The Ultimate Amazon FBA Retail Arbitrage Guide: How to Start and Succeed
- Extra Pocket Change
- Feb 10
- 4 min read
Updated: Feb 12
Amazon FBA (Fulfillment by Amazon) has become one of the most accessible ways for entrepreneurs to build a profitable e-commerce business. Among the many strategies available, retail arbitrage stands out as a low-risk, high-potential method to start selling on Amazon without developing your own product.
In this guide, we’ll dive into the essentials of retail arbitrage, covering everything you need to know—from what it is to actionable steps to get started and tips for maximizing your profits.
What is Amazon FBA Retail Arbitrage?
Retail arbitrage involves purchasing discounted or clearance items from retail stores (like Costco, B&M, or Tesco) and reselling them on Amazon for a profit. The process takes advantage of price discrepancies between brick-and-mortar stores and the online marketplace.
For example, you might find a toy on sale at your local store for £10, but that same toy could be selling for £30 on Amazon. After fees and shipping, the price difference becomes your profit.
Why Choose Amazon FBA Retail Arbitrage?
Low Start-Up Costs: Unlike private label, you don’t need to invest in product development or large inventories.
Quick Turnaround: Products are already manufactured and branded, meaning you can start selling almost immediately.
Fulfillment Made Easy: With Amazon FBA, Amazon handles the storage, packing, and shipping of your products. You focus on sourcing and selling.
Step-by-Step Guide to Amazon FBA Retail Arbitrage
1. Set Up Your Amazon Seller Account
Sign up for an Amazon Seller Central account. You can choose between the Individual Plan (pay per item sold) or the Professional Plan (£25/month plus additional selling fees).
Provide the necessary documentation (ID, tax information, and bank details) to verify your account.
2. Gather Your Tools
To make sourcing and selling efficient, invest in the following tools:
Amazon Seller App: A free app to scan barcodes, check selling prices, and calculate potential profits.
Scanning Tools: apps like SellerAmp offer more advanced features for product analysis (i.e. monthly product sales and profit calculator).
Label Printer: Essential for printing FBA shipping labels.
Tape and Boxes: You’ll need these for prepping shipments to Amazon fulfillment centers.
3. Source Profitable Products
Visit retail stores like Costco, Tesco, B&M, or local clearance outlets.
Look for items on sale, in the clearance section, or with significant discounts.
Use the Amazon Seller App to scan items’ barcodes to check the following:
Current Amazon Price
Sales Rank: Products with a lower sales rank sell faster. Aim for items under 100,000 in rank (varies by category).
FBA Fees and Profit Margins: Ensure the price difference after fees leaves a healthy profit (at least 30%).
The use of software such as SellerAmp will give you a better idea of monthly sales and potential profit.
4. Analyze Competition
Check the number of sellers offering the same product. Too many sellers might result in price wars.
Look for listings with an “Add to Cart” button instead of “Sold by Amazon” to avoid competing directly with Amazon.
5. Prep and Ship to Amazon
Once you’ve purchased inventory, create an FBA shipment in Seller Central.
Label each product with the provided FNSKU (Fulfillment Network Stock Keeping Unit) label.
Pack your items securely and ship them to the designated Amazon fulfillment center.
6. Understand your profit and loss
It is essential you determine your costs and how much profit you are making in order to scale.
Use tools such as Sellertoolkit and Sellerboard to efficiently do this.
Tips to Maximize Success in Amazon FBA Retail Arbitrage
Stay Updated on Trends:
Seasonal items, trending toys, or popular holiday gifts are great opportunities. Use Google Trends or social media to identify emerging trends.
Diversify Your Sourcing:
Don’t rely solely on one store. Check out thrift shops, discount stores, and even online retailers for deals.
Understand Amazon Policies:
Familiarize yourself with restricted categories and gated brands. Selling restricted items without approval can lead to account suspension.
Monitor Pricing:
Use repricing tools to stay competitive without undercutting yourself too much.
Keep Records:
Track your expenses, profits, and inventory to understand your cash flow. Tools like QuickBooks can simplify bookkeeping.
Challenges to Watch Out For
Competition: Popular items often attract multiple sellers, driving prices down. Be selective and focus on niches with less competition.
Returns: Customers may return items, cutting into your profits. Ensure all products are in excellent condition before sending them to Amazon.
Inventory Limits: Amazon imposes storage limits, especially for new sellers. Avoid overstocking and focus on fast-moving inventory.
Is Amazon FBA Retail Arbitrage Right for You?
Retail arbitrage is an excellent option for beginners looking to test the waters of Amazon FBA without committing to private label products. It’s flexible, relatively low-risk, and doesn’t require a significant upfront investment.
However, it does require time, effort, and persistence. You’ll need to dedicate hours to sourcing and analyzing products, but the potential rewards make it worthwhile for many sellers.
Final Thoughts on Amazon FBA Retail Arbitrage
Retail arbitrage with Amazon FBA is a proven way to build a profitable e-commerce business with minimal upfront risk. By following this guide and staying disciplined, you can generate consistent profits and potentially grow into more advanced Amazon FBA strategies like wholesale or private label.
So, grab your smartphone, hit the clearance aisle, and start scanning—you never know what hidden gems you’ll find!
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