Lessons Learned In Business

Increase Your Q4 Margins – The Retail Arbitrage Discount Conductor

Retail Arbitrage Discount Conductor (3)

You walk into a local Walmart and look around.  There’s a lot of product – everywhere!  You want to make some money by reselling items on Amazon, but you have absolutely no idea where to start.  You also have no idea how to achieve the highest margins by buying items at a fraction of retail pricing.  You are incredibly jealous of those people that always seem to “get it”.  They can find profit everywhere.  Sound familiar?  If so, keep reading as I reveal some of the secrets sellers use to win at retail arbitrage.

Welcome back to the “How I Cut My Sourcing Costs Up to 50%” Series.  This is post #2 in the series of 3.  In case you missed the first post, here’s the topics we covered in this 3 post series:

Don't Miss Out On The Next Post In The "How I Cut My Sourcing Costs Up to 50%" Series.

Don't Miss Out On The Next Post In The "How I Cut My Sourcing Costs Up to 50%" Series.

Some Retail Arbitrage Amazon sellers just “get it”.  They understand and work every angle possible to achieve the best possible discounts.  It’s almost like being the conductor of a train.  There’s all this cargo behind you.  The destination you are going to is the massive profit land of Amazon.  The conductor knows exactly how to get to the final destination, and get there safely.  They try to stop the train when there are road blocks such as high priced clearance like this:

Target - you are doing it wrong. Thanks Brad Clouser!

Target – you are doing it wrong. Thanks Brad Clouser!

So, how exactly do these sellers do it?  They become what I like to call….wait for it…

The Retail Arbitrage Discount Conductor

Introducing The Retail Arbitrage Discount Conductor.  No fancy conductor hat required.  But what is required is the knowledge of some very key points, and some people skills.  I like to break down the Discount Conductor to knowing these key things:

  • Seasonal Timing
  • Asking for Discounts / Creating Partnerships with Management
  • Sale Rotations
  • Clearance Rotations and Clearance Tags

Let’s go into detail of each, shall we?

Seasonal Timing

You may be thinking to yourself: “What is Seasonal Timing?”  All retail stores have specific buying and selling periods for nearly every type of product in their stores.  They tend to bulk up at one period of the year, and they tend to clearance things out at another period of the year.  Why?  It’s because consumer buying patterns are extremely predictable.  The time periods you should be looking to buy is when the peak selling time frames are over, and the stores are clearing the items out.  An easy example?  Go to all the local Halloween stores starting on November 1.  You’ll easily see 50% off on the first day after Halloween.  Think of items that could potentially sell well the rest of the year – licensed kids costumes are a good place to start.  I’ve broken down which items to buy in certain months below:

January – Office furniture, clothing, gift cards, linens, bedding, video games, wedding supplies, fitness, Christmas themed items, gas grills, calendars,  air conditioners.  Also good for eBay items, as you’ll see a lot of opened return items from Christmas.

Feburary – Cell phones, TV’s / Home Theater, chocolate (after Feb 14), winter coats and apparel, tax-filing software

March – Winter sporting equipment and apparel, luggage, gardening tools

April – TV’s (last years models), digital cameras (last years models), shoes, cookware / kitchen accessories, snow blowers, jewelry, candy

May – Cookware / kitchen accessories, office furniture, mattresses, home goods, picnic & grilling supplies

June – Vacuum cleaners (last years models), dishware, tools, Laptops

July – Laptops, furniture, home decor, tools, video games, jewelry

August – Linens, storage, office furniture, kids clothing, school supplies, swimwear, camping gear, luggage

September – Appliances, bicycles, lawnmowers, school supplies, sunglasses

October – Bicycles, lawnmowers, grills, outdoor accessories, air conditioners, jeans, patio furniture

November – Appliances, candy, tools, cookware, Halloween items, TV’s and other electronics (mostly Black Friday)

December – Pool accessories, TV’s and other electronics, tools, toys, games, DVD’s.

Of course, don’t take this list for granted, but it should give you a good idea of when you should buy items to resell.

Another great tool to determine seasonal timing?  Google trends.  Google trends is a tool that shows interest over a period of time for a keyword on google.com.  It’s a treasure trove of information to see how demand ebbs and flows throughout the year.  Put a keyword into the tool, and look for what I like to call a “steep drop off”.  This is where you’ll see gradual build up, and then a steep drop down.  A perfect example is Halloween costumes:

halloween costume demand

Not surprisingly, the demand falls off a steep cliff immediately after Halloween.  Based on that trend, when would be the best time to buy?  As soon as the demand dries up in November because everyone is trying to get rid of it.  When would be the best time to sell these items? When the demand is the highest – October.

Let’s take a look at one more example – wedding gifts.

wedding gifts demand

Looking at this graph, the lowest valley at the bottom is right at the end of December and the beginning of January.  Not surprisingly, this is the best time to buy wedding supplies.  The peaks are typically in July and August, which are the best time to sell those wedding supplies you picked up on the cheap in January.

“Know the seasons well, and target stores based on seasonal trends.”

A good retail arbitrage discount conductor knows the seasons extremely well and targets specific stores based on seasonal trends.

 

You Know You Want More.

You Know You Want More.

Asking for Discounts / Creating Partnerships with Management

bryan young

Bryan Young – Store Management Partnership Expert

Asking for discounts and creating partnerships with retail managers can bring huge rewards for the buyers that do it.  I personally don’t have a lot of experience in doing this, so I’ve brought on an expert to discuss this topic.  Meet Bryan Young from ProfitSourcing.com.  He’s the author of Book Flipping: 10 Steps to Setting Up and Fully Automating a Used Book Selling Business on Amazon, and runs a fully outsourced retail arbitrage business.  One of the major keys to his retail arbitrage success is building solid relationships with store managers.  I’ll let him take it away…

“One of the main problems in online selling is that there’s a tendency for those doing retail arbitrage to all end up sourcing the same sales/stores. If you happen to find a really good clearance event, it really is only a matter of time until others follow suit. All retail outlets, for the most part are being monitored by resellers, it’s just the way things are.

The same goes for Online Arbitrage and Wholesale, you do all of the hours upon hours of research to find an excellent source for products only to spend the following months sweating bullets. There’s always a legitimate anxiety that some other online seller, or VA or computer program will stumble on your pot of gold and will really mess things up!

Entrepreneurs aren’t sheep. They don’t follow the heard. They don’t settle for low-hanging fruit. They don’t strictly adhere to the status quo. They are inherently different from the masses. Being different and taking the road less traveled is in their DNA (A quick disclaimer, there are some online sellers who are crushing it out there in these fields, but I guarantee they are hustling in their own unique ways.)

With the ever swelling flood of online sellers, it’s not as easy as it was last year, or last month, or even last week, to sell physical products online. To be successful, and to remain successful in this business requires innovation and a nimble approach.

To set yourself apart from your competition you must find the highly profitable, well ranked inventory that your competition doesn’t have access to, and I would submit to you that a trip to the clearance section at Target or a quick Google search won’t cut it for you anymore (I remember those days though, good times!).

Find your entrepreneurial angle. Be creative. Crush your competition.

Here’s our innovative product sourcing strategy – one that has us on pace to do over $1 Million in sales this year. We negotiate with store management to get a stellar price on product the store is desperate to dispose of. In a nut shell, over the course of the last 8 months we have been working very hard to build mutually beneficial relationships with management at some of the local retailers (all part of national chains), and it has paid dividends.

Do you want to do some negotiating? Is so here’s my #1 piece of advice:

Know Your Role!

Don’t ever forget this, they (the retailer) needs you more than you need them. If you approach this strategy with the alternative mindset, you’ll fail. If you call a store manager and say “Pretty please, can you do ME a favor and give ME a good deal on some stuff?!” You’ve already lost.

Instead think of it this way. These stores, especially right now, are inundated with inventory as they scamper to make room for Christmas. Before you even talk to a manager be thinking that it’s them that needs you (and REALLY bad too). Say something along the lines of, “I’ve noticed that you have 4+ rows of clearance items that are overpriced and not selling, I’d be happy to help YOU out by taking a good deal of them off your hands. I could be in later this week, I would be willing to spend a few thousand dollars in exchange for a discount on price”.

Now that’s a much more powerful position to be in, don’t you think!

I would love to hear about how you guys are innovating, leave a comment below!”

Thanks for the input Bryan!  To throw my additional spin on this topic, it might be wise to project a professional image when discussing the discounts with managers.  Show that you mean business, and you have money to spend.  The end result you want is for the manager to be calling YOU when they want to get rid of product.

A good retail arbitrage discount conductor has many store managers on speed dial.  They also are the first person the store manager contacts when they need to move product.

Sale Rotations

This is a pretty simple concept you may already know.  Almost every major retail store runs weekly sales / ads.  In most cases, they run them from Sunday – Saturday.  Our local grocery stores in Charlotte, NC mostly run from Wednesday – Tuesday.  Why is this important?  At times, sale items can be discounted enough to turn a profit.  A good habit to get into is to either visit stores on the day the sales hit, or go through the ads online prior to the sales hitting.  Do some research on those items in the ad, and you are sure to find some profitable items.

Other sale rotations to keep an eye out for are centered around holidays.  Many stores will release special sale pricing for holidays such as Presidents Day, Thanksgiving, Black Friday, Memorial Day and Labor Day.

Here are a few places you can do online research for ads:

Slick Deals

Weekly Ads

Shop Local

“Looks at weekly sales for great deals.”

A good retail arbitrage discount conductor looks at weekly sales for great deals, and understands when sales start and end.

 

Are you ready to improve your business skills?

Are you ready to improve your business skills?

Clearance Rotations and Clearance Tags

Clearance items are where a lot of new people doing retail arbitrage start.  Take a stroll down that clearance aisle, and what do you see?  Hopefully not this hot mess:

clearance

What you hopefully will see is a potential massive amount of profit.

A majority of retail stores have specific strategies for clearance items.  In general, most stores have specific rotation schedules for when they actually clearance items.  An example would be Target.  They usually mark down a specific department every week day.  A sample schedule might look something like this:

Monday – Electronics, Accessories, Kids Clothing, Books, Baby and Stationery

Tuesday — Domestics, Women’s Clothing, Pets and Market (food items)

Wednesday — Men’s Clothing, Health and Beauty, Diapers, Lawn & Garden items and Furniture

Thursday — Housewares, Lingerie, Shoes, Toys, Sporting Goods, Decor & Luggage

Friday — Auto, Cosmetics, Hardware, & Jewelry

In a lot of cases, the stores will also have graduated markdown schedules.   They might initially start with 25% off.  Then, after a certain period of time, it goes to 50% off.  Finally, when they are really looking to get rid of the items, they will do 75% or even 90% off.

Just understanding these concepts will put you ahead of the game.  However, since every store is different, how do you really know when the stores are taking discounts?  One way is to peek around the corner, and see if you can find employees pricing clearance items.

I PEEKING

If you decide to go this route, I would recommend keeping a log of what you see every time you visit the store so you can start to see patterns.  The easier way?  Start a conversation with an employee.  It’s not that difficult to ask “I’m really looking at purchasing some of these clearance items.  Do you have any sort of schedule of when you usually mark items down?”

Each store also tends to have specific clearance tags that can give away some clues.  The Krazy Coupon Lady has a terrific article breaking down Target clearance tags.  She has covered it better than I can, so I would recommend checking the article out.  An even more amazing article can be found at Rather Be Shopping.  They break down clearance tags at nearly every major big box store.  Between those two articles, you will see everything you need to know about clearance tags.

“Strike up conversations with employees to find out when markdowns take place.”

A good retail arbitrage discount conductor has studied the clearance tags, and understand exactly what they mean.  They also strike up conversations with employees at stores to find out exactly when markdowns take place. Finally, they write them down, or keep them in a tool such as Evernote (non affiliate link: Evernote) to easily find the information later.

Are You Enjoying This? Let's Make This Official.

Are You Enjoying This? Let's Make This Official.

Lessons Learned

When I first started doing retail arbitrage, I didn’t know about the Retail Arbitrage Discount Conductor.  I learned these techniques, and are exactly what helped me re-start my business.  If you apply the techniques above, you can be immensely more successful with retail arbitrage.  Pro Tip: Once you have these down, start training employees or contractors to do them for you.

To recap, the Retail Arbitrage Discount Conductor:

  • Knows the seasons extremely well and target specific stores based on seasonal trends.
  • Has store managers on speed dial, and they are the first person the managers call when they need to sell items.
  • Looks at weekly sales for great deals, and understand when sales start and end.
  • Study clearance tags, and understand exactly what they mean. They strike up conversations with employees at stores to find out exactly when markdowns take place.

I’ll see you again soon with the next post in the “How I Cut My Sourcing Costs Up to 50%” Series, which will discuss the Gift Card Shark Strategy.  Make sure you enter your email address below because I’m sure you don’t want to miss out on the next post!

Don't Miss Out On The Next Post In The "How I Cut My Sourcing Costs Up to 50%" Series.

Don't Miss Out On The Next Post In The "How I Cut My Sourcing Costs Up to 50%" Series.

Continue The Discussion

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Chris Potter

Chris Potter is an internet entrepreneur that loves working on businesses and helping others with their businesses. He has operated businesses that have sold over $25 million in retail sales, bought and sold a blog design business, and started websites from scratch. Skyrocket your business by joining his Mentoring Program!

4 CommentsLeave a comment

  • You’re absolutely correct about FBA sellers buying from the same stores and the same clearance sales. The profit and ROI looks great when you scan it on your selling app, but the price drops once all the FBA sellers send in all their inventory at the same time. That 100% ROI all of a sudden is down to 50% or less.

    • I totally agree with Randy. You work so hard only to see the ROI shrinking after the arbitrage is sent in. It’s tough out there but I keep reminding myself that there’s billions of people out there buying and not as many FBA sellers. There’s still plenty to go around. Thanks Bryan for all your great suggestions! Thanks Jordan too! Love reading your helpful words…

  • Chris,
     Great job on the Posting! I am new to your Blog, a 2nd year FBA Seller. Getting ideas of product purchases and the month to purchase them really is setting Sellers on a great track to be successful. Do you feel Sellers do not diversity enough in their choices? 

    • Thanks for the kind words!

      I think a lot of sellers in general get in a specific path, and don’t think outside the box a lot. I know I did in the past, and I work hard every day to make sure I don’t do it again!

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