Inside Online Arbitrage
Ever since the pandemic has changed the way we live and work, small business owners have been looking for innovative solutions to stay profitable. Many Amazon sellers have always sourced their inventory using retail arbitrage in brick and mortar stores. If you’ve never sourced online or want to know more about it, you’re in the right place!
Like traditional retail arbitrage, sourcing online has its pros and cons. Before you decide if it’s right for you, here’s what you need to consider.
There are many advantages to sourcing online, especially in the time of COVID. The obvious one is the fact that by sourcing from home you’re automatically socially distancing yourself, and there’s no need for a mask or other safety precautions.
Sourcing online saves you gas money, mileage, and wear and tear on your vehicle.
What’s better than finding profitable inventory to sell? Doing it in your pajamas! Sourcing online gives you the freedom and flexibility to shop at your leisure without regard to weather conditions, store hours, or distance. Throw in the fact that everything gets delivered right to your door, and you’ve got a perfect storm of opportunity!
Nearly every retailer which has both online sales and brick and mortar stores offer certain products exclusive to their websites. By sourcing online, you have the advantage of getting your hands on profitable inventory that you just can’t find in the stores.
But with the good of course, comes the not so good. Here’s what you need to know about the not-so-bright side of online sourcing.
Bait and Switch?
How many times have you purchased something online only to find the real thing doesn’t meet your expectations? Pictures (and lighting and camera angles) can often be deceiving. Many times you’ll find color and consistency variations in products that aren’t always apparent from the photographs.
In the good old days (before COVID), shipping times were usually pretty reliable. You could place orders almost anywhere with full confidence that you would receive the package when you actually expected it. However, with many people falling sick, losing their jobs, and interruptions in the chain of supply everywhere, shipping delays have become the norm rather than the exception. Take this into account when you place any orders for inventory and try to give yourself plenty of lead time to stock up.
This is a potential risk you take any time you order online. Once you place your order, your product is in the hands of the warehouse and shipping partner, and as we all know, things can happen while a package is in transit. If you receive damaged goods, you have to go through the entire process of returning the item and either getting a refund or a replacement. Some retailers will allow you to return damaged items to their brick and mortar locations. Others may not or may not even have physical locations. In that case it’s up to you to repackage and ship back the damaged items.
Profit margins can potentially be lower when you source online, especially when you factor in shipping costs. There may also be higher taxes than in your state depending on where the item ships from. Be aware of what state taxes may apply when sourcing.
Tools and Tips
There is an infinite number of retailers to source from online. If you’re looking for general, readily available goods, here are some of the best retailers to buy from:
If you’re looking for goods that are a little more unique, you can try retailers like HomeGoods and Christmas Tree Shops and That! Bear in mind, however, that once these retailers sell out of a product, you may never see that item again as they constantly rotate their inventory.
No matter where you source from, always check the sale and clearance items and look for online coupons for the retailer.
How InventoryLab Can Help
If you’re already using IL, you already know that our web-based research tool Scout can help you see category, rank, and fee details about a product to help you make profitable purchasing decisions. If you’re not an IL subscriber, you can sign up here for a free 30-day trial!
There is no shortage of options when it comes to online sourcing. If you’re considering online arbitrage for the first time, be sure to weigh the pros and cons to determine if it’s the right choice for you and your business.