How to Use Holiday Sales in your Retail Arbitrage Strategy

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It’s no secret that retailers are already going out of their way to slash and burn their remaining 2016 inventory and offer ever more tempting deals and promos to ever more price-conscious consumers. This has been happening since the start of November, long before Black Friday, Cyber Monday or the traditional Christmas shopping season.

Why?

Shoppers are shopping early

Adobe has one answer: Consumers are shopping earlier than ever before. In its 2016 Digital Insights Shopping Predictions study, Adobe found that 31% of shoppers planned to start holiday shopping long before November hit. Predictions from Adobe included 48% of consumers making their holiday purchases by Turkey Day, and another 88% making their holiday purchases by the end of Cyber Monday.

With consumers expected to drop some serious coin, retailers are not afraid to start promotions early, eagerly pushing loss leaders in front of a perceived demand for goods and gifts.

What does this season of retail plenty mean for you? It provides you with endless possibilities for retail arbitrage, which is the practice of buying bargain-priced goods and selling those goods for a higher price later on.

Retail arbitrage is nothing revolutionary, and many business models are based around this strategy of buying low to sell high.

However, the key questions that many marketers face when taking advantage of retail arbitrage are these: Where does one find lots of low-priced items? Also, how can one know which items will sell and which ones will go stagnant?

To this end, here are some surefire steps for locating retail deals and avoiding the duds.

Places where you can locate retail arbitrage deals

Online auction sites- (e.g., eBay)

Online “garage sale” sites like eBay are some of the best available places for finding discounted product lots and all kinds of cheap goodies, many with free shipping to boot. To locate the deals, try searching these sites using terms like “lot,” “set” and “collection.” Also, look for manufacturers from China.

Low-priced items that are new and offer free shipping can be purchased for a quick turnaround on higher-priced sites like Etsy, Amazon, or even your own website. For example, you could purchase LED dog collars at roughly $1-$2/each on eBay.

dog-collars

With just a little bit of customization, such as by adding a hand-stitched pet name, unique cloth covering, or some beading, you could then sell your dog collars for as much as $24.99 on Etsy.

etsy-dog-collars

In fact, Groupon recently offered its own dog collar deal, with the collars looking very much like those value-priced ones on eBay.

led-pet-collar

Local store deals

Sometimes, it’s best to go and check out physical products before you purchase them. In such cases, your local stores are the best candidates for having discounted goods. You can learn which stores have the best items to purchase by first downloading an app like Flipp (via the iTunes store or Play Store), which delivers weekly store ads and flyers.

With Flipp, you can register for store newsletters and flyers and have them delivered right to your inbox. At that point, you can peruse the store holiday deals and sales and compare their name brand prices with those posted on Amazon or eBay. If there’s any doubt in your mind about the quality of a good, you can check it out in person before making a bulk purchase.

To predict if your products will sell well on an online marketplace like Amazon, use the following trick: Find out what rank is assigned to those products via Amazon. This rank, called the Amazon Best Sellers Rank, is updated on the hour and tells you how well a product is selling. Here is an example:

tsum-tsum-amazon-rank

Ideally, you want to purchase and sell products that carry a rank of 4,000 or lower in a popular category like toys and games. The lower the rank, the more in-demand the item is on Amazon, and the more likely that it will sell there (and other online auction sites).

Social media marketplaces

Facebook Groups is just one place where you can locate cheaply priced goods for quick turnaround. While these goods are not likely to be new, they can be examined first hand and then resold through sites like eBay and Amazon.

fb-groups

In many cases, sellers posting goods on social media marketplaces just want the stuff gone. Many product photos are taken within storage units and garages, which means that in those cases there is simply no room in the home for the good. You can also place offers for items if you think their starting price is too high.

Should you sell on Amazon or eBay?

There are several major differences between these two leading platforms for retail arbitrage. With Amazon, you can send your goods to their warehouses via the Fulfilled by Amazon program and not have loads of inventory to worry about. Also, the Amazon FBA program takes care of packaging, shipping and customer returns/complaints/questions.

The drawback with Amazon is that many of its elite seller programs can only be qualified for by sellers who are selling completely new items. Likewise, sellers must often obtain permission from product manufacturers if they wish to sell their products online. To be favored by Amazon in its Buy Box, sellers must have good customer ratings and loads of inventory. Finally, there is the higher cost of FBA and Amazon in general to contend with.

With eBay, sellers can choose to do more of the upfront work, including packaging/shipping their items for buyers, processing orders, and even providing transaction feedback. There is usually no requirement that a seller who is selling even large lots of brand name items obtain manufacturer permission.

The cost of these advantages is time. eBay is OK for a seller who has a handful of items to sell, but not for the seller who is trying to make a living through the platform and cannot be spending hours upon hours of time listing items, especially lower priced items.

As mentioned previously, there are also other selling platforms such as Etsy. Alternately, your best bet may lie with featuring your products on you own website and not paying any platform any kind of commission.

Making holiday retail arbitrage work for you

The key to making a successful run with holiday retail arbitrage is to buy small product lots and work your way up to larger lots and product deals as you gain experience. You don’t want to be stuck with $1,000 worth of bobble head figurines you can’t move. You also need to carefully consider where you’ll store your inventory, and how much storage fees will run. However, if you play your cards right, you could easily reap the benefits of a shopping season that now well extends into 2+ months.

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