One of the popular choices for anyone looking to bring in more money each month is retail arbitrage, also commonly known as reselling. If you’ve ever sold something on eBay or Facebook Marketplace for more than you originally paid, then the basic idea will be familiar. But if you’re thinking about diversifying your business interests, find out how to generate extra income from retail arbitrage with a sustainable and scalable approach.
There’s a big difference between occasionally offloading unwanted items from around your house, and approaching reselling as a business. While it’s possible to get started on an informal basis to test ideas, you’ll need to develop a reliable source of stock, consistent demand from customers, and a way to stand out from other retailers, just as with any eCommerce business or side hustle.
Notable American entrepreneur and author Gary Vaynerchuk has often suggested retail flipping as a way to earn extra money in any spare time. But it’s important not to underestimate the time and effort required to develop it into a sustainable income stream, particularly if you’re intending to rely on it to cover your bills on a regular basis.
What are the benefits of retail arbitrage?
Sourcing products for those who don’t have the time or knowledge to find them directly is a business idea that’s existed for centuries. And the internet has made it easier for buyers and sellers to connect through dedicated marketplaces, which means you can get started in minutes once you’ve found a suitable item to sell.
Without the overheads of shop rental or staff, you can keep any profit or reinvest it (subject to tax, of course). And one of the big benefits of retail arbitrage is that you can start small in your spare time, and test an idea to see if it’s capable of growing into a worthwhile income stream.
Products for resale can come from anywhere, while retail arbitrage tends to focus on new products which are underpriced by retailers or in high demand. Common examples include rare or limited-edition sneakers, toys, sports memorabilia, or video games.
It suits anyone who loves bargain hunting, and especially if you also have an interest in specific hobbies or brands. But there are also a variety of free and paid tools to help you spot opportunities, including the Amazon Seller App, or looking at previously completed and sold listings on eBay.
You could also potentially grow and monetise an audience by documenting the process on Youtube, with popular channels attracting thousands of subscribers. Many also offer paid guides to starting or improving your sales through the various marketplaces, which is another income stream you can add once you’ve established yourself.
And if you notice a demand for products which are in short supply, there’s always the potential to move into selling your own versions in the future.
How to find products to resell?
There are a lot of potential sources for products which may be underpriced and capable of being sold for a profit. Whether you prefer to go out and about to find items, or would rather do everything from your laptop, it’s entirely up to you.
Some of the common sources for retail arbitrage and reselling include:
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Charity and second-hand shops.
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Antique shops
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Boot fairs and garage sales.
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Online marketplaces: You can often find items which are mislabelled or under-priced, allowing you to pick them up and relist them correctly for a profit.
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Supermarkets and other retailers: Along with pricing errors, retailers will often need to sell stock cheaply to clear space for new items.
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Auctions or liquidations:
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Return pallets: Various retailers, including Amazon, offer bulk sales of returned items, allowing you to gamble on finding something profitable rather than just broken or faulty products.
If you’re making purchases in person, then you’ll need to factor in travel costs before you declare your profit from each trip. And you might feel awkward walking around a charity shop scanning items to see if you can sell them for more. But they have the advantage of letting you see exactly what you’re buying, and making connections with the shop owners or assistants, who might pass on friendly tips in the future.
Buying entirely online means you’re relying on the descriptions and content grades provided by wholesalers and auctioneers. Many storage auctions and liquidations are collection only, so you’ll need to travel to pick up your new purchases, or pay someone to pick them up on your behalf. And you may be left with large amounts of unsellable rubbish after you’ve picked out any good items.
How to start selling resale products
It’s fairly simple to set up an account on a popular marketplace and offer an item for sale. But if you’re looking at creating a sustainable income from reselling and retail arbitrage then investing some time and effort will greatly increase your chances of success.
The most effective marketplace will depend on the items you’re selling. While Amazon, eBay and Facebook Marketplace have massive audiences for all types of products, you might find you can get higher prices for clothes and fashion through Depop and Vinted, or vintage items and craft supplies may do better via Etsy. You may also want to list items on your own website, to help build your branding over time and become a destination for people looking for particular products.
Whichever platforms you choose to utilise, it’s important to understand how to list your products effectively. Taking some time to craft effective headlines and descriptions will help you potentially increase both your sales and profits. And some simple photography techniques will ensure everything looks as good as possible, including having adequate lighting and not including a room full of junk in the background.
If you want to build your retail arbitrage and reseller business, then it’s important to establish your shipping process and customer service from the start. Getting positive feedback and reviews will build trust in you as a retailer, attracting more potential buyers in the future. And they can also help your listings stand out, and provide useful information and testimonials for your own website as well.
When you’re starting to list products, make sure you understand how shipping costs are calculated, and take them into account when you’re setting prices. This includes any packing materials you might need to keep products safe, along with postage. And make sure you can ship any items promptly once they’ve been sold.
Growing your retail arbitrage and reseller business
Selling your first items for a profit can be incredibly exciting, but to build a sustainable business you’ll need to understand how many sales are required each month, where your stock is coming from, and how much you’re making from each transaction.
Looking at your previous sales and researching competitors will help you understand what is most likely to sell, and which marketplaces tend to be the best for reaching the right customers and prices. Even a small premium can quickly add up when you scale the number of sales you’re making each month, and the same is true of reduced listing fees.
Operating as a business also means you need to track your revenue, expenses, and profit for tax purposes. And to ensure that you’re making a worthwhile return on your time. Making an extra few pounds after hours of work might be an enjoyable hobby, but it’s not an effective way to increase your income.
Setting out a basic business plan will help you identify potential problems, and also allow you to plan for success. If you don’t want to switch to a full-time self-employed career as a reseller, then you may need to look at how you can streamline and automate the tasks involved. Or plan your pricing and profit margin to allow for part-time staff in the future.
You can also use it to plan future marketing and promotional activity, tracking which is the most successful and effective for your business. If you’re intending to build a brand to make most of your sales through your own website in the future, you may want to list items on marketplaces for the first 12 or 24 months to bring in revenue while you develop your site.
Once you understand the products which result in sales and profit, you can then choose the most appropriate options for marketing your self-employed business. But if you’re not planning, tracking, and measuring, then you won’t know what is actually working for you.
Any self-employed business can potentially benefit from IPSE membership, particularly when you get access to tax and legal helplines to prevent you from potentially making mistakes with Self-Assessment, or if you’re subject to a tax investigation.
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