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How to retail arbitrage, from age 24 he started selling on Amazon

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  • Kade Peterson started selling on Amazon by buying discounted products from retail stores.
  • Buying a few items at a time allowed him to learn the process without taking big risks.
  • Once he figured out how to use the seller page, he started buying from manufacturers.

Kade Peterson, 24, wanted to be an adult Amazon salesman after seeing his older brother succeed.

“Growing up, Trevor was just my role model. I always wanted to do the things he did, the sports he played, the clothes he wore and the music he listened to,” Peterson said.

His brother, 26, had purchased products from suppliers on Alibaba and ship them to an Amazon warehouse. But Peterson wanted to start small. So he turned to retail arbitragebuy products on sale at discount stores or even major retailers such as Target and Walmart, and resell them on Amazon.

He was also able to do it as a side hustle while attending Utah Valley University.

The unit price often costs more than if purchased from a supplier. However, this allowed him to buy fewer products to test. He was also able to sell well-known brands instead of building a brand from scratch and hoping people would buy it, he said.

The first time he tried to arbitrate a product was in 2018. He had $500, which he said had been saved up over the years. He and his brother walked into an overcrowded merchandise store with the Amazon Seller app in hand. They then started scanning the products to see how much each was selling for on Amazon.

In the makeup section, Peterson scanned a bronzer that was selling for $2 in the store. Sellers on Amazon had a price between $21 and $24. He decided to buy 10 of them to try his luck. Once uploaded to Amazon, they sold out within a week and he made a profit of $140, he said. So Peterson kept going back and buying more, gradually increasing the number of units as he built confidence and profit. He told Insider that he bought and sold a total of 606 units of bronzer over a period of a few months.

He gradually started doing this with different products he found on sale, from toys to sporting goods. Anything with a profit margin of at least 50% was a winner.

But what he finally realized was that just because an item sold more doesn’t mean it would find buyers. Peterson made many mistakes buying things that weren’t requested. He spent months breaking even between products that were selling and those that weren’t. He also didn’t take into account the time he spent in the shops to determine if it was worth it.

“It would take me 20 minutes, 10 minutes to get to the store, then an hour or two of scanning, then an hour or two of getting the products ready and sending them to Amazon. Only to earn, say, $20,” Peterson says.

Another mistake he repeatedly made was buying products he didn’t have permission to sell on Amazon. New sellers can’t sell most major brands like Nike or Barbie, he noted. In these cases, he would completely lose money or try to sell them on eBay.

In June 2021, he made over $3,000 in profit, according to a screenshot of his trader dashboard seen by Insider, which was his most profitable month for arbitrage.

Today, he sells products he buys from manufacturers outside of Alibaba, following his brother’s process. The products are then shipped directly to Amazon’s warehouse from the manufacturer. He started doing it because he wanted to evolve without trading more time for money.

“The struggle with retail arbitrage is yes, it’s low risk, but it also takes more work because as soon as you sell, it’s done,” Peterson said.

Sometimes Peterson will still arbitrate products if he’s in a store and sees a good deal, he said. Year-to-date, his Amazon earnings top $309,000, according to a screenshot of his Amazon account. Most products have been shipped from a manufacturer.

Arbitration was a great way to start because he was able to make mistakes and learn more about Amazon’s seller app in the process. By the time he was shipping large bulk orders, he had a good understanding of what he was working on and what was not.

“Amazon Seller Central can be a little confusing and overwhelming for a new seller when they first set up their account, and they see how many features they offer their sellers, and that can be a little confusing,” Peterson said. .

Advice from lessons learned

After noticing that some products sold immediately and others never sold, he realized he could use an Amazon metric known as the Amazon metric. Amazon Best Sellers Rank (BSR). This helps determine the popularity of the product based on how it sells. The lower the ranking, the better the product sells, he said. For example, in the toy category, a product with a sales rank of less than 100,000 is likely to sell out quickly, he noted.

He also has uses an additional tool called Keepa, which allows him to see the historical data of a product’s sales rank. This is important because some products are seasonal, he noted. For example, at Christmas the sales rank of a winter product may be very good, but in summer it may be very poor, he said.

He determines if he has the authorization to sell a product before buying it. Peterson will analyze the product while it is in the store to determine if there are any restrictions on its sale.

New sellers can’t sell as many types of products as experienced sellers, he said. But some brands don’t allow anyone to sell their products, no matter how long you’ve been an Amazon seller, he noted. However, there are ways to qualify for certain brands, he said.

“There are two ways to do it,” Peterson said. You can either get a written note from the brand that they authorize you to sell the product, which is the most difficult way. The easiest way is to buy products from a distributor and then get a invoice from him and to send this invoice to Amazon. showing that, ‘Hey look, I have official merchandise.'”

Once you have permission to sell a certain brand, you can also go to any retailer and buy the brand, he said. However, you must be careful that they are authentic and in good condition. If a customer complains about a faulty product, Amazon will shut you down, he said.

when it comes to profit margins, he never buys a product whose return on investment is less than 50%. In the event that another competitor lowers their price, you will also need to lower yours to remain competitive, he noted. Sometimes you can find yourself in a bidding war, he added. A good profit margin gives you the flexibility to adjust your price.

There are also shipping costs to consider, which you pay out of pocket when shipping products to an Amazon warehouse. Additionally, there are Amazon processing fees and storage fees. Pricing varies based on the weight, size, and channel category of the product on which the product is sold. On average, Peterson says his fee is about 35% of the product price. He uses Amazon’s FBA calculator where he scans the barcode of the product and that determines the fee breakdown and calculates his profit.