In light of the recent discussions over the future of RA [see recent blog post by Cynthia Stine, “Is Arbitrage Dead?“], I thought I would share some thoughts . For those of you who may not know much about me, I have been selling on Amazon full time for a little over 4 years. During that time I have sold close to $3 million, 99% from RA. My business hasn’t really grown as I sold my first million in 18 months and have averaged around $600k a year. As those with me from the beginning know, I have diversified across RA going from Health and Beauty, to Grocery, then toys and now Clothing and Shoes. This has been my way to adjust to the adversities I have encountered. Others have grown their business and many have moved into Wholesale, Liquidation and Private Label. I have written a couple of books and started many others. My latest book will cover my experience from start to finish as I anticipate my voluntary extinction at the end of this year.
I drafted up a chart to explain how I feel about the different modalities of sourcing for Amazon and offer it up here for the Scanner Monkey tribe. The chart is based on Maslow’s Hierarchy of Needs:
Basically in a nutshell, Retail Arbitrage/Thrifting are the equivalent level of Freshman year in college. A necessary component.
For me I am kind of like a black and white photography professor. I teach you to get proper lighting with F-stops and how to pick the right angle, developing film in a dark room etc. I leave the digital and advanced photography to others. Does that mean that if you are going to be a digital photographer or work in animation or another form of videography that you shouldn’t take Introduction to Photography. No, I think it is very important, just as I think it is important for a Neuro Surgeon to have taken Anatomy in lower levels of their education.
Are there photographers who still do black and white photography and develop their own film? Yes, and many are very successful, sought after and very wealthy. However, the trend is leaning towards other mediums and sadly so seems to be the case with Amazon.
“So John, where does that leave us?” For me, business as usual. I am trying to grow my business a little and have involved family in that endeavor. Will I stop sourcing RA because of the possibility that they will not accept receipts from retail stores. Not at this time. Do I see this as another shot fired across the bow? Most definitely. Do I recommend RA as a way to start a business selling on Amazon? Yes! To me it is definitely the right path. What you learn, the product knowledge you gain, will only make you more prepared to be successful at the other levels.
Ok T-rex, like you I am a hard charging RA ground pounder who is selling over $300k a year and just quit my job, what should I do? That, of course, is up to your particular circumstances but as Cynthia’s blog post reads, Amazon ‘may’ take steps that ‘if’ you get inauthentic claims, you will not be able to use retail receipts to defend yourself. What is new? Amazon has been unreasonable in the past and will be so in the future. I have said on numerous occasions that selling on Amazon is basically gambling. To me, a new dealer has just sat down at the table and there are signs he/she may have marked the deck. Complaining to management won’t help, he is management. Do I run crying into the night? Did I when they suspended me two years ago? No, I buckle down, pay attention and try to play by the new rules.
So in summary, RA as a method of sourcing for FBA, may be going by the wayside. Makes no sense to me, but hey, Amazon is a self-serving entity and they will do what they will do. Many are fearful. Don’t be, but be cautious. If you were planning on opening a warehouse next month and hiring five people to do RA for Q4, you may want to reconsider. Growth at this time, may not be the best use of your money. Notice I said ‘may’. If I receive an e-mail or an official policy notification from Amazon that leads me to believe they don’t want my stuff I will slowly move in to other modalities. If I get suspended or see many others get suspended because of Amazon’s new policy I will focus on leaving Amazon totally. Any company that bites the hand of the person that is feeding it which is exactly what would be happening, does not deserve my food.
I am not fearful of new developments, I am cautious. To me the real concern should be for those who are selling non-exclusive wholesale. We have seen how profits have diminished when supply outpaces demand. If large RA sellers start putting their sourcing budget in to wholesale, I personally think that will diminish the returns in that arena. As for Private Label, sourcing from China is like playing Roulette with a .38 revolver. In the past you had one bullet out of five. If Trump is elected, you may see different importation regulations that put a hiatus on that endeavor. (Second Bullet) Also isn’t the whole reason for the discussion counterfeits ? where do they come from? (Third Bullet) Did John just say that! Creating local, American made Private Label items to me would be the best solution at this time.
Once again, this is all opinion and of course may differ from yours. I offer it simply as someone who has seen the ups and downs of business. I wish everyone a most prosperous Q4!
~ John Groleau (aka “T-Rex”)
We recently asked our Scanner Monkey tribe to share their favorite Retail Arbitrage (RA) tips and strategies, and boy did they deliver! We received over 50 comments from newbies and veterans alike with actionable advice that runs the gamut from planning the day, to sourcing product, to developing relationships with store personnel.
The following is a compilation of the 25 best and most LIKED tips shared in a post in our Scanner Monkey Facebook group:
- Understand that if you want to learn a new category, or a new store, it’s going to take some time. It’s an investment, and it’s worth it. I see so many new sellers quit because they spend hours in a store and only find one item. Whenever you are looking at a new store or category (or just new to the biz) your time sourcing should be counted as learning. Any money you make is bonus. Probably for the first 5-10 hours this is reasonable. – Jennifer U.
- Balance learning with action. I see a lot of people not utilizing the availability of learning tools, and losing lots of money because they are doing what they know and not learning how to do better. But I also see a lot of people who are constantly just trying to learn something new. Learn RA, try it for a month, get frustrated. Learn Wholesale, try it for a month, get frustrated. Class after class after class, spending tons of money but never spending the actual time in the field to really hone any one skill. Don’t do either of those things. – Jennifer U.
- Have a plan. Don’t drive around willy nilly scanning random things here and there. Pick a store, pick a section and scan it from top to bottom before giving up. You’re going to struggle to find great product if you cherry pick what you think will sell. – Amy F.
- Before doing anything figure out your business plan. By that I mean figure out the numbers that you need to make enough money to accomplish your mission. For example, if you are in the building stage and have small amount of capital, maximize that capital on high velocity, high ROI products, and once you are out of capital use the resources you have left which is usually time to elevate your skill set so you can further maximize your capital once it begins to really flow. When I ran out of capital I still scanned entire stores with no intention of buying (hated finding gem) because I couldn’t, but that led to me developing crazy recall and that coupled with learning the retail cycles is one of the biggest factors for my success. – Derrick F.
- Buy things you don’t use personally. I’m a dude, and I’m an awesome buyer of purses, makeup, women’s shoes, high end health and beauty, etc etc. If you buy things you use, your personal passions will override market data. If you buy things you don’t use you enter the Zen space of only focusing on barcodes. – Andrew A.
- (1) Get yourself a KDC scanner. Not only will it speed up your business. It stores your Barcodes from the day. Which you can go back to the computer and upload into Scanner Monkeys Scansheet software. Then when you are planning to go out and if you have already scan an entire isle (which i have the entire Target grocery departments UPC) you can just pick up what is selling great at that time. (2) Scan everything in the Beginning. Then when you are up and running you will know what is selling and what is not. Plus you will be able to know as soon as something new is on the market. (3) Get into a mastermind group with people that in different parts of the country then you are in and have the same drive as you.. I am apart of RA mastermind group and we share stuff at the stores that I would over look all the time. Team work can payoff. – Dean J.
- Since focusing my business on RA primarily in 2015 I’ve formed a team that has their own stores to hit so they don’t cross paths. Over the last year each shopper would spend $1-$2k per day. We recently started experimenting with 2-3 man teams. Rather than 1 person going out and spending $1-$2k we have 2-3 people cover the store which enables us to cover multiple stores in a day and spend $4k+ rather than $1k-$2k. The additional cost of the 1-2 employees is $100-$200/day. The extra $2k per day in spending should net us an extra $1k+ per day in profit. Would you trade $100-$200 in someone else’s time for an extra $1k per day? – Brian F.
- If you find a great sidewalk sale, semi-annual clearance event, etc, open up your calendar, fast forward 6 or 12 months, add an appointment to that future date to call that store & check back to see if they have that same sale going on again. – Elizabeth T.
- Subscribe to a sourcing list, esp. in the beginning. You may not find the the actual items on the list but you’ll get a through schooling in what brands are worth checking. You’ll also learn to scout items out of your comfort zone. – Guusje M.
- Be flexible and versatile, I have gone from primarily Health and Beauty to grocery then toys and now shoes and clothing. Open your horizons. Once you find a niche become an expert then look for new things. When sourcing, look for what you know first, then scan new things to add to your knowledge base. Build relationships. Find experts and buy them lunch and listen to their wisdom. Doing that I went from zero to 1/4 million in shoe sales in 14 months. And lastly, don’t give up, this is a marathon not a sprint.- John G.
- Stock up on discounted gift cards from the stores you shop often to increase your margins. Also, use credit cards to rack up miles and cash back on your inventory buys. Always pay the cards off in full and never pay interest. – Alexander A.
- Remember to track your mileage deductions. I like MileIQ because it uses your phone’s movement to automatically start/stop trips. At the end of the day you just go through each trip and swipe right for business, left for personal. – Dang L.
- When you are planning a long RA day, pack a cooler of healthy food. Eat healthy and you will have more energy. – Karin B.
- Stretch! Literally and figuratively. RA can wear on the body, and getting stuck in a product rut can wear on your business. Go down that aisle you always avoid, go to that store you always drive past. – Scott M.
- OUTSOURCE!!! Find something good at a store? Hire someone to hit all of the stores in your area and grab those items for you. You can also hire someone hourly to scan everything in the [enter favorite product category] aisles. – Stephen S.
- In the beginning go to smaller stores, and gravitate to CLEARANCE aisles. Larger stores like Walmart & Target, you can spend days and not find a lot of inventory and get frustrated. Get the “Finding Discount Stores” app on iTunes (not available on Android unfortunately). Only 99cents and a great app to find stores around you, especially useful when you are traveling or in another town. – Bob W.
- Make sure you stay aware of current business news! With a lot of companies struggling with pending bankruptcies/store closings, this can lead to massive buying opportunities. Sport Chalet (West Coast only) and Sports Authority in the last few months have led to massive hauls for us with pennies on the dollar. Befriend the Purchasing Manager of the liquidation company, and store managers and get their contact info. – Lou B.
- Look for store exclusives (ie Target exclusive, TRU exclusive). They generally are in more limited supply, and can command a higher price point. Also, look for regional & local brands in your stores – aka Regional Arbitrage. Once someone becomes “hooked” on a particular brand of coffee (or whatever) that they can only get in a certain part of the country, once they move elsewhere they will pay a premium for that “taste of home”. – Jay Bayne
- Have a plan. Remember that you’ll be coming back to this store again. Be intentional about relationships and building them because the good ones TAKE TIME. Take a notebook and write down the manager’s name. You may think you’ll remember, but after 15 different Toys R Us stores, you’re bound to forget. See a stack of potentially awesome items in the overhead? Make a note to call the store in two weeks to see if the price has dropped and they still have them. – Chris Green [A special thanks to Chris for allowing us to use the front cover shot of his Retail Arbitrage book in this post 🙂 ].
- When scanning shoes and sneakers scan all sizes available. Often times some sizes are not in the catalog but others are so you may miss an opportunity if you only scan a few sizes. – Marc P.
- When sourcing shoes be sure the box has the matching size as the label and they’re the same. I’ve found a size 9 and the other shoe was a size 10 in the same box. – Molly G.
- RA is its own animal. It’s not just reading charts and assessing risk. There is an element of the unknown with RA. What is at one store may not be at another. What one manager might allow, another will not. Etc. Planning is crucial. It just is. One must understand certain questions might come up and have responses for said questions. “What are you going to do with all this stuff?” “How much do you sell this for?” “What are you doing with that thing (scanner)?” You need to think things thru so you know how to respond intelligently and politely. You also must keep in mind that your actions, as an Amazon seller, DO impact ALL future interactions you will have with the store and others will have with the store. Tread nicely! – Robin J.
- If you’re ever in a store, especially a Walmart, and you’re getting terrible or no cell service use their wifi. This happened to me on my recent drive back from Los Angeles. I was in a remote WM that had some decent clearance, but no service. Then I remembered about their wifi. At first I thought it wasn’t going to work, but I waited and a login page come up. I just clicked to accept the terms and was good to go. Found a cart full of profitable items that I would have missed otherwise. Not sure what other stores have free wifi, but worth checking out if necessary. – Jeff H.
- When developing relationships in your stores…don’t stop with the managers. If you frequently shop in the same stores try and checkout using the same cashier (but only if they are nice). IF you are friendly and courteous, those cashiers will go to bat for you if you need to divide up your order into multiple transactions (to avoid the limit __ buys), or they may even have some “secret coupons” behind the counter. – Jay B.
- You NEED a quick, easy way to take notes so you don’t forget. Reprice that. Update that listing. Make this item I am buying a 2 pack. etc. I use Evernote, but find what works for you. – Scott M.
Do you have some Retail Arbitrage tips & strategies you would like to share? We would love it if you posted them in the comments below!
Happy hunting everyone!