6 Tips For Launching A Profitable Retail Arbitrage Business

Posted on: 7 October 2016

Retail arbitrage--buying consumer goods to resell at higher prices--is a home-business model that's relatively easy and inexpensive to execute. As with any business venture, however, your best chance for success comes from building a solid foundation before you jump in.

1. Verify that you're allowed to conduct business from your home. Small operators have little to worry about, but if you'll receive frequent merchandise deliveries and maintain inventory, check with your municipal zoning office to make sure you're in a zone that allows this type of business. If not, you can ask for a variance. You'll also need permission from your homeowners association if you live in a community governed by one.

2. Create a workspace. If possible, dedicate part of your home to your arbitrage business. At a minimum, you'll need space for a large table and for storing merchandise and shipping materials.

3. Write a business plan. Creating a business plan forces you to think through your launch and prepare for your first year in business. Use the plan to establish your budget, list venues where you'll purchase and sell your merchandise, and establish milestones for gauging your business' success.

4. Create a workflow system. Research tools that can help you evaluate potential purchases, manage inventory and track income and expenses. Your system is likely to evolve as you gain more experience, so keep it simple and adaptable to start.

5. Purchase equipment and supplies. Again, start with the basics. A sturdy table for sorting and packing merchandise; shelves for storing inventory; mailing supplies; and free apps for product research, bookkeeping, and inventory tracking are all you need to get up and running.

6. Do some trial runs before you start buying. The benefit is twofold: a chance to try out your workspace set-up and your workflow system, and free capital you can use for your first shopping haul. Start off by selling items you have in your home:

  • List media and easy-to-ship toys and electronics on an auction site
  • Offer sports and exercise equipment on a local online classified site or yard sale group
  • Sell old jewelry to a store that resells estate pieces or offers cash for gold and silver
  • Trade in old electronics to retail sites for cash or credit

With your space and your business process ready to go and cash to burn, you're ready to start buying. Take it slow--stick with money from your trial run for your first haul, and invest the proceeds. Before you know it, you'll be earning enough to buy larger and more profitable hauls and still have enough left to pay yourself.