The difference between RA and thrifting, and why RA is exponentially more profitable
There are hoards of people thrifting for profit – retail arbitrage is like thrifting, except instead of scouring through a tiny assortment of thrift shops, you can scour all of the world’s biggest brands both online and offline.
If you’re already a thrifter, this page will convert you to retail arbitrage – we guarantee it. If you’re not, read this carefully before going down either path, because we’re well aware that there is a certain appeal to thrifting.
Time vs. payout
When you walk into a thrift shop, you can’t spot what any item is at a glance. You have to individually inspect each potential candidate, and most of your time is spent sifting through the items. If one catches your eye, you have to look up the price on your phone while you’re in the store. You also have to drive (or walk) to the thrift store and back.
This takes up quite a bit of time. New thrifters won’t know what to look out for, and they’ll take even longer.
And something bought in a thrift shop is, by definition, used. The primary place to sell used items is eBay. Unfortunately, online auctions aren’t booming – they’re declining rapidly. According to Compete, eBay’s traffic has dropped from just over 88 million unique visitors per month to just under 66 million from 3/14 to 1/15.
That’s eight months! Basing your business model on the used online market is investing in a dying (or at least declining) market.
On the other hand…
Retail arbitrage is as simple as scanning a barcode into a special iPhone or Android app if you’re at the physical store. If you’re online, it’s as simple as copy/pasting the barcode between a third party store and Amazon.
Profit is easily calculated, and because you sell under the brand’s name on Amazon, there is no guesswork as to whether or not your item will sell. You just select products with a certain profit margin, buy them, send them to Amazon FBA, and they sell with no effort or uncertainty on your end.
No customer support
Amazon handles everything once you list
Your work is done once you label and send the product to Amazon’s warehouse. As long as you’re using FBA, Amazon ships it to the customer with free shipping and fast processing. You don’t have to keep track of orders or remember to package the items yourself. If you do online retail arbitrage, you can just get your order, label the items, tape the box up, re-address the box and send it it straight back to Amazon.
On eBay, you handle everything
You print all of the labels, respond to all customer questions about shipping and tracking, and take care of all refund and exchange requests.
Again, once you ship off to Amazon, your job is done. Returns will be taken care of by Amazon, and Amazon also handles the customer support as they are the ones that are in charge of shipping and such. You just answer questions about the item itself if it is your very own listing – but if the company also sells on Amazon, questions will usually be directed at them.
Time spent sending packages
Thrifting doesn’t give you the volume to use a fulfillment center, so you’re stuck storing and packing all of your inventory. This takes time, and you also have to pay for materials. (Packaging 10 items, taping them, taping the labels on, then driving to the post office takes a surprisingly long time.)
You do have to pay for shipping to Amazon. Amazon gets massive discounts with delivery couriers, though. Your costs to ship there are significantly less than if you were shipping it personally. And the shipping is a one-time cost – aside from that, you just have to pay the FBA fees.
It’s cheaper to have Amazon ship it for you
You can see how much it would cost to fulfill any order with FBA here. Type in the name of the item (or UPC/ASIN to make things faster), select it, and you’ll see the estimated fees for the item.
If the order is fulfilled by Amazon, Amazon takes two fees – one is for the packing and shipping of the item, and the other is for the referral fee. The referral fee is unavoidable no matter what you do – you can see the referral fees here. Shipping is always much cheaper than you’d get if you walked into USPS, UPS, or Fedex by yourself.
If you don’t choose to use FBA, you pay a referral fee on top of your higher shipping costs and the time it takes you to ship the items. Doing it yourself just isn’t feasible for most people, and luckily, there’s no reason to do it. Yes, you are constrained to selling through Amazon only, but for our purposes, that’s just fine.
Oh, and Prime members always want Prime items. Doing 3-5 days shipping with 1-3 days of handling won’t be good enough for most.
On that same note…
Prime is faster than you are, period.
No thrifter is ever going to be unloading enough inventory every week to get substantial discounts with couriers. In orders to ship a package priority with USPS, you’re paying $5.80, $12.35, or $17.45 for a small, medium, or large flat-rate box, respectively. If it’s larger than a large flat-rate box, it’s likely too big for thrifting or retail arbitrage – fast shipping gets expensive past that size.
If you ship boxes every single day without any breaks, like we said, with the flat rate boxes, you get 1-3 day shipping. Overnight shipping is too expensive unless someone specifically requests it and covers the bill.
Amazon is two days, guaranteed. And with Amazon, you don’t have to get up early, pack all of your boxes that sold the night before, and get them in the mail. Their entire process is streamlined, and they guarantee the 2-day shipping.
(There are 30 to 40 million prime members in the US alone, FYI.)
Multiple items, not just one, fall onto your lap
To make a significant amount of money from a thrift find, it has to be a good find. Even if you double your price on something, a $40 item is still just $40 profit (before fees and shipping). And most stuff in the thrift store does not cost $40… a $20 item even tripled is still just $40 profit.
If you strike gold in a retail arbitrage environment, you can buy as much of a single product as you want. If you’re confident in the find, buying 10 to 20 units isn’t unheard of. (We have a full guide (chapter 5) on how to be 100% confident that your items will sell before pulling the trigger.)
10 items, even at 50% profit, is a 5x return. $20 turns into $100, $40 turns into $200, etc.
Of course, this is just one example. The point we’re trying to make is that when you hit hold with retail arbitrage, you tend to make a lot more money on those good finds. You also have many more options – thrift stores in your area vs. the entire online retail and brick and mortar environment.
Scalable with your bankroll
The limitation on thrifting is that you have only the thrift stores in your area. It’s not like you walk in and find yourself walking out because you can’t afford any more merchandise – you walk out because you have exhausted the store’s supply, and you have to wait until people sell more used items to that particular store… or keep driving to scour new stores.
In thrifting, the cost of your profit is your time. You put a certain number of hours in, and you find a certain number of items to sell.
Retail arbitrage, continuing with the theme of this chapter, is completely different. If you find an item and there are 20 on the shelf or 99 available online, you can simply buy more units, sell more units, and make more money. You spend way less time and make exponentially more money.
Used vs. New
Walk into any general thrift shop and we guarantee you’ll see these items lining the walls and clothing racks:
- Noticeably used clothing from popular brands, or somewhat new clothing from completely unknown brands
- Old books worth nothing
- Used appliances (microwaves, etc.)
- Jewelry worth nothing
- Used furniture
Very few buy used clothing online – no one wants to wear something that someone else has sweated in and washed. Books – self explanatory. Used appliances – no guarantee that they will work, or if they do, continue to work in the near future (some might have broken features that you don’t notice)…
Et cetera, et cetera, et cetera. You’re not finding used iPads at the thrift store. You’re finding obscure junk (yeah, we’ll say it) that you’re praying will sell used.
Retail arbitrage… new products from the biggest brands, and those brands are definitely not carrying obscure junk. They’re carrying the stuff that people buy! Everything is brand new, sealed, in the original packaging, etc.
Brandability and stigma
Stigma is easy to cover – do you want to be on your smartphone for hours in a thrift store? Probably not. You can shop at any big brand store for retail arbitrage, and we’re also going to show you how to do it online so that you don’t even have to leave the house.
This guide will also cover how to take your existing customers from Amazon, get them onto your brand’s email list, and alert them of new products that you have. You can be known as the company that emails only when they have a good deal. Assuming you follow our advice, you can build a solid following from your retail arbitrage efforts, and that following will continue to buy from you if you continue to get products that appeal to them.
Let’s say you source a kid’s toy, and 10 people (presumably parents) buy the item. Then you do that 10 more times (for toys) and out of those 100 customers, by using our tactics, 30 go onto your email list.
Then you get another product, and let’s say you pick up five units. You tell your 30 existing toy customers about the five units, and two or three of them buy… you have just moved half of your inventory and made a certain amount of money by doing one email blast.
As you grow, you are known as the guy that existing customers should pay attention. They’ve bought something for a good deal from you… you have their ears and they trust you.
You can brand your company and sell everywhere… eBay, your own online store, etc. You can’t really do this with eBay, because like we said before, at thrift shops, you’re buying assorted junk. There’s no rhyme or reason to your purchases.
But we’re getting a little bit ahead of ourselves, here. Let’s first start with finding one product.
That’s what the next chapter is all about. We’ll go into the sourcing process, breaking down exactly how to do it right from your laptop or by driving to any big brand store.