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Retail Arbitrage Vs. Private Labeling

by Scott on April 25, 2016

Reason for Online Business

Last week, I wrote a post about one of the items on my #40Before40 list that I’m most excited about. You can check the post out here: Starting an Online Business: Amazon FBA

Lots of people have already created successful part time and full time income streams with Amazon FBA. There are 2 business models that we will explore that you can use to make money with Amazon FBA:

  • Retail Arbitrage
  • Private Labeling

Let’s take a deeper look at each of these options.

Retail Arbitrage

Retail Arbitrage is when you purchase products at a discounted rate and then list them on Amazon for a profit.

Discounted products found at Walmart, old textbooks from used book sales or even sourcing products from Ebay can all be used as sourcing strategies for a Retail Arbitrage business.

Once you source your products, you package them up, send them to one of Amazon’s warehouses and list the product on Amazon’s website. After that, you wait for the product to sell and Amazon sends you your cut.

The important thing to remember with Retail Arbitrage is to source products that have enough of a profit margin for it to make sense to sell. Also, it’s important to check that comparable product listings have a best seller ranking of 100,000 or less. I’ll expand more on Best Seller Ranking in a later post.

Private Labeling

Instead of sourcing existing products or brands, you research products that are currently selling on Amazon, then find a manufacturer to produce a similar product and build a brand to sell on Amazon.

Product selection is extremely important here. You do NOT want to select a product that doesn’t have enough demand, or a product that has too much competition. You will also need to make sure that whatever product you select has enough of a profit margin that it isn’t wiped out by the fees you will pay to Amazon.

My Choice: Private Labeling

For my Amazon business, I’ve selected private labeling. I don’t want to have to worry about inventory levels disappearing or price undercutting to remain competitive with other sellers who might be selling the same product.

Private labeling also allows you to grow a brand that you can expand with new products and expand into other channels such as Ebay and other ecommerce opportunities.

Next up, I’ll show you the strategy that I will be using when looking at potential products to use in my Amazon Private Label business. It’s called “The 10x10x1 Strategy.”

Is there anything in this post that you’d like me to expand on or explain in greater detail? Let me know by sending me a quick message by clicking here!

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