In the competitive Amazon landscape, the two most popular strategies have garnered attention and success: Retail Arbitrage and Wholesale.

While both offer unique opportunities for aspiring entrepreneurs, the question is: which one is to choose? 

Let’s delve into the nuances of each model, to help you make an informed decision.

Retail Arbitrage: The Thrill of the Hunt

Retail arbitrage involves physically sourcing discounted products from local retail stores, and reselling them on Amazon at a profit.

This business strategy relies mainly on identifying products with a significant price discrepancy between the online marketplace and the physical store. 

The pros of Retail Arbitrage: 

Retail Arbitrage has numerous advantages that can be enticing for aspiring entrepreneurs. Let’s explore some:

• Accessibility: Retail arbitrage is the best solution for beginners to enter the Amazon selling business with relatively low barriers to entry. Why? Because it’s relatively easy. Anyone can walk into a store, scan products, and start selling items for profit. 
• Low startup costs: What’s attractive about this business model is the minimal financial investments needed to enter the eCommerce world. You can start small, leveraging your existing resources and gradually scale up as you gain experience and profits.
• Low-risk experimentation: Retail arbitrage provides a low-risk platform for testing the market. You can experiment with different products, brands, and pricing strategies, since the products and brands you sell are already known and in demand. 

The cons of Retail Arbitrage:

While the advantages are super attractive, it’s crucial to consider the potential drawbacks associated with Retail Arbitrage. Here are some cons to be aware of:

• Stock limitation: Retail Arbitrage typically operates on a small scale, relying on individual purchases from retail stores. This means that if a product is selling well, you can run out of it pretty quickly. This limits the potential for significant growth and scalability. 
• Time-consuming: Finding profitable products through retail scouting can be a time-consuming activity, and there is no guarantee that you will come across them.
• Inventory constraints: One of the biggest impediments is that Retail Arbitrage heavily relies on the availability of products in retail stores. Often, retailers may impose restrictions on bulk purchases or limit access to certain products.

Wholesale: Unlocking Scalability and Consistency

Wholesale involves sourcing products directly from manufacturers or authorized distributors and selling them on Amazon.

The pros of Wholesale: 

• Scalability: Wholesale allows sellers to access larger quantities of products consistently. By working directly with suppliers, you can sell a product again and again. This lets you to meet increased demand and saves you a lot of time. 
• Reduced inventory risks: Wholesale eliminates the need to rely on discounted products for inventory. By sourcing from different suppliers, you can diversify your product range and ensure a more stable business model.

The cons of Wholesale: 

Just like Retail Arbitrage, Wholesale comes with potential drawbacks. Here are a few of them:

• Competitive market: The wholesale industry is always buzzing with activity. Thus, to outwit the competition, you need to offer unique products and attractive deals to customers.
• Dependence on supplier relationships: Wholesalers rely heavily on their relationships with manufacturers and suppliers. Any disruption in the supply chain, such as production delays, quality issues, or changes in supplier terms, can negatively impact a wholesale business.  
• Limited control over branding: Unlike Retail Arbitrage, wholesalers often have limited control over the branding and customization of products. This can limit the ability to differentiate products and build a unique brand identity.

But, which one to choose?

Determining which approach is better for you depends on various factors, including your goals, resources, and preferences. 

Retail arbitrage is an excellent starting point for beginners or those looking for a hands-on, exploratory approach.

On the other hand, wholesale provides a path to long-term scalability, better profit margins, and a more streamlined business model.

Luckily for you, in our MDS Podcast Episode, Corey Ganim, Amazon Wholesale Expert, encompasses both retail arbitrage and the transition to wholesale, offering invaluable insights and sharing valuable advice to keep in your back pocket. 

Turn it on Spotify, Apple Podcasts, Google Podcasts, Amazon Music, Listen Notes, Stitcher, Pandora, and Accomplishment media, or watch all our video content on our YouTube channel.