such as with my table tennis brand.

I do think though, that retail arbitrage is a good starter side-business for someone who wants to earn an income quickly. It requires only a small investment and you can put as much or as little time into it as you want.

  • http://extrapixel.co.uk/ FingerPointingToTheMoon

    Hey – Nice write up!

    Once your products were displayed for sale on Amazon, did you have to do any PPC to get them noticed or the fact that the ASIN already existed, you didnt have to promote?

    Cheers
    Amit

    • http://www.arbing.co.uk/ Sam Priestley

      Hi Amit, No we didn’t need to do any promotion. The ISIN already existed and was already selling well. I think it was ranked in the top 2,000 toys and games, which we guessed would translate to a sale or two a day.

  • Emile Zachary Indik

    Hey there, thanks for the post!

    Slightly confused… Would it not have been cheaper to ship the product directly from the seller to Amazon’s warehouse? Is this possible, or is there a required layover for hand-labelling the product?

    In the same vein, I’m curious if it’s possible to purchase a pallet of product from Alibaba and have it shipped directly to Amazon’s warehouse. Do you think the Alibaba seller would need specific labelling instructions?

    Finally, how quickly did you sell off your 4 items, if at all?

    Thanks again,
    Emile

    • http://www.arbing.co.uk/ Sam Priestley

      Amazon FBA have a few requirements for delivery which we avoid by using their pre-paid delivery labels. I don’t know any stores that are flexible enough to deliver it correctly to Amazon FBA. Plus, and more importantly, you don’t want them to know what you’re doing. If they knew that they could sell the items easily and for more money on Amazon, then they’d just do it themselves!

      You could order from Alibaba and send to Amazon’s warehouses. But once again you will probably want a middle man to do the delivery. If they work out what you’re doing then they will just undercut you. You could use something like Flexport to do the delivery for you.

      But if you are going to the trouble of ordering from Alibaba and wait the two months for delivery, then I recommend changing the product slightly and branding it yourself. Check out this post for exactly what I mean: http://www.arbing.co.uk/blogs-earning-report/ . That way you will have no competition.

      I think they sold in about two weeks.

      • http://www.baseddiscounts.com Based Discounts

        Would Flexport do all the Amazon FBA labelling for you?

        • http://www.arbing.co.uk/ Sam Priestley

          The only labelling needed is adding the carton labels. Yes they do that for you. Then Amazon do the final product labelling.

          • http://www.baseddiscounts.com Based Discounts

            Ok, thanks for the help. Was just wondering if there’s a way to automate the labelling.

  • Sarah Friedman

    Great writeup.

    I was looking for the idealo app and they don’t seem to have a solution for the United States, do you know who does?

    Thanks

  • Meera Kharbanda

    Hi Are there any other apps that you could recommend for retail arbitage please?
    Just starting to sell on Amazon. Eventually would like to private label but thats too far fetched as a beginner.
    Many thanks
    Meera

    • http://www.arbing.co.uk/ Sam Priestley

      Hi Meera, I’m afraid I just private label now so am out of touch with the retail arbitrage side. Check out this article for my guide at creating my own product: http://www.arbing.co.uk/create-sell-physical-product/

      • ray mark

        Hi there,
        Off course we can do this. Going out of business sales of big stuff can be increase the big stuff locally. You can also retired direct sales consultants because of this they may not able to sell that inventory on auction sides but you can sell it. Arbitrage having many advantages to use it

  • Joe

    Good post!

    Nice to see an arb blog based in the UK.

  • Richard Dickinson

    Surely HMRC class this as a selfemployed trading business transaction, which they want you to be registered for for VAT/tax purposes?

    • http://www.arbing.co.uk/ Sam Priestley

      Yes it would, but you only need to register for VAT once you hit £82,000 of turnover. By the time you get to that point it will probably be worth it!

  • Amz Accelerator

    Very interesting Blog, and I liked the way you explained the fees, I’m not sure if this is of interest to other here but I’m just on the final stages of developing a piece of software for the UK and European Online Arbitrage Market. I think this will be a game changer over ere and will really help with your sourcing. You can check it out here http://www.amzaccelerator.com. Hope you enjoy.

  • http://www.baseddiscounts.com Based Discounts

    Is there any difference with how much you pay amazon if you drop off the product at a UPS drop off point? If you pay amazon to do the labelling for you, do you just put the products in a box with no label on it and give it to UPS?

    • http://www.arbing.co.uk/ Sam Priestley

      Hello,

      I’m not sure what you are asking. Amazon charge for the labelling of each individual item, £0.15 or $0.20. You also have the choice to do it yourself. The box needs to be labelled by you with the UPS pre-paid shipping label.

      • http://www.baseddiscounts.com Based Discounts

        Never mind, I was confused myself and found the answers a few days ago. Have you ever used any FBA prep centres before? I think there’s a couple in the UK.

        • http://www.arbing.co.uk/ Sam Priestley

          I haven’t used anyone that is marketed as an FBA prep centre. But I have got my freight forwarders to provide a similar service. I send them the goods, they quality control and label them, then they send to Amazon. I think it cost me about 15p an item. But that was in large quantity.

  • Teo

    Hey, awesome blog!

    One question. What about using Amazon from Europe countries that are not a part of European Union? Serbia as an example. Have you tried using the FBA from an outside country?

    Thanked in advance 🙂

    • http://www.arbing.co.uk/ Sam Priestley

      I use FBA in the USA from here in the UK so it can be done but you need to be careful with import tax and shipping costs. They can get expensive! But if it is still worth it with them, then go for it!

  • Ibeez Brand

    Superb blog! Thank you very much! Step by step guide with images- as if I am on an arbitrage course! Marvellous!
    Just would like to know what printer do you use to print the labels out? I have a samsung laser printer is that ok or do I need to buy a label printer?

    • http://www.arbing.co.uk/ Sam Priestley

      Thanks! You can just use a normal printer. I have and use a simple Samsung laser printer.

  • Kris Yoge

    Thank you for the nice blog
    and we also creating tool for the business seller
    who want to use auto ordering functions
    http://www.richmelon.com

  • http://tnnvtr.com Emilio López

    Thanks for sharing! Really well written, to the point, and exciting to read.

  • Frustrated

    Thanks, that’s a really helpful article. My biggest concern though is why should anyone buy from me on Amazon? That’s what I don’t get. The buying at wholesale/discounted prices is easy, listing easy. But whats the secret sauce to make people buy your board game as opposed to the hundreds of other people probably selling the same item.

    • http://www.arbing.co.uk/ Sam Priestley

      If you’re selling the same product as everyone else then the only way someone is going to pick a product is based on price. If you are listing your item for cheaper than the competition then your item will be the one that is bought. Amazon makes the choice for the customer by giving the buy box to the cheapest seller. You can read about the buy box more here: https://www.amazon.co.uk/gp/help/customer/display.html/?nodeId=200408180

  • vibrator

    i’m sure it will helpful to us. best of luck

    goo.gl/3aeIzi

  • Kazmio

    Again thank you for your detailed post

  • http://meplusmymakeup.blogspot.com Roo

    Hi Sam,

    I was wondering if there was a way to send the items you buy directly to the Amazon warehouse from the website that you purchased them so that there wouldn’t be a need to hold any physical stock. I have been trying to research how to do this for a while but I can’t seem to get any clear answers. Any advice would be greatly appreciated.

    Thanks,
    Roo

    • http://www.arbing.co.uk/ Sam Priestley

      I’m afraid I don’t think that’s possible. Amazon have pretty strict requirements for delivering to Amazon. And more than that the company you are buying from normally don’t like it when they realise you are just reselling for an arbitrage opportunity. There might be services out there that will forward the parcel on for you, but I don’t know of any.

  • Bertie

    Its a great way to get used to the sales and FBA process- before leading into building your own product brand in a particular line – will also help you to get a decent seller rating to start with – but the “real” money is in your own branding and selling that on amazon for sure. Nice fun informative blog . Thanks for sharing (I do Amazon FBA at the moment and looking soon at my own branded goods) . It is a cash for time business- but there are skills involved to it as well. The ability to negotiate, the ability to “feel” the market, and make smart buying decisions – coupled with an ability to streamline and make the whole process more efficient are just some of the main drivers . Not everyone can do this and i know of people who have made losses and given up- luckily im doing pretty well and my eye is firmly on the bigger prize. Bert

  • Tom

    Hi,
    Thanks this is excellent example. My question would be is it possible to ship directly from the source to Amazon (eg Debenhams to Amazon) I realise you would have to pay the label fee from Amazon, but it would save the cost of the shipment from your location to their warehouse.
    Thanks

    • http://www.arbing.co.uk/ Sam Priestley

      Hi Tom. It might be possible but I haven’t found a way to do it. Sorry!

  • http://www.bonnevida.co.uk Gracie

    This was a really clear guide! Don’t think I’ve found such honest information anywhere. One question – when I shop on Amazon I very rarely look at the other sellers of an item. I am sure when I do my listing I will get lost in the other 60+ people selling the same thing. How do I either stand out from this or make myself the 1st listing (and everyone else becomes other sellers)