Jason and Sarah were public school teachers when they stumbled upon the lucrative world of Amazon FBA retail arbitrage.
With just a $100 investment, they turned their initial inventory into over $180,000 in sales within 12 months. This extraordinary achievement allowed them to quit their jobs and focus on their Amazon business and growing family.
In this article, we’ll delve into the details of their journey and explore how you, too, can find success in this niche.
Starting with Amazon FBA: Product Categories and Sourcing Inventory
Jason and Sarah sell a wide range of products on Amazon, but when they first began, they had trouble spending their entire budget. That changed when they started selling clothing, particularly bras. Jason’s spending went from $100 per shopping trip at Walmart to thousands of dollars at Kohl’s in a single day.
Clothing is a great category for new Amazon sellers for several reasons. It is not a “gated” category, meaning that new sellers don’t need Amazon’s approval to sell most clothing items. Additionally, clothing requires more care in packaging, which deters some sellers looking for a quick and easy turnaround. With the vast variety of styles, colors, and items of clothing available, there’s less competition for the Buy Box on individual products.
Taking Advantage of Kohl’s Discounts
Jason and Sarah found success by sourcing most of their clothing inventory from Kohl’s. Although the store may seem expensive at first glance, savvy shoppers can stack multiple discounts when buying in bulk. The couple is part of Facebook groups that share Kohl’s coupons and discount codes, and they closely monitor the store’s website for sales.
Jason and Sarah have developed a Kohl’s discount calculator to help them take advantage of the various discounts available. They’ve encountered some obstacles when purchasing large quantities of items at once, but they’ve built relationships with store managers who are often happy to see them clear out excess stock.
Why Large Retailers Don’t Sell Online Themselves
You might wonder why stores like Kohl’s and Walmart don’t simply sell their discounted items online themselves. Jason believes that the logistics and costs involved in managing online flipping at the store level make it unfeasible for large retailers. Additionally, there is inherent risk in holding onto unsold inventory, which may need to be liquidated at a loss or donated. It’s more cost-effective for these stores to manage their own margins in-store and online without getting into the retail arbitrage game.
Hiring Help and Empowering Others
As their business grew, Jason and Sarah hired helpers, mostly friends and family, to increase the amount of stock they could buy. They also trained others to become Amazon sellers. Their helpers were paid an hourly rate for prepping and shadowing Jason, and they later received a commission based on the profit made from the items they sourced. Some of their helpers eventually started their own Amazon businesses, which Jason and Sarah fully support, as there is plenty of opportunity to go around.
Getting Started with Amazon FBA Retail Arbitrage
Starting as an Amazon seller is not difficult, but it takes time to become proficient at spotting great deals and sourcing inventory in bulk. Jason and Sarah spent their first few months learning the ropes and figuring out the best stores for finding profitable items. For new sellers, they recommend focusing on clearance sections and treating the first six months as a learning period. Making money with Amazon FBA retail arbitrage is not a fast or easy process, but it is simple once you get the hang of it.
To start, you’ll need:
- An Amazon Seller Account: Begin with a free Personal seller account, and upgrade to the Professional account level once you’re selling more than 40 items per month.
- The Amazon Seller app: This free app is available on iOS and Android.
- A small initial investment for purchasing inventory.
- Time Investment and Dedication to the Business
- When Jason and Sarah began their Amazon FBA journey, they were working full-time and had no children. They dedicated all their spare time to sourcing items, visiting stores during weekends, days off, and even lunch breaks. For the first year, they reinvested all their earnings back into the business. Their dedication and hard work paid off as their total sales exceeded $180,000 within the first year. This allowed them to quit their jobs and focus solely on their Amazon business after just a year and a half.
Profit Margins and the 30% Rule
Jason advises new sellers to aim for a 100% return on investment (ROI) and follow the “30% rule” as a general guideline:
- 30% for the cost of goods
- 30% for Amazon’s fees
- 30% for your profit
The Amazon seller app can help you calculate fees, so you’ll have a good idea of the selling price required to cover costs and fees. Jason and Sarah’s net profit typically hovers around 25%.
Sourcing Inventory Online
In addition to buying inventory in physical stores, Jason and Sarah also source items online using a tool called Tactical Arbitrage. This tool helps them quickly find profitable products to flip on Amazon. Keep in mind that margins are generally lower online, and there is more competition.
Learning from Mistakes and Bad Buys
Even experienced sellers like Jason and Sarah occasionally make bad buys. Their advice is to “go wide, not deep,” purchasing a variety of items rather than investing heavily in a single product. This strategy helps minimize the impact of bad buys, as the profitable items can offset losses.
Essential Tools and Technology for Amazon FBA Retail Arbitrage
Jason and Sarah use Scoutify 2, a product scanning app that integrates with their InventoryLab software and Keepa, a tool that tracks sales history on Amazon. The app allows them to easily view historical data and manage their inventory efficiently.
For beginners, investing in advanced tools is not necessary. Start with the Amazon Professional seller account and gradually incorporate other tools as your business grows and profits increase. Inexpensive items like a UPC scanner and a Scotty Peeler can save time on packaging and shipping if you have a small budget to start with.
Sustaining Retail Arbitrage Inventory
Jason believes that retail arbitrage inventory will never run out, as there are always new stores to visit and different niches of items to explore. Living in Orlando, a prime shopping destination, Jason has access to a plethora of stores, but he is also willing to drive long distances to find new opportunities.
The Future of Jason and Sarah’s Amazon Business
With their efficient processes in place, Jason and Sarah’s business has become largely passive. Jason spends about 15 hours a week shopping, while their team handles packing and shipping. They are considering venturing into private label sales, which offers a more passive income model with potentially higher returns and less legwork.
For those interested in learning more about Jason and Sarah’s methods and connecting with other sellers, consider joining their Facebook Group and checking out their self-paced Amazon FBA courses at Hustle Buddies Official.
By following Jason and Sarah’s inspiring journey and their strategies, aspiring Amazon FBA retail arbitrage sellers can learn valuable lessons in dedication, discipline, and smart decision-making. Although the road to success may not be easy, with the right mindset and commitment, it is possible to achieve financial freedom and create a thriving business.
- Jason and Sarah’s success story highlights the importance of the following principles:
- Dedication and Time Investment: Commit to spending time on your business, especially in the beginning. Success comes from hard work and perseverance.
- Focus on Profit Margins: Aim for a high ROI and follow the 30% rule to ensure profitability.
- Diversify Your Inventory: Minimize the impact of bad buys by purchasing a variety of items rather than investing heavily in a single product.
- Utilize Tools and Technology: As your business grows, incorporate tools and technology to streamline your operations and increase efficiency.
- Be Willing to Explore New Opportunities: Always be on the lookout for new stores, niches, and sourcing methods to sustain your inventory.
Jason and Sarah’s Amazon FBA retail arbitrage journey is a testament to the power of dedication, smart decision-making, and willingness to learn from mistakes. Their success story serves as an inspiration to those who dream of financial freedom and entrepreneurship. By applying the lessons they’ve shared, new and experienced sellers alike can work towards building a thriving, sustainable business.