This question keeps coming up in our Facebook Groups in regards to buying online or in stores and then reselling on Amazon FBA. Amazon seems to be moving towards having fewer high-quality sellers. They are now making it more difficult for new sellers to get started. There are three trends that are contributing to the problem and raising concerns.
The three trends that are making online arbitrage harder
Too many sellers on Amazon
1. More and more people are selling on Amazon. FBA became a ‘thing’ a couple of years ago. This meant that people looking to make money online or quit their job would often find ‘Amazon FBA’ when searching for online business ideas. As a result of this, there has been a huge influx of new sellers making things more competitive. Some of these sellers will price incorrectly not taking into account Amazon fees and therefore are impossible to compete with. It is hard to gauge whether this trend is tailing off yet.
There is also an influx of Chinese sellers and people resident in other countries using FBA to sell in the US, UK or European Amazon markets.
Brand Gating and restrictions
2. More and more brands are being gated or restricted. This is increasing rapidly and looks set to continue throughout this year. This means there are fewer products you can safely buy and sell on the Amazon platform. This results in more competition over the products that are still available.
3. Due to the huge increase in people doing online and retail arbitrage retailers are starting to realise this is a problem. Some are now stopping people buying in bulk for toys and other products. This makes it harder to get the good deals. This, in turn, makes it difficult to scale your business and make a full-time income. If you can only buy a maximum of 4 of a product from Toys R Us it is hardly worth bothering. I can see this being rolled out to more stores and retailers over the next 12 months.
So these three pressures make things harder for Online Arbitrage on Amazon. We picked 4 random product pages on Amazon and found that less than 15% of the products listed were safe to buy and sell. The rest were either gated brands or selling them would risk getting your account suspended. Eighteen months ago it would have been closer to 70% available to sell. You will now struggle to find anything in certain categories like Sports or Baby that you can actually sell yourself.
Should I continue putting effort into Retail or Online Arbitrage?
So should you continue with Online or Retail Arbitrage? It is certainly harder but there are still opportunities if done correctly. You need to be very careful to avoid protected products and we have a list of problem brands here. You will also have to be clever when ordering, possibly splitting your orders between different stores or buying only a limited quantity per week.
Traditional Online Arbitrage could gradually become more difficult. However, it is still worth doing now to get your Amazon business established and to use as a springboard to a more robust online business.
Q4 and the run up to Christmas has traditionally been when sellers can make a large portion of their income. Sellers often stock up on toys throughout the year ready for the huge increase in sales. Unless you are buying from authorised wholesalers I would avoid this strategy as there is a good chance many of the brands will be gated before November.
It is an opportunity to diversify your business
We recommend diversifying and building other income streams and strategies throughout the year so you can survive without Online Arbitrage in 2018. Also, do not be deterred by brand gating as it can actually be turned into an opportunity. If you make the effort to get the right side of the gate you should be protected from account suspension. There will be fewer sellers to compete with therefore healthier profits. If you can also get ungated in new categories then there is an even greater opportunity and you can probably build a solid longer-term business.
What steps should I take to build a healthier online business that will last?
Selling online is certainly not dead and is not going to die anytime soon with online retail growing massively each year. There is still a huge amount of growth potential and many great opportunities for those sellers who adapt. You need to start seeing yourself as someone who ‘sells online’ rather than someone who just does online arbitrage selling on Amazon FBA.
8 years ago we made most of our profits from selling on eBay with four eBay shops running at the same time. Then the larger companies started selling on eBay too and it became too competitive. We then concentrated on Amazon and other platforms and quickly replaced that income stream. We adapted to survive and have had to do this many times over the last 12 years.
If you plan on making a living selling online you will quickly realise that things are constantly changing in 12 to 18-month cycles and you have to remain flexible and positive. If you have the core skills and are willing to take risks and be open-minded you will always find a way to make money online.
Please let us know what you think in the comments below. You are also very welcome to join our Facebook Groups where we discuss issues like this;