Intro to Retail Arbitrage

What is Retail Arbitrage?

Retail arbitrage is the age-old practice of buying things cheaply in one place, and selling them for more elsewhere. As much as retailers love to talk about price-matching their competition, it doesn’t happen everywhere. There can be big discrepancies between the value of a toy sold in The Entertainer, compared to its price in Sainsburys. These can save you money when you do your Christmas shopping. (Woop!) But they can also pose opportunities to earn profit.

With retail arbitrage, you buy new products from an actual shop, and then sell them elsewhere. Where you sell it is up to you – eBay, boot sales, wherever you think you can get a better price. Just to make clear: this exact process works online too, and the process is suitably named online arbitrage, but that’s for another time.

An Example of a Retail Arbitrage Opportunity

Going back to that big price difference before. We have a Star Wars figure. In The Entertainer, it’s £30. In Sainsbury, it’s part of their in-store clearance, so has been reduced to £10. They’re trying to get rid of these last three units, because the new film’s coming, and they need to make space for a counterpart product.

You go into Toys R Us and see the same exact product. Full price at £29.99. Smyths is next door, so you nip in there. £30 again. Clearly, Sainsburys has a deal that no one else is matching. Something’s going on here.

You return to Sainsburys. Luckily, no one has spotted the deal yet. It’s £10 here, £30 everywhere else. Money can be made. You buy all three.

Once home, you list them on eBay for £30 each, Buy It Now. They sell within a week. After around 15% commission is taken, you have made £46.50 in pure profit – £15.50 from each unit.

Now you’re officially in the game.

Why Do Price Differences Exist?

For the same reason that sales happen.

The RRP of a product is just what the manufacturer recommends its in-store value to be. It’s up to the retailer to determine what sort of margin they want from that product. That will depend on the quantity they initially buy, how long they will sell it, the turnover of stock, and a whole host of other factors.

Price differences between high street retailers tend to be quite marginal. However, opportunities crop up all the time with certain promotions.

Ones to look out for include:

• 3 for 2
• 2 for £20/£25/£30
• Clearance
• Closing down
• Last chance to buy
• 40%-90% off

Bear in mind that this is just a starting point. Unassuming, non-sale products can end up being extremely profitable too. 

Where Can You Sell the Products?

Amazon. Extremely popular one, thanks to their FBA programme. There’s a lot to it, so may not be for beginners, but their marketplace is known for turning over stock quickly. There are a couple of barriers to entry (such as declaring self-employment) but it’s one of the most efficient ways to sell on your retail arbitrage stock quickly.

eBay. For entry-level retail arbitrage, eBay is the safest place to go. If you’re willing to post things out, you can sell to people across the UK. Not only that, but their Global Shipping Programme lets you market to the rest of the world too. Got a UK exclusive? Someone in Japan might be interested.

Gumtree. Much like eBay, Gumtree allows reselling beginners to get their foot through the door. This platform is better for collection-only listings, which may reduce your earning potential in some instances, but still can be profitable. Shpock and Craiglist both work approximately in the same way too.

Boot sales. These are perfect for any finds that you’d sell on for £5 and under. Any higher and it’s probably worth listing elsewhere. People assume that they’re getting a deal, when they buy from boot sales. This makes it far easier to get rid of inexpensive items quickly.

How Do You Find the Prices of Things Quickly?

Your mobile is your friend. I don’t know how you would fare in this game without a smartphone.

If eBay will be the destination for your finds, check on the app to see what price the completed listings are selling at. If it exceeds 15% comfortably (taking P&P into account), you’re on to a winner.

For Amazon, it’s even easier. They have their own scanning app, which lets you check the price of each item instantly. Just hover your phone’s camera over the barcode or the front face of the product, and it will compare the product against its database.

What Should You Buy?

If you’re new, stick to what you know. It’s that simple. If you’re well into your cycling, you will know the value of a good freewheel. Others wouldn’t even know what it is. If you have kids, you might know the value of the latest essential Christmas toy. Those who know a lot about a certain niche will do well. Once you’ve been in the game for a while, you’ll develop a portfolio of niches.

As well as the categories, buy retail arbitrage stock that you can take home comfortably, store in your home comfortably, and sell conveniently. For example, I found a £350 home gym that should have been £500. No, just no.

Have a minimum ROI in-mind before you purchase. If something is suitable for eBay, expect them to take about 15% off the sale value. For Amazon and its FBA programme, it’s closer to 40%, although it depends on the size and weight of the item, and how quickly it sells.

Look out for red stickers in-store and always be sure check the prices online. If Amazon’s your thing, scan the products to see the value and its Best Sellers Rank (broken down in this table), before you pull the trigger on a purchase. If you’re an eBay, ensure that the completed listings sold recently.

Any Final Tips?

• Invest what you can afford to lose.
• Make small investments at first, until you’re confident that you know what you’re doing.
• Buy things with a proven track record of selling (low Best Sellers Rank, eBay Sold listings, etc)
• Aim for 30% minimum profit on each unit you buy.
• Don’t forget to account for commission.