Investment Assessment: Retail Arbitrage vs. Buying Wholesale

Buy low, sell high—that’s the investor’s motto. But investments are risky, and there’s no such thing as a sure bet. With that in mind, investors must balance the risk equation, using what they know about the market to inform their decisions about when to buy and when to sell. This is true of any type of investment, whether it be in property, the stock market, or—in the case of resellers—merchandise.

Resellers operate on a much shorter timeline than most investors. To turn a profit, their turnover must be rapid. Merchandise prices fluctuate and items can depreciate quickly. While property might appreciate in value over time, merchandise sitting on a shelf (antiques aside) is money lost.

Finding product, then, is the most important part of a reseller’s investment equation. And calculating that investment depends on two additional important factors: the risk associated with each product purchased, and the amount of time spent finding and listing that product.  

Based on those factors, we’ve developed an investment assessment between the two most common sourcing methods: thrift shopping or retail arbitrage and purchasing wholesale.

Thrifting or retail arbitrage. Buying products for individual resale is a tried-and-true method for many resellers. For some, that means hitting the nearby Goodwill or Salvation Army stores. Others raid the clearance racks at box stores like Target or WalMart. Still others source online, based on price information from sites like Keepa.com or CamelCamelCamel. All resellers can take advantage of price tracker sites like these to keep an eye on price activity for items or categories they commonly sell.

  • Risk Assessment: Low. This kind of retail arbitrage allows resellers to be very selective with their purchases, hand picking each item based on how well they think it will sell. That’s particularly true today, since smartphones make researching prices in-store in real time possible.
  • Time Assessment: High. Being selective takes time. Resellers doing arbitrage this way are often spending time driving to various locations, shopping for products one-by-one, and individually researching each product’s pricing fluctuations.
  • Overall Assessment: With a low selling risk and high time investment, this method is best for resellers who have a low volume of sales per month, or as a supplement to a larger wholesale purchasing strategy.

Buying wholesale. This is another common method of product sourcing. This merchandise often comes stacked in boxes or in one large box called a gaylord on top of standard pallets. Resellers can purchase this grab-bag of merchandise online for direct delivery, either individually or by the truckload. Pallets are also available for purchase from a liquidator’s location or as part of a pallet auction. Prices range widely based on the pallet contents, but can be purchased for as little as $50. More expensive pallets typically fall in the $800-1,000 dollar range.

  • Risk Assessment: Medium to High. The risk of a pallet varies widely, since the quality of merchandise is never a certainty. All resellers who regularly purchase pallets should spend time identifying vendors they trust that will deliver a pallet that can turn a profit. Buying in person sometimes includes the opportunity to examine the pallets before buying. Another method of vetting pallets is through a merchandise list, or manifest—some vendors offer these up front, for free.
  • Time Assessment: Medium. Once a reseller has identified pallet vendors they trust, the time it takes to actually purchase the pallet is typically low. What takes time is sorting, labeling and listing items for sale—having a streamlined system in place and tools like a barcode scanner and label printer can drastically accelerate this process.
  • Overall Assessment: This method is best for resellers who are doing a relatively high volume of sales per month. While the pallets themselves can be high-risk, they can also lead to a high reward.

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