Private Label and Retail Arbitrage – Which is Best?

Michael MicheliniBlog, Business, Ecommerce0 Comments

What is Retail Arbitrage?

Retail arbitrage is buying trademarked items at a discount, and then reselling it for a higher price online. This concept of selling is pretty popular on eBay and Amazon.

People who do retail arbitrage are usually those who are after zero overhead costs. Typically, someone who carries out this business model gets their products from a retailer in bulk, at a discounted price, or from a clearance or liquidation sale.

The best thing about retail arbitrage is that it doesn’t require you to create or introduce a new brand to consumers; therefore, the startup investment isn’t that big. On the other hand, sourcing products to resell is a major drawback – it can be time consuming and risky.

What Is Private Label?

Private labelling, as its name implies, is a business model that allows a seller to own and carry his/her own brand – from the product itself, the label, packaging, design and quality. Private labelling is very popular on Amazon.

Typically, people who do private labelling get their products manufactured in bulk from China and have it shipped to one of Amazon’s warehouses for fulfilment. This business model requires a significant startup investment and extensive research on what to sell, as well as finding the right manufacturer/supplier. If done right, private labelling is a sustainable way to make money and start a successful company.

Retail Arbitrage vs. Private Label

ADVANTAGE

RETAIL ARBITRAGE

PRIVATE LABEL

Cheaper Startup Cost

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Lower Risk

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Profitability

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Sustainability

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Control

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Obviously, private labelling wins over retail arbitrage (RA) for many good reasons. One major reason is that Amazon has a policy that prevents reselling certain brands without express approval from the manufacturer, and RA is simply not good as a long-term business model. Personally, I find RA to be an unethical business model, and as customers wise up to the sales scheme, RA has a good chance to crumble.

Retail arbitrage and private labelling are the most popular business concepts on Amazon, but there are actually more ways to make money on Amazon with options such as Online Arbitrage, Dropshipping, Amazon Affiliate Program, Amazon Merch, Amazon handmade, and Amazon home-based customer service representative.

Side Hustles on Amazon

Online Arbitrage: This is similar to retail arbitrage. The only difference is that you’re sourcing your products online and reselling them online as well. The most common place to get products for online arbitrage is on eBay, where some items are much cheaper than those on Amazon.

Dropshipping on Amazon: Dropshipping is a process wherein a merchant sells products that do not have to be on-hand or in the merchant’s possession, yet readily available at your supplier. When a product gets sold, the merchant will simply notify and pay its supplier to get the item shipped directly to the customer. This is ideal for people who are after low startup costs as it doesn’t require purchasing and managing inventory

Amazon Affiliate Program: Also known as Amazon Affiliates wherein you advertise existing items listed on Amazon and get paid up to 10% of the sale amount from the qualifying purchases. This program is ideal for online influencers such as bloggers and vloggers who can use their influence to get people to purchase a specific product on Amazon.

Amazon Merch: An invite-only marketplace for content creators where they can sell their designs / artwork and let Amazon takes care of the rest, including production, sales, shipping and creating a product page on Amazon.com.

Amazon Handmade: If you’re familiar with Etsy, Amazon simply has the same marketplace for you to sell your handcrafted goods. Unlike Etsy, not everyone can join the marketplace; it has an application process wherein you have to specify the complete production process and provide great product photos. Applications are thoroughly reviewed to ensure every artisan meets Amazon’s handmade goods requirements.

Amazon Customer Service Associate: If selling isn’t your forte, you can still earn on Amazon by being a customer service representative. You can check out and apply at Amazon Jobs if you’re interested.

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