Earning Income from Retail Arbitrage Actually Takes Work
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When my wife and I first started out with retail arbitrage, we were skeptical of even making a sale. To our surprise, we have actually made several sales over the past 5 months.
Earlier this year, we decided to give Fulfillment by Amazon (FBA) a try as a way to build a retail arbitrage income stream. Prior to FBA, we had sold a few items on eBay and have sold as a Merchant on Amazon.
Neither experience was bad, but it wasn’t something we thought we could scale into a full fledged income stream. That is where FBA came in.
Fulfillment by Amazon is a tool used by many sellers to earn extra income. In some cases, sellers are able to make a living through FBA.
Our experience so far has been limited. There has been good and bad with selling on FBA. If nothing more … we have learned a bunch of things NOT to do if we decide to continue on with this potential income source.
And when it comes down to it … earning an income from retail arbitrage takes work. We just haven’t been willing to put in that work just yet.
Below is a quick recap of our latest sale we made.
Retail Arbitrage Using FBA
It is that time again where I will give a quick update on our Fulfillment by Amazon (FBA) money experiment. We are testing out selling through FBA to see if it can be a viable extra source of income for our family.
So far … I would say it is a wash. Not good but not bad either.
We have now made our 6th sale using FBA and are learning a bunch about the products NOT to try and sell.
Here is a quick recap of our most recent sale and progress thus far with FBA –
Most Recent Sale
It took a little over 3 months to make our latest FBA sale. The last 2 sales I reported on were back at the end of June!
I kinda forgot about our FBA inventory for the last several months. But after I logged into our account and saw the FBA Inventory Storage Fees adding up ($.77), I decided to start dropping the price on our remaining inventory.
One of the items that we dropped the price on was our 1 board game we had in inventory. We originally listed the game at $19.99. I decided to take a loss on this item and match the lowest price currently on Amazon – $12.99.
I could have probably waited and kept it a bit higher, but I wanted to get it out of inventory.
Here is a breakdown of the sale –
- Sold 1 Unit for – $12.99
- FBA Fee’s – $7.34
- Cost of Item – $10.00
So as you can probably tell, we took a loss on this item. The total loss was ($4.35).
Not entirely what I was expecting when we listed this item, but I have realized it is hard to make any profit off of this type of item.
Breaking Down the FBA Fee’s
What I realized early on about selling items on FBA is that you need to shoot for the higher priced items – well over $20.
Here is a breakdown of the FBA fee’s for the board game we recently sold.
Board Game Item – Sale Price $12.99
- FBA Order Handling Fee – $1.00
- FBA Pick & Pack Fee – $1.06
- FBA Weight Handling Fee – $2.34
- Per-Item Fee – $0.99
- Referral Fee on Item Price – $1.95
Total Fee’s – $7.34
Percentage of Sale Price – 56.5%
Since we paid $10 for the board game originally and the fee’s were $7.34 – we would have needed to sell the item for well over $17 to make any profit. Even if we would have sold the board game for a reasonable $19.99 – our profit (under $2) would not have been worth the effort.
I can tell you that once we get rid of our remaining inventory (5 craft items) – we won’t be selling low priced items on FBA again. There is just no room to make a decent profit and in this case we lost money.
FBA Inventory Update – First Shipment
Whenever we make a sale on FBA, we update the status of our first shipment – which contained a total of 11 items. These items consisted of 3 different products that were shipped to 3 different FBA locations. The total costs for this first shipment was – $66.81.
These costs included the price of the items to sell, shipping fees, and materials. No FBA fees were included in this total.
After our sixth sale, we had a positive balance for the first time of $1.19. However, we also incurred $.77 worth of FBA Inventory Storage Fee’s over the past 3 months.
Those fee’s brings our positive balance down to – $.42.
Still a positive balance, but basically we are breaking even.
Note – You may be wondering how our overall balance increased this past sale, despite us losing money on the board game. Well … the $66.81 cost above had the original cost of the board game ($10) already factored in. So we got $5.65 as a result of the sale (after FBA fee’s), which was added to our previous overall negative balance.
If we were to pull the plug on our retail arbitrage money experiment today, we would be basically breaking even. Not exactly what I had expected, but I have certainly learned a lot from listing items on FBA.
We have 5 total units remaining in our first shipment at a couple different Amazon locations. In order to sell these items, I will need to drop the price below our break even point for each.
I plan to drop the prices, get rid of the inventory, and claim a very small profit for the 11 items combined. Remember – The cost of the inventory has already been accounted for.
The alternative to not dropping the prices is that I will pay FBA Inventory Storage fee’s of $.19 a month – which will eat into profits even more.
We have been selling items on FBA for over the past 5 months. In that time, we have sold 6 of the 11 items that were listed.
After accounting for the cost of the goods to sell, shipping costs to FBA warehouses, FBA fee’s etc. – we have made an astounding $.19 on this side income stream.
Not exactly my idea of a worthwhile side income stream.
And while we haven’t made much profit, I have learned plenty of things. The most important being don’t try and sell low priced items. The FBA fee’s will eat up any profit.
After observing our little time with FBA, we plan to switch gears a little on what and how we approach retail arbitrage in the future.
Do you have a profitable FBA income stream? What types of items do you sell?