Retail Arbitrage: Buy Low from Local Stores, Sell High Online

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GEORGIA, USA. 18th Nov, 2013. (Emily Rose Bennett/Staff).Zoomer, a robotic dog toy, made Walmart's Chosen By Kids toy list for t
Emily Rose Bennett/Zuma Press/Alamy
What would you do if you saw money just lying in the aisle of your local mall store or big-box retailer? And not a few coins or a dollar bill, but fives, tens or even some twenties? Would you take the time to bend down and pick them up -- or would you just continue shopping?

A silly question, but thanks to technology and a little work, people around the country are finding money at their favorite stores using something called retail arbitrage.

Don't let the Wall Street term "arbitrage" scare you: All it means is taking advantage of a price difference between two markets. With retail arbitrage, you buy items that are on sale for less at your local store than they're selling for online, and then resell them on the Web for a profit. And your partner is Amazon.com, the world's largest online retailer.

The Lesson of Zoomer

Let's look at a real-life example and how a retail arbitrager can take advantage of it. This past Christmas, my daughter really wanted a robot dog called Zoomer. Week after week, she talked about how cool the toy was, and never missed a chance to call me in to watch the ad for it on TV.

I assumed that there would be plenty of these toys at my local store and waited until the week before Christmas to start shopping. To my horror, there were no Zoomers. Apparently, I was the last to learn that Zoomer was one of the hottest items of the holiday season. I checked every store I could in Southern California, where I live, but all were sold out, in their actual stores and their online marketplaces, and they weren't expecting more to be available until after the first of the year

Panic set in. How could I face my daughter Zoomerless on Christmas morning, all because I had been a lazy dad? Fortunately, my wife came to the rescue. On a hunch, she called her sister who lives in Houston, who found one at a local Target and mailed it to us in the nick of time.

If I had been in that Houston Target and had seen that Zoomer, I could have bought it and listed it for sale on Amazon for three times the list price -- as a number of sellers did during then -- and it would have sold, making me a profit of $200.

An Amazon Account, a Phone and Some Research

But inefficiencies in supply and distribution don't just happen during holiday seasons -- they happen with all the time, with thousands of different products, and you can capitalize on them. All it takes is a free Amazon sellers account, a mobile phone, and a keen eye and understanding of what is in demand on its marketplace.

Once you find an item you think is a good candidate for arbitrage, you can type its SKU number into Amazon's site on your mobile device and you will see a real-time listing of the item's price, its sales rank, and how many of them are currently for sale on the site.

If the item is a good seller, and there is enough profit between what you can purchase it for and what it is selling on Amazon.com (AMZN) for (less packing and shipping), then you can arbitrage it.

Fulfillment by Amazon allows you to purchase an item and send it to Amazon -- using its highly discounted rates -- where it will store it for a small fee and take over shipping, customer service and returns. FBA allows those who want to make a living from retail arbitrage to purchase as much inventory as they want and not have to worry about storage, fulfillment or any of the other hassle that go along with owning a small business.

So next time you walk down the shopping aisle, drive by a garage sale or see a sign advertising a closeout sale in your neighborhood, remember, if you were using retail arbitrage, you might be able to turn those opportunities into cold, hard cash.

No man is an island, or even a peninsula, so I encourage your feedback in the comments below. And don't forget to pick up my book, "Trading: The Best of the Best -- Top Trading Tips for Our Time."

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JordanMalik.com

Arbitrage is a centuries-old practice that is 100% legal and it actually (in a perfect world) it moves the supply/demand curve toward what the true value of an item is (not what corporate suits deem the price should be). So haters in these comments thread, keep hating. Kudos to Brian Lund for a great article explaining how arbitrage works, 'to the masses' - Jordan Malik / http://JordanMalik.com

April 11 2014 at 5:33 PM Report abuse rate up rate down Reply
da.pro

Commenters - Please, please, please stay ignorant as I hear it is quite blissful. So if I lie to you and say it is EXACTLY like scalping you'll believe me? Also it is helpful if you would please forget everything you have ever knew about supply and demand. Thank you for assistance.

Great, now please hate away and be blissful. Ah bask in the glory....

Mr. Lund, I enjoyed your article, it is a great general overview.

April 10 2014 at 7:35 PM Report abuse rate up rate down Reply
aayalaam

Excellent idea. I think I'm going to quit my job so I can focus 100% on this retail arbitrage.

April 10 2014 at 10:25 AM Report abuse rate up rate down Reply
klw4919

Interesting. How does this differ from the disgusting practice of ticket scalping? Just curious.

April 10 2014 at 10:24 AM Report abuse rate up rate down Reply
dencuddy

We're supposed to take investment lessons from someone who shops for Christmas at the last minute and is shocked that he can't buy what he wants?

April 10 2014 at 7:58 AM Report abuse rate up rate down Reply
HonknDodge

People who would pay more for an item that a SCALPER is selling at an inflated price are just plain nuts.

April 10 2014 at 7:49 AM Report abuse rate up rate down Reply