What is Inventory Arbitrage?
Enterprising individuals have found ingenious ways to leverage differences in perceived value.
Inventory or retail arbitrage is when you buy a product from a retail store such as Walmart and then resell the product on your own or mainstream e-commerce platforms at a profit. As an e-commerce business model, retail arbitrage is one of the best ways to launch an online store or Amazon business as it doesn’t require a lot of inventory to get started.
If you want to start retail arbitrage, you have to put the time into finding good deals or sales, then buy the products cheaper to sell at a profit.
The obvious question here is why would people pay more for your product?
Mainly because people are typically not as informed about places they can find the product at a better price. In other words, not everyone takes the time to shop around. They’ll see your product online and add it to the cart without doing a lot of research.
Is Repackaging a Product Legal?
If you have a generic product that is unbranded, it is completely legal to repackage a manufacturer’s product and put your brand on it. If your product has another business’s branding somewhere on it, however, repackaging is illegal and you may be slammed with a copyright or trademark infringement.
Many manufacturers specialize in producing white-label products that sellers can buy to resell as their own branded products. These products can include everything from coffee, to silicone coasters, to healthy food supplements.
When it comes to retail arbitrage, it is important to remember although repackaging a manufacturer’s product may be legal in some cases, it may not always help to boost your sales, especially if other sellers are selling the exact same product in a crowded marketplace.
In order to boost your sales from branding, you have to make sure that you differentiate your product or service to the buyer in some way that it hard to imitate by competitors.
What is Arbitrage in Economics?
Arbitrage refers to the act of simultaneously buying and selling a product or any other asset with the objective of profiting from the difference in the buying and selling price. This profit is due to the difference in two similar financial instruments in two different markets.
Demand and supply, for example, is the exact same concept in two different states, but the demand for a product may be lower in one of them, which means that the market price in the two states differs. Exploiting this price difference means that you can make a profit.
What is an Example of Arbitrage?
An example of retail arbitrage is when you find a fur coat for sale in Texas at, say, $45. You buy the coat and have the retailer send it to your third-party prep center in Kansas. You then list the fur coat on an e-commerce website for $120. Someone in Alaska sees the listing and buy the coat.
The demand for fur coats in Alaska is much higher than it is in Texas and, even if the supply is more or less the same, it means that the market price for fur coats is higher.