What is retail arbitrage?
Retail arbitrage is a method of obtaining inventory which involves purchasing items from retail stores, and reselling the merchandise on online marketplaces. Typically this method is used by smaller sellers, but we have seen sellers generate over $500,000 per year using this purchasing model.
Sellers purchase products from big retail stores like Walmart, TJ Maxx, Best Buy, Macy’s, Bloomingdales, Home Depot, The Disney Store, and hundreds of other retailers. Sellers have used this method since Amazon’s inception, and there are plenty of websites and software tools which assist sellers with selecting and listing these products on Amazon.
Due to the easy accessibility of purchasing items from retail locations, many sellers take this route when starting their Amazon business.
Should you use retail arbitrage to obtain inventory?
Even though retail arbitrage can generate a quick profit, this purchasing model is no longer a viable way for sellers to operate their Amazon business. Amazon has quietly changed its policy in regards to retail arbitrage without informing its sellers. Due to this internal change, retail arbitrage sellers contact us on a daily basis to manage and reinstate their suspended accounts.
The main types of suspensions which stem from retail arbitrage are “inauthentic items”, “counterfeit items”, “used sold as new items”, “materially different items” and “infringement”. These suspensions are typically generated by a customer complaint or a brand owner complaint.
Ironically, even though the main cause for a suspension can be retail arbitrage, the type of complaint which generates the suspension can significantly affect the process of reinstatement. For example, “used sold as new” suspensions are much easier to reinstate than “counterfeit” or “stolen goods” suspensions. Unfortunately, based on the type of complaint, it can be much more difficult to get the account reinstated.
Since Amazon sellers can’t control the type of complaint that will lead to their suspension, retail arbitrage opens sellers up to a multitude of potential issues.
You’ve been suspended, now what?
Many sellers are completely puzzled on how to proceed once they have been suspended. Seller Performance requests a detailed appeal plan, and asks sellers to provide invoices which prove authenticity.
The first question we always get is: “how are we going to provide an invoice when all we have is a store receipt?”
We caution sellers not to attempt to make their own invoices in order to try to cover up the retail arbitrage. Many sellers modify their current invoices to “fit” what Amazon is asking for. If a seller only has a receipt or purchase order, they will create an invoice, and submit it to Amazon hoping that it will work. Most of the time, this method doesn’t work, and it damages the case significantly. Even the slightest modification can result in delays to reinstatement.
Amazon sees thousands of invoices on a daily basis, and it is very easy for Seller Performance agents to spot a fake or manipulated invoice. Submitting this kind of invoice can add on another violation called “forged and manipulated”; this type of suspension is very difficult to resolve. Therefore, it is always best to submit the original proof of purchase to Seller Performance.
Sometimes sellers operate a combination of retail arbitrage and drop shipping. This is a very dangerous business model because sellers can get suspended for products they never sold, even though they listed them on Amazon. In this case, sellers don’t have any proof of purchase, which makes the suspension more difficult to resolve.
It is best to avoid these types of practices since they can’t be beneficial in the long term, and they can trigger a suspension at any time.
Can sellers prevent a suspension if they already use retail arbitrage?
Pay close attention to buyer complaints and negative feedback, and immediately address any accusations of “stolen goods”, “counterfeit”, or “fake” products. Communicate with buyers in order to resolve all possible issues to the buyer’s satisfaction.
Try to get the negative feedback removed by working with the buyer, and make sure not to violate Amazon TOS (Terms of Service) while communicating with the buyer.
If you’ve sent retail arbitrage inventory to FBA, we recommend removing it. Recently, Amazon has been refusing to return inventory to sellers if they have been suspended for “inauthentic” or “counterfeit” products.
Even though retail arbitrage is legal, it is no longer going to lead to a long term business with Amazon. While you may make some profits in the beginning, you will most likely get suspended, and have to deal with costly changes in order to update your business practices. We suggest that sellers move away from retail arbitrage, and move to more stable sourcing options.
Pro Tip: It is the best to consult a professional such as Sellercare if your account is suspended. In most cases, significant changes need to be made to seller account logistics, inventory, and sourcing before the appeal is prepared.
It is best to try to prevent suspensions in order to avoid this process entirely. In order to effectively prevent suspensions, it is crucial for sellers to monitor their account health page, and to proactively address all negative parameters. If you want a professional opinion, Sellercare also provides Risk Assessment Services and Suspension Prevention Services, in addition to Reinstatement Services.
All notices and warnings must be addressed immediately, and solutions need to be provided to Seller Performance to notate the account. These account notations will either prevent account suspensions, or in the case of an account suspension, these notations will speed up reinstatement after a follow up appeal plan is sent.