Retail arbitrage is all sunshine and rainbows until you stumble upon the reality of the harm it brings in the long run. Retail arbitrage allows you to buy from one seller on a platform at a lower price and sell it at higher prices on another platform, benefitting from the differences in the prices.
When you’re running an Amazon FBA business and don’t want your account suspended, retail arbitrage is a No-Go! It violates the community guidelines of Amazon and also bars you from selling temporarily or permanently! Retail arbitrage is a gray area when it comes to selling on Amazon.
“With retail arbitrage, you have the retailer as a middleman, so if there is anything unclear about the receipt or suspicion about the retailer, then Amazon may not find your evidence of authenticity to be acceptable and your account could be permanently suspended. And of course with retail arbitrage, there is always the risk that you won’t be able to find inventory to sell, which is something you don’t have to worry about with a wholesale model.” – Leon Vartanian
In his years of guiding people to earn more than $10k each month through Amazon FBA, Leon has helped many people recover their suspended accounts due to retail arbitrage. He shares his insights on what downturn businesses face because of retail arbitrage. According to him, the major cons of retail arbitrage are:
- Supply Shortage: With retail arbitrage, you will always be on the edge of the supply running out. Since you buy the product from another seller, it can run out of stock and you’ll be left scrambling for another product in the market.
- Lack of loyalty: When you build customers based on low prices, you’ll lack loyal relationships. In case you’re not able to provide products at low prices, the customers will quickly transition to another seller.
- Profit margins are not stable: You don’t own the products, so you have no control over the margins. As a reseller, you have to pay the retail markup, commissions, and the cost of shipping from the original supplier. Even if you get a product from clearance sales, as there’s still a slight markup you have to pay.
- Bad inventory=bad repo: Retail arbitrage can go wrong if you get stuck with bad inventory which leads the way to negative reviews. If you have inventory that isn’t selling, you’ll have to lower the prices till you break even or go into losses.
You can practice arbitrage on Amazon on rare occasions but its growth potential is limited. Relying on Leon’s words, you should stick to the wholesale concept to ensure positive reviews and loyalty. If you need more guidance, you can also join his coaching and scale your business.
