Amazon sellers in our Facebook Groups are always asking – ‘is it getting harder to sell on Amazon when doing arbitrage?’ Retail Arbitrage is when you buy from physical stores to resell on Amazon and Online Arbitrage is when you buy from online retailers to resell on Amazon.
Amazon definitely seem to be moving towards wanting fewer but higher quality sellers on its platform. This ensures their customers are getting the best shopping experience. To achieve this they have introduced more rules and restrictions for new sellers. There are three trends that are contributing to this problem and raising concerns.
The three trends that are making online arbitrage harder
1. Too many sellers on Amazon
More and more people are selling on Amazon. Amazon FBA became a ‘thing’ a couple of years ago. This meant that people looking to make money online increasingly find ‘Amazon FBA’ when searching for business ideas. As a result of this, there has been a huge influx of new sellers making the marketplace more competitive. This trend shows no sign of slowing down.
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. Often their cost of living is less than people in the USA or UK so they are happier to make less profits. This makes them hard to compete with.
2. Brand & Category Gating and restrictions
More and more brands and categories 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. Amazon is also making the application process stricter and will often require written permission from the brand owners for you to sell.
Due to the huge increase in people doing online and retail arbitrage retailers are starting to realise this is a problem. Some stores are now stopping people buying toys and other products in bulk. This makes it harder to get enough stock of the best deals. This, in turn, makes it difficult to scale your business and make a full-time income. Over the next 12 months restrictions are likely to be rolled out to more stores and retailers.
So these three pressures are definitely making things harder for Arbitrage sellers on Amazon. For example, we scanned various search results 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 sell on Amazon FBA with Online or Retail Arbitrage? It is certainly harder but there are still huge opportunities if done correctly. There are thousands of sellers making a great income from arbitrage. You need to be very careful to avoid risky products and we have a full list here. You will also have to be smarter when buying stock, possibly splitting your orders between different stores or buying only a limited quantity per week.
Traditional Online Arbitrage will gradually become more difficult as Amazon continues to tighten the rules. However, we still recommend arbitrage as a great way to get your Amazon business launched and gain experience. You can also use it as a springboard to a more robust online business. Many Amazon sellers will move into Wholesale or Private Label once they have mastered Online Arbitrage.
Also remember the last few months before Christmas can be an incredible opportunity for Retail Arbitrage. Amazon sellers can make a large proportion of their yearly profits in this period. You should plan ahead and ungate as many categories as possible and make sure you have sufficient funds in place. Always check products for restrictions before buying.
It is an opportunity to diversify your business
We recommend diversifying and building other income streams and strategies throughout the year so you could survive without Online Arbitrage. 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. Amazon is at the forefront of this growth so Amazon FBA is definitely the best place to start. There is still a huge amount of potential and many great opportunities for those sellers who learn and adapt.
10 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.
We recommend new sellers join our friendly and supportive Facebook Group Amazon Selling for Beginners. Experts and other newbies can help you get started successfully and make sure you avoid any problems.
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