Recently we polled our members to see how they are sourcing products for their Amazon and online ecommerce businesses. This was the result.
Although this is a small sample of our total membership, I was surprised by the results. A majority of people are still sourcing via arbitrage, whether it be online or in store. This is definitely a somewhat risky but profitable model in the short term.
This leads me to wonder, what is the future of arbitrage? Is it a sustainable business model? I will say yes with some major reservations.
- This model will become harder and harder to do on Amazon.com as the rules are tightened, brands are restricted and inauthentic claims are harder and harder to fight.
- Those who have been doing it successfully for at least a year are at a bigger advantage because they have achieved some mastery and cash flow.
- While Amazon.com may be more challenging, those who can adapt to international marketplaces such as Amazon in Europe and Linio in Latin America will thrive. (Linio will be adding major shipping functionality from the US in 2017 which will make it a much better fit for arbitrage than it is now.) Many people in other countries are desperate for our brand name goods and the seller marketplace and warehouses are not nearly as congested as the US ones are. Developing countries in particular will be great for arbitrage such as Latin America (Linio.com), India (Amazon.com), and even China.
- Sellers who learn international marketplaces besides Amazon will be at a huge advantage. For example, if selling in the UK, what other marketplaces besides Amazon make sense for selling?
- Sellers who can sell in multiple marketplaces will be safer. For example, selling on Ebay, Jet, Facebook, Pinterest, Instagram and even local will be able to fully capitalize on their deal sourcing capabilities.
An Overview Of Online Marketplaces In Europe from BVOH
Arbitrage is still a viable business model for many but keep a lean inventory to make sure that pivots are not too costly. The days of just send it into Amazon and move on are over. Accounts must be much more closely monitored, records kept better and growth strategies must be employed.
I would love to hear YOUR arbitrage experiences and opinions. Please comment below.
Kelly is a full time seller who lives in Michigan. She sources via RA, OA, wholesale, and private label. Her only other steam of income besides Amazon is selling her returns on Ebay.
“To be honest I don’t really like being told what to do so I am better at working for myself. I also love setting my own schedule and working when I want to. I want to be available to my kids when they need me and to go on vacations when I want to. My goals now are to start working towards retirement by building my business and putting money away so that I can live comfortably and enjoy my kids and someday grandkids.”
I sell around 10,000 to 12,000 units a month with gross average sales around $220,000 to $230,000.
A Few Things
“I just recently got married and we have 5 kids between the 2 of us. A 22 year old, 20 year old twins, a 9 year old, and a 7 year old. All girls except the 7 year old ( poor guy.) We enjoy camping and going on vacations to anywhere warm as we live in the frozen tundra of Michigan…lol”
What do you love about being a member of Scanner Monkey?
“I love all the great people! Everyone is so helpful and I know I can get an answer quick if I just ask. Not to mention Scanner Monkeys are a blast to hang out with.”
In a recent email to sellers, Amazon further refines the ecommerce role that they want to play in the marketplace.
“In the past, one unit of each ASIN in storage has been exempt from the twice-annual Long-Term Storage Fee. Effective with the February 15, 2017, Long-Term Storage Fee assessment, this exemption will end. A Long-Term Storage Fee will be assessed on all inventory that has been in a U.S. fulfillment center for six months or more. There are no additional changes to the Long-Term Storage Fee at this time, other than there will no longer be a single-unit exemption effective February 15, 2017.
You can, however, remove these units for free: Starting today, September 19, 2016, we will reimburse you for the return fee or disposal fee for one unit of every ASIN for which you file a removal order. This promotion applies to inventory in U.S. or Canada fulfillment centers and expires end of day October 14, 2016, after which time normal removal-order fees will apply.”
Amazon, as the “everything store” had an emphasis on the availability of, well, everything. In order to do this, they were willing to house and store a large variety of items provided by third party sellers so that a customer could look on Amazon for that obscure textbook, rare bra size or discontinued toy and have it shipped for free as part of their Prime subscriptions. With Amazon’s business growing exponentially, and warehouses filling as fast as they are built, this strategy is changing.
Amazon sellers have been adjusting to their further restrictions on warehouse storage for a while now. Amazon wants our inventory levels to be low enough so that we do not carry more than a 6 months supply of any product unless we are willing to pay a high storage fee. Until last week, sellers could keep 1 of any item in stock with no long term storage fees which allowed for the stocking of rare books and other hard to find items, this is no longer the case.
Now, the fee structure and communication that sellers are receiving is letting us know that Amazon wants to be the place for popular items. They want items that will sell in the next few months and that’s about it. It’s a mass business that is far more profitable and predictable overall for them but less welcoming to the treasure hunter or picker. These sellers stock items that may sell for hundreds of dollars but appeal to a very specific buyer who may not even look for this item for 8 or 15 months from when it is sent in. Source the rare book, prep it and send it in to Amazon and then as Ron Popeil said, “Set it and forget it”.
This business model is not one that is helping with Amazon’s new plans so they are discontinuing it. As a way to help sellers transition, at least, we can have these items returned to us for free until Oct. 14th 2016. This is actually very helpful. For those who stock thousands of books, having them returned for a fee of $.50 each or disposed of for $.15 each can really add up. It also means that the prime fulfilled rare book may be coming to an end.
Impact On The Individual Book And Other Long Term Item Seller
This cost of storage is now an issue so each item will have to be carefully evaluated to see if it is worth storing and selling via FBA (fulfilled by Amazon). The business model will have to be adjusted significantly and those with greater expertise will continue to succeed, perhaps even to a greater extent. When any business become harder, it means that those who are willing to do extra work can be rise to the top.
New Business Opportunities Arise
In online used clothing sales, there has been a rise of more customer focused niche sites such as Swap.com (see our blog post about that here) as well as Instragram and Facebook selling. The used clothing item, which had formerly been the domain of eBay, thrift stores and garage sales is now upscaling and diversifying as more and more customers look online and want a used product shopping experience that is seamless and enjoyable. There used to be a wide range of online book stores and used books sites that were gobbled up by Amazon and eBay such as Half.com. Currently there are used book sellers that do a huge business on Amazon with both FBA and MF sides to their businesses. They are large companies with warehouses and staffing and may be in a position to take further domination of this used book market with warehoused and shipped merchandise that is sourced by third party sellers. Sites that have not been able to get off the ground due to Amazon’s domination may now have a shot as over time, the selection of hard to find items goes down on this giant retailer. We may see the rise of more corporate online second hand stores that provide an Amazon style shopping experience for buyers and an outlet for the selling of millions of hard to find items.
Another sales opportunity for these hard to find books is to convert them to Createspace and Kindle e-books. There is a business model where authors and estates are contacted by a consultant and a revenue share is put in place. Out of print but in in demand books can be made available and accessible. Perhaps these hard to find books can even be sold more, if the price goes down because it’s a print on demand (POD) product. Are you the professional who knows enough to contact these people and work with them? For many authors or their descendants, understanding Amazon’s POD system is just not a priority so the knowledgeable book seller can switch to a role as a service provider.
Regardless of your plan to adapt, think hard about your inventory levels and take advantage of this free grace period from Amazon.
We’d love to hear what you think and how you will adapt to these new changes. Please comment below.
“Robert” is a humble seller. He quietly helps and supports others and never touts his own horn. I have had the privilege of knowing him for several years and he finally answered some questions on the condition of anonymity.
He has been selling online for 17 years and sells full time. He focuses entirely on selling online with no other streams of income. He currently sources primarily via wholesale and online arbitrage. He likes this business because does not enjoy the 9-5 life and has the goal of saving money for retirement as he’s already been living debt free for a long time.
Moo-Lah: He is on track to sell $1.7 million in 2016. (Yes, you read that right.) He says that his ROI varies and he mostly works solo except for a prep center that he uses to send in his inventory.
A Few Things: His fave foods are pizza and anything chocolate and he enjoys reading. He works hard, travels and keeps his nose to the grind stone.
What does he love about being a part of Scanner Monkey?
“I like the sense of community and sharing. 99% of the folks are genuinely nice people. I know I can turn to the members if I have concerns and I don’t mind helping others who may need it.”
Julie is a part time seller who squeezes in her successful business while she home schools her two kids
. She has been selling online since 2014 and sells mostly wholesale with a bit of arbitrage thrown in
. She is now working on her first private label product. She also earns a small amount from selling shirts on Merch by Amazon
and her husband has a full time job.
“I started Amazon because we had a tremendous amount of debt with no end in sight. As a stay-at-home mom, FBA was perfect. I just hoped to make an extra $500 a month to help pay it down. I never fathomed it would become what it has. I paid off all our debt (except the mortgage) in December 2015
. Our next goal is for my husband to quit his job in May 2017 by having a consistent monthly profit level for us to live comfortably and invest in our future.”
Her average sales are $35K per month.
A Few Things
“I love Jesus, Disneyland, homeschooling my 2 crazy kids, and running a local support group (with the help of lots of coffee)!”
What do you love about being a member of Scanner Monkey?
“I love the positivity, camaraderie, and wealth of information shared there. I wouldn’t be at this level in my business without it!”