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Does Retail Arbitrage (RA) Have A Future on eBay and Amazon?

The eBay & Amazon Seller's News ~ August 2018 ~ Volume 19, Issue No. 14

Tips, Tools, News and Wholesale Resources for eBay and Amazon Sellers
by: Skip McGrath

In This Issue:

Musings from and about eBay, Amazon and The World Wide Web

  1. Does Retail Arbitrage (RA) Have A Future on eBay and Amazon?
  2. Understand your fees Before Selling on Amazon
  3. How to Negotiate Exclusive Selling Arrangements for eBay and Amazon
  4. Niche of the month - Used Children's Clothing
  5. New Wholesale Sources for eBay and Amazon Sellers

"Failure is success in progress." ~ Albert Einstein


You may have noticed I only did one newsletter in July. We are normal people and like to take some time off too. Besides, our grandkids are out of school for the summer, and we like to spend time with them.

However, I will be back to doing two newsletters this month

eBay & Amazon release quarterly numbers

Amazon Second Quarter Sales up 39% to $52.9 Billion. Those are astounding numbers considering the second quarter is usually the slowest.

Operating cash flow increased 22% to $21.8 billion for the trailing twelve months, compared with $17.8 billion for the trailing twelve months ended June 30, 2017.

Net income (profits) increased to $2.5 billion in the second quarter compared to $197 million the same time a year ago.

Meanwhile in the same period, eBay saw sales of $23.6 Billion versus Amazon's $52.9 Billion. eBay's profit however was slightly higher because Amazon is still building fulfillment centers which directly affects profits.

Long term storage fees start in a few days on August 15th. Review your inventory and remove any products you need to by then. To be safe, do your removals at least a day early on August 14th, so Amazon can process them before the 15th. If you want to avoid this in the future, then do a better job managing your inventory. Whenever I see an item in my inventory moving slowly, I aggressively discount it to get rid of any excess.

Amazon recently made it slightly difficult to contact support but it can still be done. Here's how:

1. First click in Help and when the window opens there is a link at the bottom of that window that says Contact Us.

2. Click on that and another window comes up that asks you to select between Selling on Amazon or Advertising or stores.

3. Select Selling on Amazon.

4. Once you do that it will open a window that says Top Solutions. Click on the last one and when that opens, just ignore it.

5. Now look back on the left and you will see a list of topics.

6. Go down the list and select My Account, and under that click on Other Account Issues. When you do that, it will open a support form. You will have the choice of chat, phone or email. I always have the best luck with email, because I get written instructions to fix my issue.

Amazon will start enforcing image guidelines by Sept. 18th. Here is the announcement (Seller Central login require to access the links):

By September 2018, you may see items suppressed due to the following defects in the main image:

- Blurry or pixelated image or image with jagged edges

- Image with any text, logo, graphic, or watermarks shown

- Multiple product views or colors or sizes are shown in image

- Product on model

- Product occupies less than 85% of the frame

Follow these steps to address main image issues, which may lead to search suppression of your ASINs:

1. Go to Inventory > Inventory Reports.

2. Select the Listing Quality and Suppressed Listing Report.

3. Click the "Request Report" button.

4. Download the report and review the issues with the Field Name = Main Image URL

5. To correct a problem, upload a new main image that meets Amazon's image requirements:

- Image is at least 1000 pixels on the longest side

- Image that is not blurry or pixelated and doesn't have jagged edges

- Image that doesn't show any text, logos, graphics, or watermarks but shows only a real product photo

- Image that shows only one (front) product view (and one color/size), except if several items are sold together as a multi-pack, which must be mentioned in the title

- Image with product shot flat without a model

- Image where product occupies 85% of the frame

Note: After you upload the correct main image, expect a 2-day delay to reinstate any suppressed ASIN.

To learn more about suppressed listings, refer to this help page.

Amazon Prime Day Results: Amazon Prime Day was a huge success for our account. I normally sell about 22-25 items per day, but on Prime Day we sold over 55 items. Some other facts:

1. Members worldwide purchased more than 100 million products during Prime Day.

2. Amazon third-party sellers (that's you and me) sold over $1 Billion total on Prime Day.

3. Amazon welcomed more new Prime members on July 16 than any previous day in Amazon history.

4. Amazon experienced technical issues that interrupted sales in the first few hours but fixed them quickly.

Speaking of Amazon Prime - Amazon is raising the Prime membership fee from $99/year to $119 per year. The new charge will take effect the next time your membership renews.

Manage critical tasks on Mobile with the Amazon Seller app. Here is information on this valuable seller too:

The Amazon Seller app available on iOS and Android lets you:

  • View your sales. See your business performance for today, this week, or this month.
  • Manage your inventory. Easily update your prices and quantities.
  • Manage your orders. Get notified when your product sells. View your pending orders and confirm shipments.
  • Create listings.
  • View your next payment. See your next disbursement amount and the date.
  • Provide great customer service. Respond to customer questions quickly with customizable email templates, or simply mark messages as 'no response needed.'
  • Find new products to sell. Check current prices, sales rank, competing offers, and customer reviews by using text search or by scanning items.
  • Receive new pricing opportunities. Stay competitive on the go when listings are close to the buy-box price, have low sales conversion, or are eligible for a fee promotion.
  • Have a question about selling on Amazon? Use the app to contact Seller Support.

For more information or to download the app on iTunes or Google Play.

Holiday Selling Dates for Toys & Games Announced. You may think this is too early for this announcement, but note the date of August 18 in the first bullet below, which is almost here.

Here is the Amazon announcement:

To maintain buyer confidence in Amazon this holiday season, we are implementing holiday selling guidelines for the Toys and Games category. Effective October 17, 2018, through the first week of January of 2019, sellers who meet the following performance criteria will be eligible to sell in the Toys and Games category.

  • Your first sale on Amazon must be prior to August 18 of 2018, and need not be specific to the Toys and Games store.
  • You must have processed and shipped at least 25 orders from August 1 through October 1 of 2018. The orders do not need to be specific to the Toys and Games store.
  • Your pre-fulfillment cancel rate must be no greater than 1.75% from Sept 1st through Sept 30th of 2018.
  • Seller's late shipment rate must be less than 4% from Sept 1st through Sept 30th of 2018
  • Seller's order defect rate must be no greater than 1% short term, as of October 1 of the current year.
  • All orders that use Fulfillment by Amazon (FBA) will not be subject to the holiday season restrictions, as long as your selling account is in good standing.

Note the statement in bold. As long as you sell via FBA you will not be subject to this restriction.

Amazon categories requiring approval. These change from time to time, but this is the current list

Note: You must be logged into Seller Central to access those links

Lets get started with this month's in-depth articles:


1. Does Retail Arbitrage (RA) Have A Future on eBay and Amazon?

The future of retail arbitrage

First - what is Arbitrage? Webster defines it as:

The purchase and sale of products in different markets in order to profit from price discrepancies.

Retail Arbitrage is nothing more than buying products in retail stores such as Wal-Mart, Target, Loews or Kohl's, (usually on sale or clearance) at a low price then selling them on eBay and/or Amazon at a higher price. The difference is your profit. Do the same thing in an online site and it's called Online Arbitrage (OA). I know it sounds strange, but products on Amazon and eBay often sell at much higher prices.

Let's say you walk into Wal-Mart and they are having a clearance sale on Kong Dog toys for $2.50 each. Using the Amazon seller app (A free smart phone app), you look on Amazon, and see the same toy is selling for $14.95 on Amazon with $4.44 in total fees, and they have an excellence sales rank, so you buy up the entire supply of 24 units and happily head for home counting you profits as you go.

There is just one problem. It turns out that Kong is a restricted brand on Amazon. When you try and list it, you will get a message that the brand requires approval. This will be impossible to get because, except for a few grandfathered sellers with special permission, Kong does not allow their products to be sold on any online shopping site.

(Here is a link to an article that lists most of the brands restricted on Amazon. Note: These same brands tend to be restricted on eBay also through their VeRO program).

So now you are stuck with 24 Kong dog toys. You may be able to give a few to your friends who own dogs, but you will most likely end up donating the rest to a thrift shop.

This illustrates just one of the problems of Retail Arbitrage. Now, before you get too discouraged, there are still plenty of products available that are not restricted. Its just that they tend to be either an off-brand product or a lesser known brand name. Nevertheless, these products still sell. Here is an example:

I was in Wal-Mart one day and found 25 off-brand weather warning radios on clearance for just $2.90 each. I couldn't find that exact brand on Amazon, but similar radios were selling for between $16.95 and $24.95, so I decided to take a chance. That turned out to be a good score because I sold all 25 within 12 days at $19.99 each.

It turns out that both eBay and Amazon are trying to kill the RA and OA business, so although it may be a great way to get started selling, it's probably not a good long-term business strategy. However, if you are going to do this, get the Amazon Seller App on your smart phone and take it with you when shopping. This way you can check for approval of an item before buying it. Just enter the UPC code and try and list the product. If it requires approval you will be able to see that before purchasing.

Also I recommend printing out the restricted brands list and carrying it with you.


2. Understand your fees Before Selling on Amazon

A lot of sellers think they understand their product costs but many of them fail to account for their true product cost. Some of the factors that go into your product cost include inbound shipping, shipping to Amazon (if you use FBA), interest cost, storage costs (both your own and Amazons'), fulfillment fees if you are using a prep and ship center, import duty if the product was imported and so on. It is important to have a true understanding of your costs before you list an item and set a price.

That brings us to fees. These days more and more sellers are using Fulfillment by Amazon (FBA). Amazon charges extra for that service, and if you are not careful those fees can eat up your profits.

Fortunately, you can preview your fees in the Manage Inventory section of Seller Central.

Fee Preview in Seller Central allows sellers to calculate net proceeds for each product.

Amazon Seller Central fee preview

This is a great feature for pre-calculating you profit when setting prices. Just subtract the total fees from your selling price then subtract your total product cost to see your net profit. For example, on the first item I am selling for $19.99, less the fees my net from Amazon is $13.80. My cost on that product is $6.00, so that gives me a profit of $7.80. So yes, I am happy to sell that item for $19.99.

Fee Preview is one of the columns you can select to display on your Manage Inventory page. Here is the complete list including the ones I have checked:

Amazon Manage Inventory page

Notice that I have Fee Preview checked. This is what causes the fee preview to show up on your Manage Inventory page. Notice you can also see things like Buy Box Price and Sales Rank. I also find those to be useful and important.

Notice that the fee preview shows your total fees including the Amazon commission and your FBA fees.

Understanding both your fees and your costs will go a long way to insure profitability.


3. How to Negotiate Exclusive Selling Arrangements for eBay and Amazon

I have written about this several times, but I keep getting email from folks who read about it last year and want more information. So I thought I would address it again.

There are three ways to win the buy box on Amazon:

  1. Be the lowest price seller with shipping
  2. Create a unique product by bundling
  3. Negotiate a deal with the supplier to be the only Amazon seller (and/or eBay also).

On eBay there is not guarantee of getting in first place in search, but if you are the only seller of a given item, then you have no direct competition.

So how do you go about finding and negotiating such a deal? Let me give you a real example of one of these deals I am involved in now.

Last October Karen and I attended the Seattle Gift Show. That is a wholesale show open to retailers and resellers only - the general public is not admitted.

Walking around in the Jewelry section we found a line of fashion jewelry we liked. A small company makes it here in the USA and the owners of the company were there in the booth. We looked at the jewelry and decided to place a small order (about $300 worth at wholesale). I then engaged the owners in conversation. I explained that we sell on eBay and Amazon and asked them if they would agree to give us an exclusive for their product on eBay and Amazon. Here are the reasons I gave them:

  • There are only so many of their items that will sell on eBay and Amazon in any given day, week or month. Therefore, it does not matter if there is only 1 seller or a dozen sellers. More sellers do not increase the size of the market.

  • Since we are the only seller, they only have to deal with one company which lowers their costs and since we are the only seller we typically place larger orders than they would get if there were several smaller sellers

  • Once we test the market and get a feel for the sales velocity, we will agree to purchase a certain amount each year, so they can predict their sales.

  • Once you have several sellers they typically start competing on price. This can upset their traditional retail accounts. When retail stores see the items selling for less online they typically get upset and may not reorder. We agree to hold their price and not do that.

  • We act to protect their brand. If we see anyone selling or mentioning their brand online, we let them know. We register the brand on Amazon, and set up a VeRO Information Page on eBay, so we can monitor other sellers and inform them.

That is the main part of our sales pitch. The other part is just being very nice and polite and engaging so they like you and will trust you.

After talking with them it looked like they didn't quite understand, and they really had no knowledge of how eBay and Amazon worked, so I suggested they think about it and we would give them a call in a week or so to discuss further. They thought that would be a good idea. After the show we went on a short vacation, and once we returned we emailed them and set up a call.

This gave them some time to formulate some questions that we answered to their satisfaction and we struck an agreement.

I am often asked what kind of contract we sign. The answer is, we rarely do that. I do have a formal contract with one company that insisted on it, but in most cases we work on a handshake or just exchange emails laying out the details. The items you need to address in the agreement are as follows:

  1. Term or length of the agreement, and notice to cancel (we always ask for 90-days)
  2. The fact that you are the exclusive reseller on eBay and/or Amazon (or any other site such as Etsy or Sears.com if you sell on those)
  3. That they inform their other retailers that they may not sell on eBay or Amazon.
  4. If they have a MAP (Minimum Advertised Price) policy that you will follow that.
  5. If you agree to an annual amount of purchase to maintain the agreement you will need to spell that out.

As for the last item, I suggest you do a good market test before agreeing to that so you have a god idea of how much you want to commit to.

Now, how do you locate these companies? In this example we found this company at a trade show -in fact of all six deals I currently have, I found all but one at a trade show. The other one was a company I contacted through their website after seeing that their product was not listed on either eBay or Amazon.

I have to say that the company that I contacted online was the hardest one to negotiate. This technique works far better in person that is does working through email.

Another category we sell in is locally produced gourmet foods. We find these at local farmer's markets and street fairs. Here again I just make the same argument. Most of these folks have a website, but they don't think of eBay and Amazon as a place to sell their sauces, spices, teas, jams, honey, etc. My approach is pretty similar to what I do with folks at trade shows.

If we see a product at a farmer's market we are usually buying from the business owner, so we make the same pitch. I currently sell over 15 items in the gourmet food category and four of them are items we have an exclusive on. I did this just a few weeks ago and picked up a line of expensive gourmet chutneys we just started selling.


4. Niche of the month - Used Children's Clothing

Used Children's clothing has been a staple on eBay since the early days. It's one niche that always works. And these days there are more and more moms looking for them. Here is a look at some recent listings (mostly auctions) on eBay for kid's clothes: (You can also list them as Fixed Price. Many sellers are now doing this).

eBay listings for children's clothing more eBay listings for children's clothing additional eBay listings for children's clothing

Here is what you need to know to be successful in this niche:

  • Look for recognizable brand names such as Gymboree, Abercrombie Kids, Baby Gap, American Girl, Carters, etc.
  • Buy all sizes and genders but group them by size and gender when you sell. In general, it is easier to find girl's clothes in good condition, but you can find boys clothes as well.
  • In general, concentrate on clothing for age 10 and under (but there are exceptions)
  • Fold and group the clothing, place on a neutral background and take good photos. Remember the new eBay photo regs - the photo has to be at least 600 pixels on the longest side.
  • Search eBay for similar items listed, or completed items that have sold. Find the ones that have sold for the most and use a title similar to that listing.
  • Also if any of your clothing is a name brand always include the brand name in the title. Remember, you get 80 characters in the title (including spaces).
  • If you can find the clothes, consider selling large lots such as 15 to 25 pieces as people buy those, but in general you will get the best prices for smaller lots of 6 to 12 pieces per lot.
  • When you buy clothes, ask the seller if they smoke or have pets. If the clothing is from a smoke-free and/or pet-free home be sure and mention that in the listing

Other things to include in the title are:

  • If you are selling a group of clothing, put the word "lot" in the title as people often use that search term
  • Size and gender
  • Size of the lot, for example: 6-piece lot

There are four main places to find used children's clothing:

  • Garage and yard sales
  • Thrift shops
  • Advertise in the classifieds that you buy used children's clothing in good condition
  • Make sure all your friends and neighbors know you buy used children's clothing

Tips for Buying

  • Only buy clothing in good condition. Unless you want to do repairs, never buy any pieces with stains, rips or tears.
  • Remember you make money when you buy - not when you sell. Buying well is the key to profits in this niche. Our local thrift shop sells children's clothes for about 50¢ per piece. So a lot of ten pieces will cost $5, which means you should try and get between $16 and $20 for the lot. If they are recognizable brand names this should not be a problem. I have seen nice lots of ten sell on eBay for as much as $29-$35.
  • When buying at garage sales always offer less when buying more than one piece. If someone is asking $1 each for items, I will usually take all the ones in good condition and offer a price for the lot. For example, if I pick up ten pieces I will ask if they will take $7 for the lot. Nine times out of ten they accept, and once in a while you might get a counter offer for more than $7 but less than $10.
  • If you live near an outlet mall, be sure and visit any children's clothing stores and get on their email list so you get notice of sales. After the sale ends go back to the store and ask for the manager. Offer them 50% of what the sale price was on the remaining items - they will often accept. I know sellers who get really good prices for groups of new items from this source.
  • Some people sell children's shoes although they are very hard to find in excellent condition. Although I often see brand new, never worn shoes at thrift shops.
  • Be sure to visit the thrift shops in ritzy or high-income neighborhoods. They almost always have the top name brands.
  • People often sell out of season clothing cheaper (example winter jackets selling in the Spring). Although I am generally against sitting on inventory because it ties up cash, it can be good to wait and sell those jackets in the Fall at a much higher price.
  • Once again - never buy clothing pieces with rips, stains or tears. People can live with normal fading, but selling items in poor condition will earn a negative feedback even if you disclose it.

So there you have it. This can be a very lucrative niche if you work at it. There are several sellers selling up to $8000 per month in just children's clothing.


5. New Wholesale Sources for eBay and Amazon Sellers

Mission Belts sells a line of very nice Exact Fit belts with no holes. Use this e-mail address for wholesale inquiries.

Alchimie Forever of Switzerland sells a large line of cruelty free and vegan high-quality beauty products

American Backcountry sells top quality Moisture Wicking Apparel and trend gear

Abbott is a wholesale distributor of high-end home décor and giftware. Family run since 1949

Cariloha offers an exclusive collection of bedding, apparel, active wear, bath goods, and accessories made from soft, cool, clean and green bamboo.

CF Cornerman sells a Premium Hospital Comfort Kit that is an alternative to flowers and candy for a sick loved one. Designed for a hospital stay and beyond: Insulated Cooler, Bluetooth Speaker, Water Bottle, Hospital Survival Guide, Body Wipes, Lip Balm, Backscratcher, Pen & Notebook, and Dark Chocolate Bar

Jesmic Jewelry by Esther Susan makes Bling Things to Hang or Wear including Sun Catcher Pendants for Window or Wear. Can also attach to key chains or pendant chains

Littlebeam makes a comfortable, supportive pillow that helps position yourself and your baby during breastfeeding.

California Picnic sells a complete line of picnic baskets, picnic supplies and a line of and gardening accessories.

Toy Zone is India's largest toy manufacturers and carries a full line of licensed products

Ganesha Expo is a large manufacturer and trader of all kinds of handicraft and handloom items.

Ashoka Exports makes a large line of household and other products based on Jute fiber.

Tulle is a large company specializing in exporting fabric based products and likes to do private label

Fashion Domino is a large designer and manufacturer of clothing and accessories. They are wholesale only.

Comfort Click Ltd is the Authorized UK Wholesale Distributor of Herbal Health & Beauty Products such as Beauty Products, Hair Care and Skin Care Products, Weight Loss and Digestive Health Products in UK and Europe.

High Voltage Wholesale sells a large line of Detox products and other supplements.

That's all for now. See you again in about two weeks.

Skip McGrath
The eBay & Amazon Seller's News

P.S. If you missed the last issue, click here to read it.

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