I’ve been selling on Amazon for several years now, and one lingering question has been circulating FBA seller groups that entire time:
Is retail arbitrage dead?
If you do a Google search for that question, you will find info related to the topic as far back as 2013. I’m writing this post in 2018, so you can see the topic has been discussed for at least half a decade.
And I get it. New sellers are wanting to try out retail arbitrage (or RA) to see if they can make money from the process of buying items for a low price at a retail store to resell them for a profit on Amazon – but they’re concerned about starting an FBA business if RA is dead. No one wants to invest time, money, or effort into a business that is doomed to fail.
Why I Still Do RA
My wife Rebecca and I are currently using several sourcing methods to find inventory for our FBA business. Rebecca does all of our online arbitrage (OA), and I focus on wholesale and RA sourcing. Our percentage of wholesale sourcing has increased each year for a few years now, but I still like to do RA because it continues to be profitable for us.
At this point, I spend one or two full days a month doing RA sourcing throughout Q1, Q2, and Q3, but when Q4 rolls around I dramatically increase my RA sourcing. Q4 (fourth quarter, or October, November, and December) is an amazing time of the year for RA, and I still love going out into stores and finding awesome treasures to resell.
The Myth that RA is Dead – Plus My Reasons Why it is Still Alive
For the rest of this post, I want to talk about the top 4 reasons I hear people say why they think RA is dead, along with the reasons why I disagree. Now, each of the points below is a valid concern, but I hope to bring clarity and truth to why those concerns do not need to stop you from doing RA sourcing.
1. Increased competition
One of the fundamental concerns for FBA sellers is that more and more sellers are joining the platform and making it harder to sell for a profit. Just about every day of the year you see new sellers joining Facebook groups for resellers, and it seems like the FBA platform is oversaturated. It can be easy to get caught up in thinking there’s too much competition in RA to make it worthwhile as a business.
This type of worry over too much competition has been going on the entire time I have been selling on Amazon. In fact, when Chris Green released his pivotal book Retail Arbitrage, many Amazon sellers bemoaned the fact that he let out a big secret and there would be an influx of sellers who would destroy FBA for everyone else.
But guess what…that hasn’t happened! Here we are several years later, and RA is still a viable way to make thousands of dollars of sales each month if you know where and how to source. Yes, it is true that new sellers are joining Amazon every day, but it is also true that most of those sellers won’t stay the course. They find out that it actually takes work to do RA, and they quit. Those new sellers are not truly your competition.
Another reason I don’t worry about an increase in sellers is the corresponding increase in products in the Amazon catalog. For example, in 2013 the Home & Kitchen category had 18 million items; by 2018 it has grown to 86 million items. In 2013 the Toys & Games category had 1.7 million items, but now it is up to more than 6 million items. As you can see, there are more than enough products out there for all of us to sell.
2. “Tanking” prices
It happens to most of us at one time or another. We find a great RA product to sell with an awesome rank and a great ROI (return on investment), but the next thing we know the price has “tanked.”
Now, I happen to disagree with the concept of “tanking” prices. A price doesn’t tank; it just drops as a result of supply and demand. A lot of times sellers will complain about tanking prices in January, after the Q4 selling rush has ended. In December many of the lower priced sellers sell out of their inventory, leaving higher priced items as the only ones in stock. If you price your own RA inventory to match those high prices but don’t sell quickly enough, the lower priced sellers will eventually come back in stock, and it will look like the prices have tanked.
There’s a simple workaround to know if a price is likely to tank in the future: use price and sales rank history to make buying decisions, rather than looking only at current price and sales rank. You can find this pivotal data online (or through my fave RA sourcing app, Scoutify) with Keepa. If you are interested in learning more about how to read Keepa graphs, check out my tutorial: How to Read and Understand Keepa Graphs
3. Amazon seller restrictions
Another common concern among FBA sellers who typically do RA sourcing is the possibility of Amazon restrictions for categories, brands, or even specific ASINs.
I’m going to keep this section of the blog post short because I have already covered the topic more extensively in my video on how to deal with Amazon restrictions. In that video I will walk you through how to eventually get approval in almost any Amazon category, if you’re willing to put in the time to make it happen.
Bottom line: If you are out in the stores doing RA sourcing and find items you are not approved to sell on Amazon, it doesn’t have to be a dead end. You can get approved for gated categories. You can get approved for some restricted brands. You can even get approval for individual restricted ASINs. Sometimes you can get instant approval, even while you’re standing there in the store aisle! Other times it takes some patience, but over time you will be able to sell more and more of the items that may currently be restricted to you as a seller.
4. IP and copyright infringement
Lastly, many sellers are concerned that doing RA sourcing will lead to intellectual property (IP) or copyright infringement notices. These infringement notices may or may not come from the legitimate brand owner, stating that you as a seller are no longer allowed to sell a particular item or brand on Amazon.
If you receive these types of notices, I agree that it is both frightening and frustrating, not to mention that resolving the problem can be a nuisance. The problem is not extremely common, however, and even when it does happen, there are ways to deal with it.
One thing you should understand is that many times these “infringement notices” are sent out by a competitive seller, not by the actual brand owner or representative. It’s sad to say, but there are sellers out there who would stop at almost nothing to harm their competition. But it’s hard to know at first if the IP notice is legit or fake, so you need to handle every notice carefully.
You should always contact Amazon to check with Seller Central to make sure you are not restricted to sell the item or brand in question. If Amazon does not restrict you, you technically can still sell the item. However, you still want to respond to any IP notice by stating that you are willing to work with the brand owner to stop selling the item IF they work with Amazon to go through the proper restriction channels. Another way you can approach the situation is to ask for a wholesale account with the brand owner so that you can become an approved reseller. For more details on what to do if/when you get notified about a possible IP or copyright infringement, click here.
I hope I’ve been able to show you through this post that RA is not dead. There are still plenty of great opportunities out there for RA sourcing and plenty of ways to deal with the common problems that arise with RA. Retail arbitrage can be a lucrative way to bring in some great profits through an FBA business, if you are willing to put in the time and effort to learn the right ways to do it.
Now it’s time for us to hear from you! Have you experienced dead ends in trying to build up FBA inventory through RA sourcing? Or do you love RA and can’t imagine why anyone would declare it dead? We would love to hear from you in the comments.
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In some Facebook group it has been said that sometimes IP infringement and copyright claims come from legit brands owners who are not willing to work with Amazon and do nasty stuff like filing above claims or item inauthentic claims which get sellers accounts suspended. In such cases seller support should not be relied upon because in the end Amazon is known to shoot first and ask later.
Amazon only suspends seller accounts for frequent and consistent IP claims, not just because of a few claims over time. In most cases, the only thing Amazon will do at first is to close your ability to sell that item and restrict that ASIN (or ASINs if you’re selling multiple items from that brand). That’s why I suggest reaching out to that brand to try and become an authorized reseller. Amazon does not automatically suspend your account, and I’ve read that IP claims fall off your metrics after 6 months, so if you are only experiencing this situation once or twice a year, you should be ok. Are the exceptions to this, yes… and you want to be careful, but an occasional IP claim is nothing to overly worry about. Plus, if you do get suspended (again, only after multiple and consistent violations) then you have the emails between you and seller central that can help you get reinstated. Any business you run will have risk, and this is one of the risks you take with RA, but again, it’s super rare and not something worth changing my business model, in my opinion.
I would add “inauthentic” as a primary argument against RA. If a customer says your product is inauthentic and Amazon questions your for an invoice, then a retail receipt may or may not cut it. Many sellers have been suspended over this. To me, this is really the primary argument against RA. If you are doing it, I would say keep inventory VERY lean so that if you get shut down, you don’t lose too much money in unsold inventory.
Completely agree!!
I agree with Cordelia. I received 3 inauthentic complaints over 20,000 transactions in six months and was suspended. This has happened to me a couple of times and each time it took months to get my account back. My receipts were all for established high end retail stores – no liquidation, no secondary stores like TJ Maxx, Ross etc. It took months to get my account back with multiple escalations. Retail receipts just don’t work well to fight this. I have 99% positive feedback over my 5 years of selling and my account is otherwise pristine. I still do RA because that is what I know, but just bought the Wholesale Formula and am putting my efforts into trying to build something there. I sold 1.4 million last year and it’s a bit terrifying to have so much money turning over with the reality of suspension hanging over your head constantly.
I know instances like you mentioned happen, and it’s always a good idea to have multiple stream of income once you get one stream mastered. I also know that each circumstance is different for everyone. Some get suspended and get reinstated in a few days, while others it takes a really long time.
It all depends on how active you are in creating and submitting your reinstatement action plan and how responsive the Amazon seller rep is. So it really is a risk to consider when molding your business model.
All businesses have some form of risk and everyone needs to weigh each risk according to your situation. Decide for yourself how much you’re willing to risk in comparison to the reward you’ll receive.
This is also why it’s a good idea to have an emergency fund in case Amazon is your only source of income (actually an emergency find is wise no matter what your situation is).
But the point of this blog was to say that RA is not dead and that most worries about why it might be dead are only extreme and rare cases. I feel like it’s the same as with airplane crashes – we always hear about the planes that crash and never the 99.9999% of those who do not. Is it risky to fly? Yes. Is it risky to do RA? Yes. But if you’re running your business with integrity, it’s super rare for you to experience a “suspension” and if you do, you can always work on getting reinstated. It seems you have experiences the super rare suspension, and for that, I’m super sorry for what you had to go through. I know if I were ever suspended, I’d hire professional help (eGrowth Partners) in a heartbeat to try and fast forward the reinstatement.
I think finding new inventory opportunities with The Wholesale Formula is a great idea. I wish you all the best with that – as I’ve found success with their course as well.
Bottom line is that RA is not dead and is a glorious source of inventory. Personally, I’ve weighed the risks and believe RA to be worth it.
I completely agree, and you are right – RA is not dead, which is why I still do it, even with dealing with suspensions. It is pretty awesome actually and absolutely worth the risk. I purchase like crazy in Q4 too, then I hold my breath while I sell through it! My category is tough and there is a lot of volume, so there is more potential for this problem. But even with that, I am very happy with my business. I’ve learned to adapt, get better, improve many aspects of my business and that helps. RA will always be part of my business because I love it. I just see the need to branch out and make it more sustainable, and I feel adding wholesale will help. I have used Egrowth Partners and Cynthia Stine got me reinstated the last time. Fear of suspension is no reason to not sell, but a powerful motivator to adjust your business (practices, sourcing, systems) to adapt and change so you can grow, profit and become more sustainable. Suspension is not the end of the world, just no fun and a hassle to work through. I also purchased Wholesale Formula through your link, am plowing through the material and am excited to go to the live event in April! Really appreciate your insight and info, btw.
Thank you for your kind words… and for your words of wisdom about the outlook of RA. It sounds like you have a good sense of the risk and reward… as well as the wisdom to be sure and spread out your risk. Well done.
I started doing retail arbitrage this 4th qtr. Sent in $750 worth of product that was selling fast. Sold everything immediately. But came out negative owing Amazon money because they took everything in fees. Ugh! 🙁
I think you need a better understanding of how the fees on Amazon work. You should be using an app that tells you how much you’ll profit from a product if it sells minus the fees. Scoutify does that automatically and even includes inbound shipping costs.
Great article! It’s reassuring to read this especially coming from someone who has so much experience with RA and so many other aspects of FBA! I’m still relatively new to FBA, but I love RA! Generally speaking, there are no quantity limits when buying in a store as there are sometimes when purchasing online. Also, there are items in stores that may not be available online, which can reduce your competition. The only concern that has been looming in my mind is the closing of so many big retail stores nationwide. Years from now, I hope we all have access to a wide selection of retail stores around us. I know this is not an immediate concern to worry about, but it does cross my mind.
It’s funny, but most of the stores that are closing over the past few years are not the stores I usually source for inventory at… So far, it’s not affected my sourcing opportunities. But I hear what you’re saying and I would think it would be a very long time before the RA opportunity begins to dry up. But it’s good to think ahead on how you may transition to add other steams of income besides RA… maybe with OA, wholesale, etc.
We started with RA and loved it but stopped over a year ago because so much was becoming restricted and storage fees increased. We still had a couple hundred items there that were selling off little by little. Then the day before Black Friday 2017, they suspended us out of the blue for “inauthenticity,” for three Sony products we’d sold in used condition in 2016. There were no actual complaints filed; it is apparently about brand restrictions.
We’ve filed multiple appeals, finally resorting to using the jeff@ email address, and STILL have gotten no response. The fact that Sony was not brand restricted at the time and that we weren’t selling as new anyway is not getting through to them.
We are incredibly disheartened by this and frustrated that you can get permanently suspended without doing anything wrong, as well as by the fact that nobody there seems to be able to read with comprehension. We conducted our business honestly and followed the rules. The scammers and hijackers continue to run rampant, and honest sellers are suspended for no reason. It’s ridiculous.
I’m glad it’s still working for you guys. We learned a lot from your blog while we were doing RA.
Have you reached out to eGrowth Partners to see about getting your Account reinstated? Amazon does not suspend sellers for selling brand restricted items before they become restricted. There must be another reason. As for the “too many items are restricted” complaint, did you ever apply to sell those restricted items. The longer you’ve been selling, the more categories and brands open up to new sellers.
We have been getting help from someone who has helped others get their accounts back. He’s had only one true failure but I think we’re about to become his second, LOL. I’ll check out eGrowth Partners, thank you.
No, we didn’t (and don’t) have the money or the sources to apply for those restricted brands. We’re focusing now on print-on-demand items, although we’ll have to do it without the Amazon platform, which definitely makes it tougher but not impossible.
If it wasn’t about Sony being restricted and it wasn’t about actual inauthentic complaints, we have no idea what it could be. Which makes it next to impossible to draft an appeal that will work because we don’t even know what we supposedly did wrong.
I’ve talked to Seller Support on the phone twice. One said it was because we owed money (we didn’t), and the other had no additional information to offer, and in fact, when I asked if I had reached Seller Support, he said “I think so”…?!?!?!
So it’s not hard for me to believe that Amazon would suspend due to Sony becoming restricted later (maybe a bot found our listings) because nobody seems to know what in the heck is going on, even those who work for Amazon. And again, those sales took place a year before the suspension!
I’m sorry for filling your comment section with our negative experience in RA, but we’re at the end of our rope with this. It’s made one thing crystal clear, though; don’t put all your eggs in Amazon’s basket, because the basket is broken. Fortunately, we had already been developing some other side hustles that will hopefully make up for the loss of 80% of our income due to this suspension.
If you have further ideas on what the problem could be, I’m all ears. 🙂
Laura, I’m so sorry that you’re going through this and that you have no info from Amazon on how to best move forward. I’m also sorry that you’re experiencing something that most people don’t have to deal with. It’s not fair and makes no sense. It looks like you’re one of the rare exceptions to the rule, and for that, I sympathize with you. I’m glad you see that it’s always wise to make sure you have multiple income streams, and I wish you all the best with that.
Thank you, Stephen. Best wishes going forward to you as well. 🙂
Hi Stephen
Are you able to write a post in which you state the exact criteria to look for in a product when doing RA
For example, weights, price points, categories etc
Yes! Right here: https://www.fulltimefba.com/find-profitable-inventory-amazon-fba-sourcing/
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Interested in RA. However the products I want to sell are home décor items sourced from department stores and these products tend not to have bar codes attached example throw pillows or floral arrangements etc. How do you get around that since a code is needed to list on Amazon?
If there is no UPC barcode, then you can do a keyword search on Amazon to see if those items are selling already, and then grab the ASIN (Amazon Standard Identification Number) and use that to list the item on Amazon.
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Hi Stephen,
I just wanted to update you and everyone regarding my experience with RA. Just to give a quick context, I’ve been selling for 5 years, started with RA and now have wholesale accounts as well as continuing with RA. We sell between 2 and 3 million/year. I have been through 5 (or more ?) suspensions for inauthentic, IP, etc. I have represented myself at times and hired EGrowth Partners a couple of times. Sometimes my account has been down for 3 months! The best lesson I’ve learned is you MUST learn how to mitigate your risk by learning all you can from each mistake (even if it is not a mistake), and adjusting your business to reduce risk. RA is absolutely not dead and is full of possibility and profit, but you must have great receipts and stay away from problem brands. I beat my head against the wall so many times with good receipts that Amazon still was not accepting. Now I only do business with stores that have great receipts that can be emailed to me and have my name, account number etc right on them. They are always from good stores that are authorized distributors. Also, always represent everything to Amazon the second you get a complaint. Great receipts and an appeal that shows you understand how you got the complaint and how you are adjusting your business to reduce or eliminate complaints (even if it is impossible) is what they want to see. Also, adding wholesale has helped and really grown my business. Product can just be re-ordered instead of always looking for the next deal. Time spent creating listing pages and driving traffic has a more long-lasting impact. It is easier to forecast and stay in stock all the time, but the margin is smaller. I have found the combination of RA and wholesale has been a great fit for us. I really want to encourage all of you who may be discouraged with RA that if you just keep with it, and keep a teachable attitude, you really learn along the way. Earn on I struggled with anger and frustration trying to manage my business and all the problems on Amazon, but you simply cannot get caught up with or worry about what is “fair”. Be ready to adjust, learn and pivot and you can build a great side or full time business. I have way more complaints to address now with selling a higher volume and Amazon’s new tools, but I CAN address them and have managed to stay out of suspension for a long time now. You learn how to get rid of things that have a higher potential for problem and grow things that don’t. You learn how to address Amazon’s teams and adjust things because they are always changing. If you want to be successful on Amazon, you have to know that this is how it is, but if you can accept that there is great reward!!
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