The path to success with Amazon arbitrage can seem clear at the outset. But before achieving profitability, you’ll have to navigate your way around many potential pitfalls. Without a strong scalability plan and seamless order fulfillment, factors like unexpected fees and fierce competition could tank your earnings.
Despite the challenges, the tremendous volume of third-party sales on Amazon—more than $156 billion last year—means there are plenty of opportunities for new sellers to start viable Amazon arbitrage businesses. This vast revenue stream can also tempt sellers to scale too quickly, ramping up the risk of inadvertent policy violations and listing errors that can put your entire seller account in jeopardy.
Success with Amazon arbitrage doesn’t come down to pure luck or secret algorithm hacks; it’s all about meticulous execution and the power of automation.
What is Amazon arbitrage, and does it include dropshipping?
Amazon arbitrage is a form of retail arbitrage, a business model in which you buy low-cost inventory from online or physical stores (e.g., clearance sales or outlet stores) and then resell it on Amazon for a profit. This model, often called online arbitrage or retail arbitrage, is popular among sellers due to Amazon’s large customer base and relatively easy setup process.
The key to Amazon arbitrage is finding great deals and marketing them to the right buyers. While the traditional idea of retail arbitrage often involves hunting down cheap inventory and warehousing it yourself, eCommerce makes various alternatives possible that are still close to the retail arbitrage model. Amazon arbitrage sourcing options include everything from brick-and-mortar thrift stores to online marketplaces, and sellers can choose from several fulfillment options that involve varying levels of hands-on attention:
- Self-fulfillment: You purchase products from other marketplaces, store your inventory, and ship it to the Amazon buyer.
- Third-party logistics: A third-party logistics company stores and ships products to Amazon buyers for you.
- Dropshipping: You hold zero inventory but purchase products as needed from your supplier (on other marketplaces) and have them shipped directly to the Amazon buyer.
Advantages and disadvantages of Amazon arbitrage
Advantages:
- Easy to start: Amazon’s low barrier to entry makes it easy for sellers to get up and running fast without a large initial investment.
- Lots of buyers: Joining Amazon’s marketplace gives you instant access to their large customer base.
- Broad scope of products: Instead of trying to find your way into a particular niche market, you can search for all types of discounted goods with strong resale potential.
- Potential to scale: Amazon’s reach and flexibility open up many possibilities for scaling your business, provided you have the right retail arbitrage apps and marketing strategies.
Disadvantages:
- Dynamic pricing: It’s not easy to keep up with rapid price fluctuations on Amazon.
- High competition: There is tons of competition on the Amazon marketplace—not just from other third-party sellers but also from Amazon itself.
- Strict marketplace rules: Arbitrage sales sometimes conflict with Amazon’s brand protection rules, which can lead to your account getting suspended.
6 essential components for Amazon arbitrage success
These marketplace-tested tips can ensure that your retail arbitrage business stands out from the competition and finds a loyal customer base.
1. Analyze data to adapt your strategies
What products do your customers want? How do you market to them? How high or low should you set your prices? If you learn how to analyze the data your business generates, you can find the answers to these questions.
Make sure you’re capturing and analyzing accurate data at every stage in the process, from initial product selection to post-sale metrics. Conduct regular reviews of:
- Sales data: Use Amazon Seller Central reports or third-party dashboards.
- Profitability metrics: Beyond gross profit, regularly review net profit margin, ROI per product, and profit per unit to precisely identify your most lucrative items and optimize pricing.
- Customer feedback: Actively scrutinize Amazon reviews, seller feedback, and Q&A sections for recurring pain points.
- Return rates by product: Flag top return reasons and use this to tweak your product catalog.
- Customer lifetime value: Calculate using reorder rates on Amazon or integrate with CRM tools.
2. Use automation tools wisely
Increasing the speed and cost-effectiveness of your business operations will often require you to leverage automation tools, especially if you intend to scale up. Far from being a mere convenience, automation will greatly reduce the constraints and labor costs that hinder your plans for expansion and growth.
For arbitrage sellers, tools for scanning products and researching pricing are critical, but needs will vary depending on the nature of your business. Amazon arbitrage sellers who follow the dropshipping model will benefit greatly from automated dropshipping platforms like Yaballe. For example, Yaballe can streamline time-consuming tasks such as order fulfillment, automatic repricing, shipment updates, and more.
3. Provide exceptional customer service
In a marketplace as competitive as Amazon’s, where many sellers offer similar or identical products, exceptional customer service can elevate you above the crowd. How you treat your customers can be a powerful differentiator that builds trust, fosters loyalty, and encourages five-star reviews. This strategy will help you grow an organically positive reputation that will drive repeat business from your existing customers and give you a competitive edge when acquiring new ones.
4. Get creative with product sourcing
You can find some unexpected bargains with incredible resale value by hitting up the usual circuit of thrift shops, clearance racks, liquidation centers, and outlet stores. However, arbitrage doesn’t exclusively tie you down to brick-and-mortar stores. eCommerce sites like eBay, Walmart, AliExpress, and Amazon itself can also yield highly profitable trending products.
5. Optimize your Amazon listings
If your products aren’t moving, but you know that other sellers are having better luck selling the same product at the same or higher prices, chances are that the quality of your listings is an issue.
Amazon product listing optimization starts with:
- A searchable, meaningful, and accurate title.
- A really high-quality product image (or several, as needed).
- Clear and informative descriptions with readable bullet points and relevant keywords.
- Mobile display optimization.
- Market research and listing optimization tools to refine the presentation.
For example, instead of writing “office chair,” you use: “ergonomic office chair with lumbar support & adjustable headrest—high back swivel desk chair for home office.”
Struggling to come up with ideas for high volumes of listings? Some dropshipping automation platforms (like Yaballe) include built-in auto-listing features to make your life easier. You can also get a little help from AI for content creation.
6. Stay compliant with Amazon’s policies
The last tip isn’t the most exciting, but it’s critical nonetheless. To run a successful retail arbitrage enterprise, you must stay in compliance with the policies of the marketplace you’re selling on and the suppliers you’re sourcing from. Getting reported for breaking Amazon’s rules and losing your account can be a frustrating setback—even signaling the end of your business.
Compliance requires careful monitoring and deliberate effort. It can include regularly reviewing Amazon’s ‘Account Health’ dashboard, actively monitoring your listing performance, and utilizing tools that automatically check for restricted keywords or ASINs to prevent inadvertent violations. Remember that only authorized admin users should be able to access your seller account; if you’re running a small business, you might be the only one in control of the account. Additionally, make sure the software tools you’re using are up-to-date on marketplace policies and capable of identifying counterfeits, protected brands, and other serious issues.
Simplify the arbitrage dropshipping model with Yaballe’s automation platform
Manual processing is an Achilles heel for sellers, and the risk of human error is high. Slip-ups like incorrect items and wrong addresses damage your seller reputation and incur unnecessary costs. Let’s consider the difference in fulfillment time: a manual order might take several minutes to process—copying details, logging into a supplier account, placing the order, and then manually updating tracking information. Multiply that by hundreds of orders, and you’re looking at hours of tedious, error-prone work.
Mastering Amazon arbitrage requires far more than just spotting a good deal. As we’ve explored, success hinges on many factors, such as unwavering policy compliance, optimized product listings, and—most importantly—smart automation.
For sellers who prefer the dropshipping arbitrage model, Yaballe’s automated platform enables you to scale your Amazon-to-eBay business and handle thousands of orders in a fraction of the time it would take for manual order processing. Yaballe can automatically fulfill Amazon-sourced orders by purchasing from either your buyer accounts or its own, supporting rapid and compliant fulfillment that ends in a prompt delivery for the end customer. Automate end-to-end, including tracking, customer service, listing, and more.
Get in touch today to preview Yaballe’s capabilities and learn more about optimizing your dropshipping business.
