Sourcing With Retail Arbitrage

When we’re asked, what’s the easiest way to get started selling on Amazon our answer is always, “Retail Arbitrage.”

Retail Arbitrage, what the heck is that?

Essentially for us, it means buying a product at a local retailer and selling it for more than 2x the buy price on Amazon FBA.

Seriously, it can’t get much easier than that.

  • Scour brick and mortar retailers for products, preferably marked down below the normal store’s price.
  • Scan those products with your Scouting App to vet the information.
  • Buy the profitable products.
  • Send them to Amazon FBA.
  • Sell them for profit.
  • Amazon pays you every two weeks!

I think that process is pretty well understood.

The problem lies with the fact that people don’t know how to consistently find products to make a solid income.

Trust me, we know. To make big things happen and overcome any potential frustration, you need to accept that not ever Retail Arbitrage (RA) run is going to be a success.

Nevertheless, with the proper state of mind and a solid plan in place, you can greatly reduce those “unsuccessful” Retail Arbitrage runs and find yourself with more products than you know what to do with.

Now that we’ve cleared the air on that, I’m going to share with you just how we were able to overcome the challenge of sourcing products consistently, turning some Retail Arbitrage dabbling into a rock-solid business that replaced both of our incomes.

And it happened in ONLY 7 months.

 


Lunch Time Sourcing: Buying Our Very First Product! 

The last job I had before we turned full time entrepreneurs was working as a Retail Representative.

Responsible for covering almost all of the Lowe’s and Home Depots in Southern California, I spent a lot of time implementing merchandising strategies. As a result, I was able to spot pricing trends, like when an item was going to be clearanced or when a product’s next price drop was going to take place.

After getting through our little tear of selling products around the house, we had the idea to buy products in the stores that I covered and sell them on Amazon for profit.

Seriously, there was no inspiration from Facebook groups, we didn’t know what a Scouting App was and never even heard of Chris Green.

We were complete newbies!

Our first go at Retail Arbitrage was during my “lunch break.” I was at a Home Depot in San Diego and this product on the clearance endcap caught my eye.

It was marked down from $168 to $94, and was selling for around $140 on Amazon.

I called Nessa for her approval, and she agreed that I should go ahead and buy it.

So I DID!

The fact that we decided to TAKE ACTION, despite all the uncertainties, was the single most important thing that we ever did for our business.

I say this, because the result on paper wasn’t great.

On the positive side, we ended up selling it pretty quickly for $134.95 and after Amazon Fees, we were paid out $110.06.

OK, you may think that since we bought it for $94 and took away $110.06, we made $16.06 profit.

Wrong! This was before our FBA days, so when we Merchant Fulfilled it, we didn’t factor the cost of shipping the product which was almost $20 bucks. Alright, we lost a few bucks on the deal…

But, we look at it as a small cost to getting our feet wet with such an amazing business.

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Going Hard At The Hardware Stores

With a taste of the Amazon potential, we said to ourselves, “why not duplicate that as much as possible?”

Come on now, I don’t mean losing money on sales. I mean finding products to buy at Lowe’s and Home Depot.

Knowing just how quickly fees can eat up profits, we implemented some basic buying criteria and downloaded the Amazon Sellers App to make sure that we were sourcing profitable goods.

Like I said, I spent all day in these hardware stores. So I not only began to focus on the new products coming in, but when the old products would be coming out.

I’d give Nessa a little report of products that were exiting the store and we would follow up on them over the weekend to see how profitable these products were if we sold them on Amazon.

And that’s when we found “the jackpot!”

Only a few weeks or so after we sourced our first product from Home Depot, we caught wind of this very high end brand that was clearancing four different variations of this product type.

The crazy thing was that these items were going for $250-$400 on Amazon, and the clearance price was under $100!!!

We were stoked!

Over the next few weeks, we bought up every single unit of these products.

The difference between these products and the first purchase we made, other than the fact that these were actually super profitable, was that we decided to use Amazon FBA.

That was a game changer. Our FBA products sold really quick and we could charge higher prices than the Merchant Fulfilled sellers.

At one point, we were getting our hands on these products for ONE PENNY EACH!

Not kidding, some of these products were almost free and it’s something that we figured out with Home Depot pricing.

We found that if we timed the clearance cycle right, knew where to look for certain products that the average customer would never know about and could negotiate the situation with management, we could stock up for almost no cost. (We share these types of insider tips only with our course members.)

By the time June wrapped up, we had are best month EVER with $3,937.20 in sales!

June 2014 Sales ScreenShot


But Then, The 5 Month Slump!

After cleaning every Home Depot out of these products, we hit a standstill.

For whatever reason, we had this limiting belief that since these rock-star products were gone, it was time to move on to the next side-hustle.

Why on earth we thought like this is purely ridiculous. The only excuse that we could conjure up in hindsight, is that we didn’t see this as a business yet. We merely viewed it as another one of our little money making activities that would pay for a nice little vaca getaway or something.

On top of that, after blazing through products that we got for nearly a penny and sold for over $300, everything else that we found seemed like a waste of time. That’s because we weren’t looking at the big picture of building an inventory. It was purely transactional at that point.

It’s pretty clear to see that this was more of a flatline than a standstill. From August 1st to December 31st, we sold $0. Nada. Zip. Zilch.

August-December 2014 Sales Screenshot

Let me be clear on one thing, after about a month of not finding any more products with mega profits, we just let our side hustle go. I mean, we limited our purchases to one niche of Home Depot with high expectations of profit, so we were really cutting out a whole slew of other products that could have been solid.

So, it’s not like we were searching Home Depots and Lowe’s stores all of August to December without finding anything. We continued to look for another few weeks for similar products but to no avail.

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January 2015: New Year, New Plan

With the new year came a lot of change. We had new motivation to start our business and after listening to Pat Flynn’s Smart Passive Income podcast featuring Jessica and Cliff Larrew, we had a new-found idea for Retail Arbitrage.

Jessica and Cliff talked about how they made over $300K in 2014 doing mostly Retail Arbitrage, and she raved about her successes sourcing at Walgreens.

Honestly, at that point, I had never stepped foot in a Walgreens so it really peaked my curiosity as to what the heck she was sourcing to make up that much in sales.

On top of that, the fact that she talked about Retail Arbitrage as a business completely changed my perspective of what we had been doing. Now, I knew that this would be the catalyst to quitting my job and becoming entrepreneurs.

A major turning point in our sourcing success was adding new stores. Inspired by the idea of hitting pharmacies like Walgreens, we decided to increase our store list.

Now, instead of just counting on Home Depot and Lowe’s for products, we added Walgreens, Wal-Mart and Target to the list.

The great thing is that these stores are in pretty much every town and city in the country. And most times they are very close together, so you can hit them all in a short time frame.

And that’s just what we did!

The only difference was this time we knew that this was a business and there was no “copping out.” We were about to go full blast.


Hitting The Big 5

Living in San Diego, we didn’t have to travel very far to hit these 5 stores. Within 10 miles of our home, we had 1 Lowes, 3 Home Depots, 3 Targets, 2 Wal-Marts and god knows how many dozens of Walgreens were speckled in between.

With full time day jobs, we made it our routine to hit up these stores every weekend.

Hands down, our favorite place to source was Target. But not any Target, rather, Targets with the Starbucks in the front entrance. Mmmm, nothing better than a hot coffee to get you in the zone for the treasure hunt that ensued.

And that’s exactly how we looked at it. We were on a search for treasure in the store, and it was SOOO FUNNN!

Since we never sourced in these stores before, there were LOTS of products that were just waiting for us.

The hardest part for us wasn’t finding products, but knowing when to say no. That’s definitely a challenge when you open yourself up to new stores and products.

You not only face the “is that going to sell?” questions, but the “we can’t sell that in new condition, right?” And on and on…

From the get-go, we weren’t scared of buying all different products with varying ranks but avoided used products like the plague.

The other thing that we quickly realized about the new stores, versus just the hardware stores, is the Average Amazon Sales Price was very low. As you know, with our initial Home Depot run our average price was over $300 but with the likes of Target and Walgreens, we were looking at maybe $20.

To work with this change, we didn’t just look at the amount of profit per unit, but the Return On Investment. This ensured us that we were making good buys, while not limiting our product selection in these stores.

But after a few months, again we found that there was a “Law of Diminishing Returns” factor, even with these new stores and price points. Meaning, the more times you hit the same stores does not necessarily equate to finding more products.

At some point, you have to give a store a rest and let the product life cycles take place. That just takes time.

This time, instead of just letting our business go, we upped the ante!

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Expanding Our Reach, Far & Wide

Depending on where you live in the country, you might find that there aren’t many big box stores close to you at all. So you’ll be forced to expand just to get the ball rolling.

For us, it took us time to have to expand, but expand we did.

Thankfully, San Diego County is sprawling and has a very dense population. So by simply expanding our reach from only stores in the city center to all of San Diego County, we were stacked!

Like holy cow, there are 21 Home Depots in San Diego County alone. That’s enough to keep anyone busy for a while.

We mapped out these stores and hit them like clock-work on the weekend.

Still, it wasn’t all glamour and glitz. We did the “walk of shame” many times. (Yea, that’s when you walk out of the store with nothing in your hands but an empty cup of Starbucks.)

But we didn’t let that get us down. By having 5 core stores and a big-ass territory, we said to ourselves, “that just means there’s more opportunity at the next store!”

Surely enough, by making a full day out of it, we never came home empty handed. Although some days we wish we did, because hauling our loot up 3 flights of stairs into a tiny studio apartment was no end of day victory lap.

Many times we found ourselves in stores as the lights were shutting off and the floors were being mopped . While getting home on the late night typically meant that we had a solid day of sourcing, we weren’t content with that.

We wanted to buy as much as we could, but be as efficient as possible. Again, we went back to the drawing board and really started to map out these stores into clusters to make sure that every minute of driving time was worth it.

After all, time is money and gas ain’t cheap in California!


Taking “Business Trips”

Seriously, looking back, we had such a blast with Retail Arbitrage.

Once we made a few tours, cleaning up San Diego County, we started to get even more creative.

Realizing just how many expenses were…”business expenses” we decided to plan little mini-vacations.

To fund our vacas, we sourced along the way to our destination.

We traveled to Los Angeles, Palm Springs and Phoenix. Wow, is Phoenix hot. Certainly not a place to do Grocery Arbitrage.

The key to us having fun and success at the same time was having a good plan in place and mapping out our to and from routes. That way we could make the most of our time.

The best part was getting to our destination, unwinding at our hotel and getting a nice dinner somewhere cozy to reminisce about our Arbitrage adventures.

Then, the next day we made our way back home, hitting the stores we hadn’t been to yet. (If there was room in the car.)

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7 Great Months of Retail Arbitrage

From January to July, we only sourced products via Retail Arbitrage.

And trust me, no matter what anyone says, you could TOTALLY make this a full time business by only sourcing products via Retail Arbitrage.

The keys are to be persistent (most people think it isn’t possible after hitting 1 store with no “luck”), plan to source (don’t just walk into a store and get carried away doing personal shopping) and follow trends (once you spend enough time sourcing, you’ll pull products off the shelf without even scanning them just by staying in the know.).

Seriously, our most successful products were ones that we initially found in one Target, and then kept our eyes peeled for the same product at the next Target.

That took us down rabbit holes, tracking other similar products that were super profitable.

Between that tactic and knowing the merchandising layout of Home Depot and Lowes, we would walk into stores, look at the overhead bays, spot products that we knew were on clearance but hadn’t been put on the clearance rack and ask an associate to pull them down for us.

Those were some real gems, especially with them still being in the manufacturer cases in brand new condition.

Over the 7 months we learned quick, took chances and grew rapidly, allowing us to pull in a fat $76,805.75 in sales!

Jan-July 2015 Sales Screenshot


Making the Decision To Quit My Job

With everything happening so quickly with our business, we almost didn’t realize what we had. The thing is that it’s comfortable to do this as a part time side-hustle, but to really make it a business while enjoying your life, requires you to step out of your comfort zone.

For us, that meant quitting our jobs.

To go from the “security” of your paycheck, to living off of your own business, that’s the real mental challenge.

After using up all of my vacation in about 5 months, I realized that it was time. Time to move on from the grind of working a full time job and then spending the weekends sourcing products. Time to not have to ask my boss if it was OK to take time off, or whatever it was.

To make the decision easier to digest, we mapped out all of the expenses we had, other than inventory:

  • Rent
  • Food
  • Car
  • Phone
  • Utilities
  • Health Insurance
  • And on and on…

Once we put that down on paper, we realized that it wasn’t such an unmanageable amount of money. It helped us to see the big picture and plan our business accordingly.

We had to sell X to afford Y.

Like I said earlier, we weren’t content with getting home on the late night, even if it was after a great day of sourcing. It took a lot out of us, and that needed to change.

That’s when I took my territory management skills and put them into play.

Instead of firing from the hip with stores in a general area of the county, like we had been doing on the weekends, we gave a bit more structure to how we hit our stores. Also, we recorded which dates we hit certain stores to allow a fair amount of time between store visits for that good inventory to accumulate.

I attribute this territory management to us being able to grow our business even more in the month following my retirement, while also giving us way more free time to enjoy things like exploring where we live, surfing, pilates (Nessa, not me) and just not ever having to rush to start the work day.

With the uncertainty of many things, the one thing we were sure of was making this business happen.

In July 2015, I officially resigned from my 9-5 job and we kicked our plan into full gear.

And in August, we had our BIGGEST MONTH YET!!!

Not big, huge! Almost tripling what we had made the month prior in July.

What’s more, is the first day of being full time entrepreneurs, we had our biggest day in sales as Amazon sellers.

Check it out!

August 2015 Sales

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Looking Back & Moving Forward

Today, our business is still evolving and we are constantly adapting to make eCommerce work for us.

For you starting out or scaling up, the important part is taking action as much as you can.

It’s not necessarily what you source, but sourcing consistently with a PLAN.

Knowing that you want to make X dollars a month with this business needs to be mapped out by doing Y.

Failing to Plan is Planning to Fail!

Even now with all the experience we have, our most productive days are the ones where we have a clear objective mapped out. It doesn’t have to be anything fancy.

It could be something as small as:

  • I will go to Target, Wal-Mart and Home Depot on Saturday morning.
  • I will search all of the clearance bays for profitable products.
  • I will also focus on the Pet Toys aisle at Target, to determine if there are any products selling on Amazon for more than the retail price.
  • My goal is to spend at least $250, and sell the products for $750 on Amazon.

It may seem basic, but it works!

Now it’s time for you. Wherever you are in this Amazon journey, take a real look into what you want out of this business and make it happen!

We’re here for to get you on the fast-track, but you need to make the decision if it’s just a side-hustle or something real.

Hopefully this article has been that turning point for you, like the one we had when we listened to the podcast with Jessica Larrew.

If so, things are about to happen that you’d never think imaginable!

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