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Selling goods and gadgets for less than the retail price is known as retail arbitrage and it fuels thousands of small to medium-sized reselling businesses. In fact, if you’ve ever browsed eBay, Amazon, or Poshmark, you’ve probably seen third-party resellers listing items from the brands customers love that way.
Here are some of the top categories you’ll see being resold on the secondary market:
So, retail arbitrage and reselling, what’s the difference? We’ll go into pros and cons so you can make the most informed decision.
Reselling is based on the principle of retail arbitrage. However, it’s done on a much larger and efficient scale. It’s the same concept of purchasing items from retailers at a lower price with the intent to resell at a profit. However, it’s much easier to turn into a money-making business.
For discount store owners, mom-and-pop shops, and flea market vendors, B-Stock presents itself as a great opportunity to buy in bulk. Online resellers, for example, will often buy merchandise in bulk quantities and then resell single items – for a profit – on commerce sites like eBay or Poshmark. For brick-and-mortar store owners, this becomes a source of awesome inventory to fill their store.
So, how do you buy in bulk and resell? We’ll jump into that below.
Going the route of liquidation pallets means you can source a lot more inventory at once. Which makes the juice well worth the squeeze if you can quickly build up inventory to resell faster. Liquidation pallets are easy to find on sites like B-Stock, where we help operate some of the world’s top retailers’ online auction marketplaces. You can easily bid and buy on deeply discounted liquidation pallets, LTLs (less than truckload), or full truckloads and get tons of inventory at once.
If you need a refresher on why companies liquidate, check out this blog.
It’s pretty straightforward calculating your margins with our interactive or downloadable lot manifests. These will give you all the information you need to figure out how much you will make based on the original MSRP (manufacturer suggested retail price), item quantity, condition, and brand. Then, you can go on to see what others are reselling the same items for and what money-making opportunities await you.
Remember, you should factor in the cost of shipping. You wouldn’t want to lose out on profit because of this – more on that later.
Like we said earlier, reselling can quickly scale and turn into a thriving full-time business. Even as a part-time gig, it can be extremely profitable. Depending on how much time you have to dedicate to the business, you can bring on employees or contractors, buy bigger bulk lots, and expand your online reselling platforms. Once you have a process down for receiving, sorting, listing, and reselling your liquidation inventory, the rest is a matter of rinse and repeat!
You’re more subject to seasonality and trends. Remember, you’re typically getting inventory that didn’t sell in stores for a reason. Maybe the season for snowboots is over – which by the way, you probably wouldn’t want to buy a pallet of those in Florida. Don’t get stuck sitting on a bulk quantity of goods that you may lose value over time! How fast items will sell depends on seasonality/ trends of the category you’re in. Some inventory moves faster than others, too. Liquidation appliances tend to move quickly because people are usually looking for quick replacements ASAP.
If you’re buying in bulk, keep in mind, you are more likely to have product discrepancies. Say you find a pallet of mixed goods at a decent price. Half of the merchandise could be damaged and the other half in good condition. This is why it’s incredibly important to read the manifest prior to placing your bid. Do your homework!
It costs to move things across the country or overseas! Do not forget to factor shipping costs into your buying budget. Think of the mileage, manpower to load/unload pallets, warehouse staff that needs to be paid, and more. Plus, depending on the carrier, shipping times will vary. So don’t get caught without inventory to resell in between shipments!
Retail arbitrage is simply purchasing products from a retailer at a lower price and reselling them for profit. If done right, buyers-turned-merchants can sell the products at a much higher profit margin than the original discounted price.
There’s less of a monetary investment if you can pick up a few items here and there. It’s not like ordering an entire pallet of liquidation goods that you will have to pay upfront for. Plus, the concept itself is easy enough to test out on a small scale.
To illustrate this point, imagine Best Buy running a sale on Sony headphones. The original value was $300, but on sale, the price is $250. You buy all the headphones in stock. You can then offer them up on Facebook Marketplace for $275 (cheaper than your customer going to the store themselves). For every pair you sell, you’ll be making $25. Pretty simple, right? That’s retail arbitrage for you!
If you are sourcing products in person, you can physically see the goods. That means it’s less of a gamble than winning liquidation lots that have come from warehouses after being transported miles and miles. Shipping implies bumps and bruises may occur along the way. In person, you have full control over the quality of goods and you know the exact condition you can relist these items for.
For example, if you grab an item from the clearance shelf and it remains unopened with the wrappings intact, it can be listed as ‘New’. However, if you purchase a lot of customer returns, these have likely been opened, will have torn packaging, or instructions missing, and would be listed as ‘Like New’ or ‘Used’ (depending).
So you can see retail arbitrage is a much more manual process. It takes time to source the inventory you may or may not even turn for that much of a profit. And as the saying goes, time is money. You can spend a whole day prowling the aisles of thrift stores, picking one by one through endless racks hoping to score big brand names. You can even hit a few different local TJ Maxx’s and Ross’ in one day. In the end, you might just find one treasure from a whole day of hunting.
Since it takes longer to secure even just a few pieces to flip, your inventory will take longer to build up. So you will be working on a much smaller scale. This works for some people if you’re just looking for a low-maintenance side gig! For people that specialize in a niche like comic book collectables or rare, vintage finds, this might be the way to go.
You risk losing money on your investment. Especially if a product was on sale due to a default or recall. In order to make money, you must have a good product at a good price. You also have to consider that others take a cut of your profit. If you’re buying up clearance items online, you’ll pay tax, shipping, and fees to the site you’re using, plus your original purchase price. That kind of middleman ends up cutting into your margins.
Another common challenge with retail arbitrage is brand gating. Unless you get approved as an authorized reseller for certain products, you may be prohibited from selling on certain platforms. Amazon is a big one to watch out for. Although these guidelines are in place to protect buyers against counterfeiters and unauthorized sellers across the site, it can be stressful not knowing if you’ll be able to make your money back. Or worse, risk getting your account banned.
At the end of the day, you will need to source awesome inventory. We are the top destination for liquidation, overstock, and customer returned merchandise. Our private marketplaces are ideal for sourcing a lot of inventory at once directly from big retailers and manufacturers. If you’re looking to get started on smaller loads, B-Stock can help with that too. Be sure to read Buying Basics: How to Become a B-Stock Buyer Part 1 & Buying Basics: How to Become a B-Stock Buyer Part 2 for more details. You will be well on your way to a thriving resale business fueled by retail arbitrage in no time!