How Does Amazon Arbitrage Work? A Step-by-Step Guide for Beginners

Arbitrage is a popular business model that strikes an optimal balance between quick startup, low investment, and profit potential. This method involves buying products at a low price and selling them for a higher price, with the difference being your profit.

There are two main models of arbitrage: offline, which involves sourcing products from physical stores, sales, outlets, or clearance sections, and online, where you source items from online marketplaces, store websites, and more. Due to Amazon’s wide customer base and lack of technical skills required, this platform is one of the top marketplaces to start this business.

In this article, we share a step-by-step guide for beginners on how to start an Amazon arbitrage business and offer tips for running an efficient ecommerce store.

How Do You Start Selling With Online Arbitrage on Amazon?

The process of starting an arbitrage business on Amazon depends on your business goals and strategy, but some steps are universal. The primary step is setting up your Amazon seller account, which is a quick and straightforward process.

During this step, you need to choose your selling plan - Individual ($0.99/sale) or Professional ($39.99/month). Then enter the required information, and complete Amazon’s video verification process.

Once your account is approved, you're ready to start selling. Below you’ll find the essential steps for reselling on Amazon successfully.

Step 1: Sourcing Products

Since you're reselling, securing good deals is key. You need to find discounted or low-cost products to ensure a profitable resale. Here are some options for where to buy products at affordable prices:

Online marketplaces: Platforms like Temu offer single products at near-wholesale prices, though the quality can vary.
Physical stores and outlets: Keep an eye out for clearance sales, discount events, and liquidation deals in local retail stores.
Auctions and return pallets: You can purchase Amazon return pallets or bid on items at liquidation auctions, but always remember to check the conditions of any product before committing.
Online stores and outlets: Many online retailers offer significant discounts, especially during sales events.

However, sourcing products at a low price alone doesn’t guarantee profitability. Now that we’ve discussed how to find potential products for reselling, let’s explore how to choose ones worth selling.

Step 2: Choose Products to Resell

Every seller wants to make a profit, which is why choosing the right product is key. Once you find some interesting products online or offline, you need to validate them on Amazon. While each seller may have their own criteria, some universal factors to consider include:

Competition: If there are over 15 sellers on a listing, this can lead to price wars and eat into your profits.
Sales volume: Products with 200+ sales per month suggest stable demand and potential for profits.
Net margin: This amount should cover your expenses while leaving room for future purchases and ads.

It's important to analyze your product ideas thoroughly to ensure that they’ll be profitable and align with your business model. However, manual research can be time-consuming and may not always provide the data you need.

This is where specialized tools come in handy. Below is a quick overview of the top four tools that can help you assess a product’s viability more effectively.

Amazon Product Research Tools

We’ve analyzed thousands of discussions on Reddit and Quora to identify the top four tools that Amazon sellers recommend most frequently to help them find profitable products. Here’s a quick overview of each tool’s key features:

Jungle Scout: Known for its in-depth Amazon market research, Jungle Scout focuses primarily on private label products, but many of its features are also useful for resellers. This platform includes a powerful keyword tool to help sellers optimize ads and find high-converting keywords. Before making a purchase, it’s important to evaluate which features align with your business needs to determine if it’s worth the investment.
AMZScout: This tool taps into a vast, 600-million-product database to generate profitable ideas for what to sell based on your preferences. It also offers a detailed product analysis tool that provides data on sales, pricing history, profit margins, and more. The AI-powered feature instantly highlights the potential benefits and drawbacks of a product. One downside of this option is that some users report occasional delays loading data.
Helium 10: Helium 10 is another powerful tool for identifying trending products and analyzing their sales potential. While some users find the data overwhelming and hard to interpret, Helium 10’s other features, like inventory management, are praised highly —particularly by FBM sellers who need to streamline their operations.
SellerApp: SellerApp offers comprehensive product research tools with the option to start for free. However, access to advanced marketing features requires an upgrade, with costs starting at $199/month for 100 ASINs. Despite being on the pricier side, SellerApp supports nearly 20 Amazon marketplaces, which is ideal if you’re selling internationally.

Most of these tools offer free trials, so it's a good idea to test them out and find the one that best suits your needs. Using the right software can significantly improve your product selection process and boost your chances of success.

Step 3: Check for Restrictions

It might not be the most exciting step, but selling on Amazon requires that sellers follow all of its policies. Some product categories have restrictions, and failing to comply with these could result in blocked listings. To avoid delays, check Amazon’s rules in advance and prepare any necessary documentation if required.

Restricted categories include:

HAZMAT (Hazardous materials): These include products like lithium batteries or chemicals that could pose a risk to consumers or the environment.
Gated categories: Certain items, such as collectibles, jewelry, and fine art, require approval due to their high value or potential for counterfeiting.
Branded products: Selling items from well-known brands may require authorization. To list these, you often need to obtain a reseller certificate from the brand or its official distributor.

To streamline your selling process, you can obtain approval by preparing the necessary documents ahead of time. Alternatively, focus on open categories, such as books, home goods, and other generic items that don’t require special approval.

No matter which path you choose, it's crucial to ensure that the product you choose is worth the effort. Now we’ll move on to the next step—listing products to sell.

Step 4: Listing Products

In order to sell products on Amazon, you need to upload them to the site. In the case of reselling, you typically join an existing listing through Seller Central, set up your offer (including the quantity and price of your product, etc.), and choose a fulfillment method.

Your fulfillment method determines how you manage your inventory and ship orders. There are two main options:

Amazon FBA (Fulfillment by Amazon): This method is ideal if you have a large amount of inventory or you don’t need to cover shipping costs from your supplier. You purchase the goods and have them shipped to FBA centers, where Amazon handles your inventory and fulfills orders. However, FBA can be expensive for small orders due to storage and fulfillment fees.
FBM (Fulfillment by Merchant): This is a better choice for smaller volumes or when managing shipping expenses from the supplier. With FBM, you receive the products first, inspect them, and then ship them directly to customers.

If you're sourcing your products locally, FBM can help reduce your shipping costs and simplify your logistics, giving you greater control over your inventory and profit margins. However, be sure to carefully weigh the pros and cons of each fulfillment method to choose the best fit for your business.

Step 5: Shipping

If Amazon FBA isn’t the right fit for your arbitrage business, you’ll need to oversee the process of shipping your products directly to customers. This means finding the right courier service that aligns with your needs. Here are some essential factors to consider when selecting a courier:

Trustworthiness: Opt for reliable shipping companies like FedEx or UPS, which offer thorough and effective tracking systems and signature request options, ensuring a more secure delivery process.
Shipping speed: In today’s ecommerce world, fast delivery is crucial. Customers expect swift arrivals, so choose a reliable courier that meets these expectations.
Hidden costs: Some fulfillment services or couriers might charge additional fees for packaging, handling, or even fuel surcharges. Be sure to review the company’s policy carefully to avoid any surprise fees.

Once the order is shipped out, you need to upload the tracking number to the system. This not only provides your customers with peace of mind but also improves their overall experience. Efficient shipping can contribute largely to the long-term success of your flipping venture.

By following this guide, you should have a clear understanding of the main steps involved in starting an Amazon arbitrage business. However, following these steps alone may not guarantee success. Let’s explore some additional strategies that can help you make money.

Tips to Boost Sales

Now that you know how to resell, let’s dive into a few strategies that can help increase the profitability of your online venture with retail arbitrage on Amazon. These proven tips from top sellers can give you an extra competitive edge:

Offer product bundles: Combine complementary products to increase order value and attract more customers.
Run PPC campaigns: Use Amazon’s Pay-Per-Click (PPC) ads to drive traffic, paying only when a potential customer clicks your ad.
Participate in Prime Day: If you’re an FBA seller, you’re eligible to take part in this major event, which attracts significant sales.
Run discounts and promotions: You’ll need a professional plan and careful analysis to ensure that your promotions or discounts remain profitable.
Leverage customer reviews: Encourage satisfied buyers to leave reviews using the "Request a Review" button, which can help build credibility.

By combining these strategies, you can get the most out of your arbitrage efforts. Monitor your results continuously to identify what works best, and refine your approach to help you stay ahead of the competition.

FAQ

Is Amazon arbitrage worth it?

Yes, running an Amazon arbitrage business can be worth it due to its quick startup potential and high profit margins. Unlike launching your own brand, with arbitrage you don’t have to wait for production, making it a faster and more cost-effective way to start selling. However, success depends on setting everything up correctly, including efficient sourcing, smart product selection, and strong marketing strategies.

Is arbitrage allowed on Amazon?

Yes, arbitrage is permitted on Amazon as long as you comply with its policies. Some products, such as branded items or those containing hazardous materials, may require special approval from Amazon’s before you can sell them. Additionally, sellers must ensure that their products are authentic to avoid counterfeit issues. Violating these rules could lead to suspension of your listing or even your account.

Is Amazon arbitrage still profitable?

Yes, Amazon arbitrage can be highly profitable when done right. Success often relies on efficient sourcing to secure low costs and setting competitive prices to maintain strong profit margins. To increase your chances, use analytical tools for in-depth market research, so you can identify high-demand products with manageable competition.

Conclusion

A thriving Amazon arbitrage business hinges on a few key elements, with product selection being the most critical. To identify the best products, consider using analytical tools that can pinpoint top opportunities. This approach will not only boost your sales but also enhance your overall business strategy, setting you up for sustained success on Amazon.

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