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How to Figure Out What to Sell on Amazon for Retail Arbitrage

Threecolts
Dave Consolazio
Published
January 2, 2024
Modified
January 2, 2024
Bag, box, wallet and laptop on a couch from online and retail arbitrage on Amazon

The new year served as a catalyst for me to begin my journey as a full-time Amazon seller in 2015. I spent the first week of January researching how to figure out what to sell on Amazon, and then the following week sourcing products at garage sales and retail locations in my area.

On January 21, I made my very first sale on Amazon FBA: an action figure of Meatlug from the movie How To Train Your Dragon 2.

I had purchased that Meatlug action figure for under $10 on clearance at Target and sold it for $39.99 on Amazon.

How did I decide that toys would be a good category for me to sell in? And what price points were good for me to buy at when doing retail arbitrage for Amazon? If you are asking yourself these questions in 2024 like I was in 2015, I’m here to help with this guide about what to sell on Amazon.

Choosing the Right Categories to Sell In on Amazon

Woman looking at items on a store rack and trying to figure out what to sell on Amazon

Before you can start sourcing for products to sell on Amazon, you’ll need to decide which categories you want to sell in. Certain products and categories are available to everyone on Amazon while others require specific approval. In this section, I’ll break down both types of categories and share my recommendations on which ones are the best for retail arbitrage.

Ungated Categories Are Available to Everyone

Ungated categories are the perfect place to start when figuring out what to sell on Amazon because they are accessible to anyone. Per Amazon’s overview of categories, the following product categories are currently completely ungated in 2024:

  • Amazon Device Accessories
  • Amazon Kindle
  • Automotive & Powersports
  • Beauty
  • Books
  • Camera & Photo
  • Cell Phones & Accessories
  • Home & Garden
  • Kindle Accessories and Amazon Fire TV Accessories
  • Major Appliances
  • Musical Instruments
  • Sports
  • Tools & Home Improvement
  • Industrial & Scientific

Additionally, the following categories are ungated but do have specific sub-categories that require approval:

  • Baby Products (excluding apparel)
  • Consumer Electronics
  • Grocery & Gourmet Foods
  • Health & Personal Care
  • Office Products
  • Outdoors
  • Personal Computers
  • Pet Supplies
  • Software
  • Toys & Games
  • Video Games

Keep in mind that even if a category isn’t restricted, specific brands sometimes are. For example, Beats by Dre is a restricted brand on Amazon, so third-party sellers aren’t allowed to resell Beats by Dre headphones on the platform even if they are brand new.

This is one of the most important reasons to use a product scanner like the one provided by ScoutIQ.co when sourcing for products. In addition to the valuable pricing information that this scanner provides (that I will cover in more detail later in this guide), the ScoutIQ app will also flag products as restricted when you scan them so you know before you buy that you won’t be able to sell them on Amazon.

Gated Categories Require Approval

Gold rings in a sale display

Restricted categories, which are commonly referred to as gated categories by Amazon sellers, are categories that sellers must apply for approval to sell in. Each of the following categories requires approval:

  • Collectible Coins
  • Entertainment Collectibles
  • Fine Art
  • Jewelry
  • Music & DVD
  • Postage Stamps
  • Sports Collectibles
  • Video, DVD & Blu-ray

When I was a full-time reseller on Amazon from 2015 through 2019, there were many more gated categories on this list including beauty and grocery, which were valuable categories for retail arbitrage. This smaller list of categories won’t really affect most resellers with the potential exception of music, video, DVD & Blu-ray.

Amazon has cracked down on these entertainment categories in recent years due to the presence of counterfeit goods on the marketplace. Sellers are now required to provide documentation of purchase orders to earn approval in these categories and risk losing their Amazon seller privileges if these documents are fabricated.

I’d steer clear of products in restricted categories when selling on Amazon in 2024. Still, while I was sourcing at thrift stores for products to flip on Amazon, I’d scan sealed CDs and DVDs to keep an eye out for rare and valuable ones. These could always be sold on eBay or another online marketplace if the potential profit made them worth the extra effort.

My Favorite Ungated Categories for Retail Arbitrage on Amazon

I gravitated towards toys, games, books, and consumer electronics right from the start of my reselling journey on Amazon. Products in these categories are popular year-round as they make great gifts and are enjoyed by people of all ages. And whatever I had trouble selling during the first three quarters of the year almost always had a buyer when the holidays rolled around in the fourth quarter.

With that said, I was always sourcing products in every category I was eligible to sell in. You never know what you are going to find in a thrift store or on a clearance sale, and it only takes a couple of seconds to scan a UPC barcode and see what your potential profit is on an item. Think in terms of seasons, too: home and garden products and pool toys sell great in the summer while blankets and space heaters sell well in the winter.

You can broaden your search even further to online arbitrage with the help of Tactical Arbitrage. Tactical Arbitrage sources over 1,000 retail sites worldwide, giving you the power to search for products in any ungated category that you can buy online and resell on Amazon at a profit. This is also a great tool for market research as getting a general idea of what products have the most potential in each category can help guide your sourcing strategies in local stores as well.

Buying at the Right Price to Sell on Amazon

Now that we’ve covered what to sell on Amazon regarding categories, let’s talk about what price points we should be looking for. I generally aimed for a return on investment (ROI) of at least 100% on all items I purchased to resell on Amazon. In this section I’ll cover why that rule worked for me and when I would consider making exceptions.

The 100% ROI Rule

If you are just getting started in retail arbitrage, you might think that this rule is way too strict. After all, profit is profit. If we can buy an item for $10 and get $15 back for it after fees to lock up a profit of $5 and a 50% ROI, why would we turn that down?

This is a fair question. If I were guaranteed a 50% ROI on an investment, I’d make that investment every single time. The issue is, when it comes to retail arbitrage on Amazon, there are no guarantees.

Using the same example above, let’s say that you scan a toy on clearance at Walmart with your ScoutIQ app.  You see that it’s selling for $21 on Amazon, which will clear you $15 after shipping and Amazon fees. At a $10 price point, you stand to profit $5 when this sale is completed.

But what happens if 10 other Amazon resellers buy that same product at their local Walmart with the intention of flipping it, and they start battling each other for the buy box by continuously lowering the price? Now you’ll be stuck either lowering the price or paying extra storage fees while you wait for them to sell out.

I had this happen on plenty of products that I sourced over the years. There are other potential issues that can lower your profits too, including:

  • Amazon starting to sell the product at a lower price to undercut third-party seller prices
  • Customer returns
  • Sudden decrease in customer demand

People on the internet who make flipping on Amazon sound easy don’t talk about risk, which you should always factor into your buying decisions. If I was buying a product for $10, I wanted to make sure that after Amazon fees, including shipping and packing items for FBA, I was projected to clear a profit of $10 or more for an ROI of at least 100%.

If the sale went perfectly and I locked up a large profit, that was great. But if I wound up needing to lower the price for any of the reasons listed above, I had plenty of wiggle room to minimize potential losses and usually still wind up with at least a small profit.

Exceptions to the Rule

The 100% ROI rule was one that I followed in most cases, but there are always exceptions to every rule. Here are three examples of instances in which I’d be okay with buying items to sell at a price that wasn’t projected to double my investment.

Rare Items

My biggest concern as a reseller was always that a product I found on clearance at a big box store like Target or at a discount store like ROSS would be discovered by other resellers as well. I still made these purchases when the price was right, but I did so with the expectation that my listing would have competition.

Finding a sealed copy of an old puzzle at a thrift store was a completely different situation. Even if the profit on a $15 puzzle was only going to be $9, I knew this wasn’t going to be an item that I’d have lots of competition on. The lower risk of selling this puzzle allowed me to lower my ROI threshold as well.

Quick-Moving Products

Products with high sales ranks on Amazon move very quickly. I found a brand of coffee K-Cups at ROSS for $15.99 that sold for $26.99 on Amazon for a while. My profit on each box only came out to a few dollars after fees, but these K-Cups almost always sold out the same day they went live on my storefront. If you can find something that consistently moves fast, you can buy and resell it with more confidence.

Different Business Model

If you have enough success as an Amazon reseller, you may eventually want to scale up your business using other methods of sourcing and selling. For example, dropshipping with SellerRunning takes a big portion of the logistics out of your hands, allowing you to list products that will be automatically packed and shipped when sold.

These types of transactions will have a much lower ROI per item than retail arbitrage, but can be scaled up to much larger quantities and require a lot less hands-on work for you.

Re-evaluate Your Buying Strategy on a Regular Basis

Man working at a computer with coffee in a glass mug

Deciding what to sell on Amazon isn’t something that you only think about once. The marketplace is constantly changing based on competition from other third-party sellers and the demands of Amazon customers. A product or category that is very profitable one month could become difficult to sell a few months later.

Everything from your retail arbitrage sourcing routes to the categories that you choose to buy and sell in should always be under evaluation. Take some time at the beginning or end of each month to reflect on what’s working, what’s not, and what changes to customer demand you are predicting in the months ahead.

Instincts are developed through experience and research. The time that you are willing to put into sourcing new categories and trying out different price points will translate to new discoveries and potential profits. Hopefully you can use the tips I covered in this guide as your starting point and then find out what works best for you as you go.