Is Retail Arbitrage Dead?

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walmartclearanceLast night I was trying to get some work done on the computer and often times I like to have Youtube videos playing in the background.  Last night I came by this video talking about how retail arbitrage (buying something at a retail store to then resell online) is no longer a viable option, that it is dead.  It is not something I had ever really given much thought too.  I have been selling online for over 10 years but only in the past 2 years have I done any RA.  After watching the video I started going through the comments section and was amazed that just about everyone agreed that RA was dead.

There are several points that I can agree with.  RA should not be your only source of income.  Their are to many factors outside of your control and it is all too easy for this opportunity to be taken from you.  Their is unbelievable competition from other sellers and Amazon themselves.  Its hard work and maybe only 1-5% of what you scan will be worth buying and selling on Amazon.  It also become very difficult to do without a decent amount of capital…although not impossible.

Despite all these hurdles, RA can be very profitable.  When watching the video I did feel that I had somewhat of an advantage over some other sellers.  Since I have had a profitable eBay based business for many years I already had some capital and I was able to take some chances on items.  For example, about 6 months ago I found an item that I could buy in store for $10 and sell on Amazon for $35-40 (about $17 profit per item).  I went to several stores in the area and was able to pick up roughly 500 units.  So in one day I spent $5,000 on just one item.  That day was the first thing that came to my mind after watching the video but later I started thinking about other items I sell.  I have quite a few items I have picked up at various dollar stores.  I have regular items that I have sold hundreds of that were bought at dollar stores.  They may only be $4-5 profit each but if an item is always available and you can get lots of low risk quantity then of course its worth it.  It would be possible for a determined person to build their Amazon inventory to 1,000 units for $1,000, that should be something any online seller could scrape together.

Another argument against RA is the increased competition.  I think it is a valid point when talking about competing directly with Amazon.  They can definitely sell an item cheaper than you will ever be able to and there are times when it seems like their inventory is endless.  In the example above I bought 500 units of an item and I still have about 60 units left.  Amazon has swooped in at a break even price for me and has 999+ inventory.  I got lucky, if they came in when I still had all 500 units then I would be stuck with either lots of inventory or losing money.  That is a scenario when having capital is a huge benefit.  Having $5,000 invested in a single item could ruin a seller with less available cash but wasn’t enough to hinder me from making any other purchases that I thought would be profitable.  Amazon is a real threat but for me other sellers either online or locally are not.  The problem of local competition can really be negated by spending more time shopping online for inventory.  Some of my biggest profits in 2015 were items bought online and sold on Amazon. (In the near future I plan on writing a post showing how local competition has benefited my business).

RA certainly isn’t for everyone but the comments section of the mentioned video made it sound like the plague.  The truth is probably somewhere in the middle.  It can be a great source of income for some and it can bankrupt others.  I think it is far from dead.  RA is work, you have to be dedicated and determined.  You have to be able to think outside the box and go beyond the Walmart clearance section.  One comment read “…it annoys me because buying and selling from retail outlets and selling on ebay / amazon is the simplest business you could possibly have. There’s not a great deal of skill required to get involved. Not a lot of time to be invested to become competent.”  If this business model does not require time to be invested and does not require competency then why does the video have 200+ comments without a single one objecting to the declaration of RA being dead?  Either the people commenting on the video are all pathetic losers or RA takes a high level of skill and competency to become a profitable business endeavor.

 

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