Are you looking to take advantage of the sales opportunity that the Amazon marketplace has to offer? Upon first look, your options can seem overwhelming. The best business model for you to choose is completely reliant on what you’re looking to get out of your business. The following are business model options you can choose and the pros and cons of each one. 

Retail Arbitrage 

The retail arbitrage business model is one where you purchase a product at a brick-and-mortar retail store and sell it at a higher price point on Amazon. You’re flipping merchandise which can be described as taking advantage of market inefficiencies. 

This system works best when you buy a product on clearance or during a sale and sell it for a price that’s closer to the actual market value. It also works well when you buy at regular price then sell it for three times what you paid in times when people are more willing to buy such as the holiday season. 

Pros:

  • An inexpensive entry into the selling world. 
  • No need to invest a huge amount for inventory. 
  • Easy to understand

Cons:

  • The process can be time-consuming as you have to physically find and restock items. 

Online Arbitrage 

Much like retail arbitrage, the online arbitrage business model involves buying a product and reselling it. However this time you buy from an online store instead of a traditional store. Online arbitrages are often easier to run than their retail counterparts as you can compare their prices on other websites with just a simple click. Plus, several tools are designed to make the process even easier, such as the one featured in this Viral Launch review.

There are several websites available for your source needs, from large chain stores to companies you’ve never heard of. These places often offer great deals that can easily be flipped on Amazon. 

Pros: 

  • A great option if you want to work from home. 
  • It can give you more sourcing opportunities. 
  • Your source operates at any time and is not restricted by normal store operating hours. 

Cons: 

  • Starting can be difficult because you don’t know where to go. 
  • It can be easy to buy too much inventory.

Wholesale

Wholesale is a popular business model that many online stores adhere to. It allows you to buy a product in larger quantities for a lower price than you would at a retail store. This is a more advanced option that is easier to try after your business has established itself. You need to thoroughly understand business aspects such as sales history and sales ranks. 

Pros:

  • Purchasing products at a lower price translates to higher profit. 
  • It means that you can easily reorder items, meaning you can choose your winners and stick with them. 
  • It requires less work from you since you don’t have to spend time actively searching for products.  
  • You can scale your business.

Cons:

  • It requires a large investment of capital to succeed. 
  • It’s a bigger risk than arbitrage due to the large quantities you bought. You risk the chance of getting stuck with a ton of products that you aren’t able to sell. 

Private Label 

A private label business is one that practices the purchasing of products and putting your brand’s name on it. With this model, you purchase from somewhere else, such as China, and slap your logo, brand, and marketing on it. It’s a practice that has gotten more attention as several restricted items can get Amazon sellers suspended. When you buy it, you don’t have to worry about those restrictions. 

Pros:

  • You’ll have little to no competition as you’re creating the listing and are the brand owner. 
  • You have control over the pricing. 

Cons:

  • It’s a bigger risk because the items typically have no sales history or ranking. 

The Bottom Line

Becoming a seller on Amazon doesn’t have to be complicated. Once you’ve chosen the best business model for your needs, you can find success with a little knowledge, experience, and effort.

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