Many people are switching gears and getting into retail arbitrage and wholesale when selling on Amazon or Shopify. Before getting into either business models, you should get a better understanding of retail arbitrage vs. wholesale.
Before we begin, let's break down what retail arbitrage is. Essentially, you're going to stores normally liquidation stores or even retail stores and going to their clearance section to find items at a lower cost. You purchase those items and send them to Amazon FBA or even sell them from your own home if you have your own Shopify store.
Retail arbitrage is a great business model if you want to go through the route of Amazon FBA. This method works since not many customers have the access or ability to purchase items through liquidation stores. Which works out for the seller since you can mark up the product and make a good profit.
The downside of retail arbitrage is that you would have to continuously go out and shop around to find more items to sell to the consumers. Depending on the products you are purchasing there could be a potential hurdle when sending it to Amazon FBA. That hurdle could be that you cannot sell the item, for example memorabilia. Always check that you’re ungated before buying via arbitrage. You're then stuck with those items and not being able to sell them. Another hurdle that it can be is it takes a bit longer to scale your business.
Wholesale is another business method that you could also do whether it's on Amazon or Shopify. But what is wholesale? Wholesale is selling goods in substantial quantities to be retailed by others. With wholesale you can purchase branded products at a discounted priced. This method can also be done through FBA if you're using Amazon as your eCommerce platform.
Normally, you buy the bulk upfront but fortunately, we have tons of wholesale suppliers that allow us to dropship one unit at a time. You're in control of your business in terms of warehousing, packing and shipping since it’s mostly done by the supplier. This method gives you the opportunity to sell products from established well known brands with existing demand from the consumers.
Both methods are great, but it really comes down to how you want to run your business.