Back in my day (way back in 2012) the rapper Macklemore taught us all about “popping tags” in his hit song “Thrift Shop”. Retail Arbitrage is a form of that same bargain shopping that Macklemore was talking about, and it is almost as much fun to say as “popping tags”.
All jokes aside devoted reader, this is a strategy that some people use to make active/passive income. Here’s how it works:
- Establish a niche product that you want to specialize in. By specializing, you are able to learn more about the items you are interested in. A couple potential niches examples are listed below:
- Toys (anything from Pokémon cards to special editions of Monopoly…no joke, both these things can be hot items because they are collectable.)
- Items that are on clearance
- Install an app on your phone (like the Amazon Seller App) to be able to scan barcodes in order to see what that item is currently selling for on the internet (Amazon, eBay, etc.).
- Travel to different retail locations near you (like Walmart, Target, etc.) and scan items to see what they are selling for on the internet. You are trying to find items in your part of the world that someone else in the world cannot find, and sell that to them.
- Buy the items that are a good deal (most sources say that you are looking for 50% profit).
- List them on the internet (Amazon, eBay etc.).
- Store them somewhere (your house, a fulfillment center, etc.)
- When you receive an order, fulfill that order.
A couple quick dangers of doing this are listed below:
- If you buy items, and then can’t sell them, your capital is tied up, and you can potentially lose money.
- Especially if it is a new item, companies can make more of it (increasing supply) to meet the demand. Typically, increased supply means less demand, and lower prices.
- You are probably going to take up a lot of space with these purchases.
- It is a ton of time to drive around to different retail locations, scan items, list them online, and fulfill orders.
The big question is “Is the Juice Worth the Squeeze?” For me, the answer is no. Many retail locations are far away from my home, and I do not have the space in my house to be able to stockpile items until someone buys them (and I do not want to pay for a warehouse to hold the items).
I have included a link to a website here for some more information about retail arbitrage, if it is something you would like to learn more about.