If you’ve been a longtime listener, you might remember Jessica and Cliff Larrew from SPI Episode 99, which is still one of our most popular episodes five years later. To this day, I hear from people who have followed their example and made a great side-hustle for themselves practicing Amazon retail arbitrage, people who say, “this episode changed my life.” That’s why I’m so excited to have Jessica and Cliff back on the show so we can go over how they teach others to create the life they want to live through their work at TheSellingFamily.com, and find out what’s changed in the last five years.
Amazon retail arbitrage can be a complicated game to play. There are all sorts of restrictions when you first get started, and it’s hard to know when you’re standing there scanning items in the clearance section whether something is actually a good investment. Five years ago, after I first talked to them, I gave their techniques a try for myself. I went to the store, scanned some items, and actually made some money. I also ran into more than a few situations where I definitely didn’t feel like I knew what I was doing and had some questions. If you’re in the same boat, this episode is for you. Cliff and Jessica walk me through each step of the process, from how to interpret the information the Amazon seller app is telling you to what you need to expect in terms of initial investment and time to get started.
The most amazing thing about Jessica and Cliff’s process for Amazon retail arbitrage is that quite literally anyone can get started today. While it’s definitely a more involved process as you get deeper into it, they’ve had consistent success with their students building up to six-figures. Just like anything else, it’s important to give it a try and see if it’s something you can see yourself doing day-in and day-out. By the end of this episode, you’ll have a really clear idea of how you can take the first steps, and if you have any more questions be sure to take advantage for the free resources Cliff and Jessica offer through their website and courses. Be sure to drop me a line and let me know how it goes!
Jessica Leroux: We love the thrill of the hunt. We like looking for stuff that's exciting, that we get big huge margins on. That people go, "Why would somebody pay $60 for a bottle of cleaning stuff.
Pat Flynn: You're listening to Jessica Leroux whose also here on this episode with Cliff, her husband and they're back on the SPI Podcast coming from episode 99. This was over 5 years ago and this is one of the most popular episodes. The ones that I get a lot of emails about because a lot of people have taken what Jessica and Cliff shared in that episode, episode 99 and have actually implemented it. Some people getting more money on the side and others even quitting their jobs to start this what's called retail arbitrage business. It's an interesting different way of building a business and I wanted to bring Jessica and Cliff back on to give us an update on where things are with doing this kind of business on Amazon, how things have changed. I want to go a little bit deeper into if you're just starting out and you want to make a little bit of side income and even turn this into a full time thing, what exactly do you need? What you need to look out for?
Pat Flynn: Where are their extra hidden costs? We're just going to go right into it after the intro. Here we go.
Speaker 3: Welcome to the Smart Passive Income Podcast, where it's all about working hard now so you can sit back and reap the benefits later. Now your host. He once removed the delete key from his computer when writing a book. Pat Flynn. That's an interesting idea.
Pat Flynn: All right. Welcome everybody, thank you so much for joining me today in session 377 of the Smart Passive Income Podcast. My name is Pat Flynn here to help you make more money, save more time and help more people too. Today we're bringing on Jessica and Cliff Leroux who are here from thesellingfamily.com to give us an overview and go into detail about how to start an Amazon retail arbitrage business. Was does that mean? It actually means you go in to a retail store like Walmart or Target with a specific app, and you scan items and you get to see how much people are paying for that item on Amazon. If the margins are right, and the numbers are right and we definitely will be going over the minimum requirements then you can buy those items and sell them on Amazon and make a pretty decent profit on it too. We're going to talk about how to do this, what to look out for, what the minimum requirements are, how much might you need to spend and how much you could possibly make as well.
Pat Flynn: So sit back, listen in and here is Jessica in Cliff Leroux from thesellingfamily.com. Jessica and Cliff welcome back to the Smart Passive Income Podcast. Thank you so much for being here today.
Jessica Leroux: Thanks for having us again.
Cliff Leroux: Good to be here Pat.
Pat Flynn: It's been a while and you know I know you know this but I'm going to mention it again for people who may not realize this but the last time you were on which was February 27th 2014. That's literally over 5 years ago. It is still to date one off the most popular and most talked about episodes on the podcast. Again thank you for coming on. I still today continue to get emails from people saying, "It was episode 99 with Jess and Cliff. I did what they said and oh my gosh it changed my life. So thank you again for that episode in for coming back.
Jessica Leroux: Yeah, totally. We still get emails today too and it's so awesome that excitement of getting their first sale and starting their first business and making real money.
Cliff Leroux: It's been just crazy just to see how many people have been introduced to Amazon from that episode and like you said we still get that today where people are just, "Wow, we heard you guys on a Podcast with Pat Flynn and that's how I started selling on Amazon." That's been amazing.
Pat Flynn: You know we've had a lot of people talk about Amazon since you've come on board from Ryan and Grant and many other people who have come on. But are you still doing what you talked about an episode 99 where and for those of you who might not remember or didn't listen to that episode, which you should by the way if you haven't yet. Because a lot of that stuff, correct me if I'm wrong is still relevant. People are still going to clearance isles at Target, at Walmart. Jessica, is this something that people can still go back to episode 99 and do the same things and earn their first dollars?
Jessica Leroux: Absolutely. Some things have changed of course because time goes by and Amazons are constantly changing platform because they're just getting bigger and bigger every day. But we still ... We love doing that business model. You know you've had people on that talk about private label and wholesale and other things and for us it's like we love the thrill of the hunt. we like looking for stuff that's exciting that we get big huge margins on, that people go "Why would somebody pay $60 for a bottle of cleaning stuff." We love doing that kind of stuff. For us, we love helping people get started. It's the easiest way that you can get started on Amazon without having thousands and thousands of dollars.
Pat Flynn: Can you give us ... Cliff perhaps we'll go to you. If somebody were to start this today based on some the changes since 5 years ago, can you give us a quick rundown of the step-by-step process and then I'd like to go with okay, well if somebody does that and their making some money, we'll follow that up Jessica with, okay well what are what are some next bigger things we can do. Cliff why don't we start with you, somebody were starting out today wanting to do ... What would you even call this? Is it called the arbitrage or is it called ... I mean I know it's like almost kind of treasure hunting but how would you define it and then how do you get started?
Cliff Leroux: Well it's considered retail arbitrage in the realm of selling on Amazon and it's basically just buying products at regular stores like Walmart and Target and then flipping them on Amazon for a higher price because of the demand and the scarcity supply and demand. It's hard to find them in stores, but yeah people you know can totally get started today doing this. Like Jessica said the capital needed to start is very little. We always recommend you know around $500 to start just to get your feet wet. It's something that people can do on the weekend and not jump in head first. It could be a little side hustle and then we recommend growing it into something big if you start it and then you find out, hey this is something that I like and I want to continue doing it, now how do I grow it.
Pat Flynn: Remember after episode 99, I had actually gone to the store with my son and we started doing us together and it was really fun. Just a little bit of an investment upfront to kind of just see what happens and it was really fun to bring my son with me in to show him. He actually was like, wait we're buying this then we're going to sell it again. Why I don't understand? So it was kind of fun to tell him. He even asked some really smart questions like, why would somebody buy this at a higher price than we can buy it here? I think that's a question that for people who are being introduced to this for the first time Cliff can to keep going here, what is the real reason why people are buying it for more on Amazon than they could get it at the store?
Cliff Leroux: Well absolutely, Pat that's a great question a lot of people have that when they first start. Because it's kind of mind boggling at first. Why would someone pay that much. There's actually quite a few reasons. I attribute it number one to time. A lot of people we see Amazon is growing by leaps and bounds and people just don't want to go to the stores anymore. Especially if it's for a hard to find product. Come around Christmas time, parents are looking for that specific toy for their daughter that they want to make her happy and would they rather travel to 3 or 4 Walmarts and maybe not get it or pay double the price on Amazon and sit at home and watch Netflix with the family. It comes down to time versus money really. If you have the extra money and you don't mind spending it and we found out over about 10 years selling on Amazon that people are willing to spend that kind of money and spend extra because they value their time.
Cliff Leroux: They don't want to go out and search for these items or another reason it could be profitable is because it could be hard to find or discontinued it though the product could be on its way out. The manufacture could be discontinuing it and what we found over the years is when there's something like a flavored coffee or of some type of food that's a certain flavor and they discontinue it. People go crazy and they'll pay 3, 4 sometimes 10 times the amount just to get it. That's something that we found to be true over the last decade of selling on Amazon.
Pat Flynn: Yeah, that's true. It reminds when Twinkies were going out. They were super expensive at that point. Jessica you were going to say something?
Jessica Leroux: Yeah, one of the things that a lot of times we don't realize whenever we're shopping and we call it sourcing, whenever we're looking for products to buy. If we're looking at a discount store like Big Lots or Grocery Outlet they specialize in things that are being discontinued, they have been pulled off of the regular retail shelf for whatever reason or were at a clearance aisle. People don't always know where to go to find that thing that's on its way out or a store may have something on discount at Target at 75% off but it may be full price at Walmart. Somebody doesn't necessarily know all the time where to find stuff at such a good price. We don't either until we find it. We just see it and go, well, this is selling for more on Amazon. That's one of the biggest reasons why we can sell stuff for even around the same retail price and people don't realize that they're paying more than we bought it for. Because when they see it at Target, it's the same $20 but we bought it at Walmart for $5.
Cliff Leroux: What are the first steps Jessica? Before you walk into a Walmart or a Target or some other store to look for these things, what do you need to have in hand to better prepare for this?
Jessica Leroux: It's kind of a funny situation on getting started because one of the things you absolutely have to have in order to get started is a scanning app. It's pretty much you can't do it without it, because a scanning up is on your smartphone, you scan a barcode of a product and it tells you how much it's selling for in Amazon. You input your cost and it tells you what your profit is. The thing is that in order to get a scanning app you have to have an Amazon seller account. You kind of have to commit a little bit before you actually go out test the waters. You can do that for free, you can set up an Amazon seller account for free. They've made it a little bit tricky. It used to be a very big blatant button that says you want to sign up for the free account. Now they actually hide it a little bit. They want you to sign up for the paid account but if you look very closely you can sign up for the free account.
Jessica Leroux: When you do that you can download the Amazon seller app which is a completely free app that connect directly to Amazon. Then you just head out to a store and scan the barcode of a product and then it will pull it up on Amazon and tell you the difference. You can do that at home with just stuff that you have or you can do it at a clearance aisle, a discount store. I always recommend that people start with clearance just because it kind of limits you a little bit on what to look for. If I tell you to go to Target and just start scanning it's pretty overwhelming because Target is a large store. If I Say find an N cap of clearance toys that's much more doable. One thing I'll say is one of the differences from when we were on 5 years ago to now is that there are more restrictions. Now it takes a little bit of time, we find that the very first weeks are the hardest. This isn't one of those businesses unfortunately where you can just get started and it's super easy.
Jessica Leroux: I think that's one of the big misconceptions now. Is that it's so easy. But you just ... Once you get going you start to realize okay, these types of things are restricted and I can sell this and it's all about just really spending the time to scan enough products and then find those things that are selling for more on Amazon. The funny thing is that once you've been selling or had your account for about 6 months, a lot of the restrictions that we see start to just fall off for people.
Pat Flynn: No way. What are some of those restrictions that we're likely to see when we're starting?
Cliff Leroux: A lot of them were brand restrictions. Obviously a lot of big brands are really at odds sometimes with Amazon like Nike Disney. They really don't want a lot of third party sellers selling their items. Those are always going to be restricted. You'll start to notice there's things in the cleaning category where they'll be a scrub pad or a toilet wand brush that once you have sales in unrestricted items in that category, it'll start to open up doors and avenues for you to potentially sell other items that had previously been restricted on your account.
Pat Flynn: Got you.
Jessica Leroux: There's different ways that things are restricted on Amazon. One is by a category or sub category and one is by the brand. One of the subcategories that people really want to be able to sell in is called toys. Which is actually a sub category of toys and so it's really confusing. I don't know why they did that. We say other toys is restricted but overall toys is not. But at the about the 6 month mark, somebody can apply to sell in the other toys and get approved. Which just means a lot of times it's like the special brand of toys. Like the higher end toys. Or there is a sub category in health and personal care, which health and personal care if you remember is one of our favorite categories, but there's a sub category of topicals, or injectables which are more likely that they could harm somebody. It's something that they're swallowing or something that they're putting on their skin. Those are restricted to brand new sellers but once somebody has been selling for about 6 months then they can get [inaudible 00:14:06] in those categories very easily.
Pat Flynn: Got you.
Jessica Leroux: It takes a little bit of time.
Pat Flynn: I was going to say it takes little time and so it would take some sort of a trial period or commitment up front just to kind of see this if this something that you want to continue to do. Because I remember when when we talk before it was it was something that you could kind of like try once on a weekend and you'd be fine. Some people took that, did commit and are now pro sellers now which is kind of cool, but for now to even give it a good trial you need to perhaps have a good run of a few months. What does that mean, does that mean going to Target everyday. Is this a daily thing? How many hours? How much time are we talking here that this would take to get to that point where it actually can become something sort of lucrative for us?
Jessica Leroux: You know we still have student every day who are getting started that share their ... A lot of people their first goal is to make a $1000 30 days of sales. a $1000 in sales. A lot of our students do that in their very first month. It's really exciting that and that would probably break down to about $300 in profit depending on what they buy of course. It isn't a huge number but it's one that definitely shows you okay, this will work. I don't want people to think they won't be able to sell anything in the first 6. Although it may feel that way when they first get scanning, but they can definitely just get started. We say $500 is enough to get them ... Foot in the door. A couple hours at a sourcing trip once or twice a week is really a good get your foot in the door. I just recommend that people spend at least an hour scanning products and that they scan at least 100 things. Because it's easy to scan 10 things and it goes a pretty quickly but if none of those items are profitable it's easy to go, okay, this isn't going to work.
Jessica Leroux: But I'll tell you that Cliff and I, we go sourcing and there are days where we scan 200 things and we only found 2 products that were worth selling, but those 2 products make our whole entire trip.
Pat Flynn: Yeah, I remember going with my son, and we found like a gravy boat or something. I was like, this is weird. It was on clearance for like $8 in was for sale on Amazon for like 35, and I was like, this is crazy. We did scan a whole bunch of things and I was getting restrictions, I was getting no this was not worth the time. The app literally tells you what to do so we'll make sure to link to that app and all the websites and stuff that Jessica and Cliff are mentioning. It was kind of cool to find that. Of course, I remember learning from you guys when we were there, we're like okay let's get all the gravy boats now so we could get them and then you know we put him on the website and they told us Amazon tells you essentially how to package these things, where to send them. You don't send all the things to one place you send them all around that all the distribution centers and then you start to attract things.
Pat Flynn: I remember getting emails daily, with four of your gravy boats sold today. It's like wow this is cool. Of course, they ship it for you. It's already done for you after that point and then we did buy some things that didn't sell either and I think that just with experience and with time you kind of begin to learn what works and what doesn't. To go back to just some the people who may listen to this and give this a shot. Is it weird to or how do you speak to the people who are like isn't it weird that you're just going in a store and scanning everything? Did the Target employees look at you funny, did other people think you work there. How do you get over fear with thing. It is a legal thing to do as well, right?
Cliff Leroux: Yes. Yes, it is. It's totally good. It is nerve wracking though when you first start. That's a common thing that people say is, "I feel kind of awkward scanning." I'm doing something wrong but I'm really not. In our experience we've never been bothered by any employees. We've had employees ask us question. What do you guys do? Are you guy selling this? I think it's becoming more common place for them to know like there are resellers out there. Selling on eBay and Amazon. In our experience we've actually had managers come up and start packing our stuff for us.
Pat Flynn: No way.
Cliff Leroux: At a Toys R Us. About 2 years ago we were in the Bay Area and a manager comes up and I asked him for a discount. I said man we have like 3 carts full of stuff and I said I'm taken all this stuff, is there any extra discount you guys can can give to me. He's like, sure. I'd love to. I appreciate you guys taking all this stuff. Then he begin building boxes right behind the counter as his employee was scanning the items. Then he was putting them into the boxes for us. It was a great experience. But it is nerve wracking. It is legal to do and just be honest with the employees if they ask. You'll get looks sometimes if you have 20 of an item. A few times I've bought 50 Elsa dolls at a Walmart and gotten a lot of looks. I was sold out on before I walked out the door during Christmas time. I just knew I was making a bunch of money on them. But it's just part of the game, part of the business. It gets easier over time and with experience.
Jessica Leroux: Target is kind of an example that's funny because they do actually have a anti reseller policy where they don't like to sell to people who are clearly reselling and so with them particularly we try to not be super obvious. It all depends on the cashier and the manager at the time. If somebody decides that you're trying to take all of the most popular thing that they have, they can tell you no that they don't want to sell it to you. Target is really the worst. But we tell anybody at any point, you don't want to be over aggressive or like we don't like to bring attention to herself anyways. Just don't clear the shelf completely of the hardest find thing. But if it's clearance really people don't care. It's whenever you're taking the thing that they're trying to keep in stock. If you're taking 25 and they just got in 25 today they may say something about it. But if you're taking all the clearance stuff, they really don't care.
Pat Flynn: Yeah, that makes sense. Now one thing I remember when I was doing this too was that there were some extra things that I didn't know I needed until I was kind of deep in the process. Like boxes and tape and label maker things. How much of those things might one need when they're starting out. Obviously it kind of depends on volume in and what it is at your shipping but what are some extra potential costs that we might need to take into account when we're starting out.
Jessica Leroux: Cool. We have what we call the bare minimums, because there's always stuff that you can add on that makes life easier. There's a lot of fun tools and gadgets that we can get. But the bare minimums that somebody needs to have in order to make this work is they have to one have a smartphone so they can have that app. Two, they have to have a computer so that they can list the products on Amazon and they need a printer where they can print their labels. You can get a fancy label printer but all you really need is a printer and a regular printer and then Avery address labels. These are going to go on each of the products. You're going to cover the manufacturers barcode with what's called an FN's Q label, which identifies each product to us as a seller. So that when Amazon scans it they know exactly who sent it in. Then you have to have boxes which is ... Just send them in.
Jessica Leroux: We recommend that people try to at least fill one hole box. There's a setting that you can change inside of your seller account that makes it to where you do send everything to one warehouse. It costs extra, but we find that when somebody is just getting started, if they all have 15 things and they end up having the ship it to 7 warehouses it makes it ... It doesn't make it cost effective. It makes more sense to pay extra to have it all go to one warehouse and then you're only using one box. Then you need to have tape to close that box. Then you need to have either regular paper or you can use 2 per sheet or 2 per page label and that goes on top of the box. That one side tells Amazon which shipment it is and what's supposed to be inside of it. It's not listed on there or anything it's just a barcode. Then the other half on is that address label. It has your address on it and it has Amazon's address where it's going to. Then that's for my FedEx or UPS.
Jessica Leroux: I think that's a pretty much it. Right?
Pat Flynn: Yeah. I'm remembering it. It was pretty simple once I got it down, and I went back and I did a couple of runs a Best Buy and I saw some headphones, and those sold out really quickly and I made Like a $15 profit on each of those I had like 10 of them ,and it was really fun. It was a good start. If I didn't have my business is that I have now I could imagine myself doing that once a week and making a little side income but the question that I have for you and Cliff maybe we can go to you for this one, is after you do this for a while you start to see a little bit of income coming in. Is it just let's go to the store more and do this because I remember going back after the day after and I was like wait I'm seeing all the exact same things. This is only scalable to a point. How do you grow this kind of business, how do you turn it into something that's more than just retail arbitrage?
Cliff Leroux: That's a great question Pat and there's a couple different ways. Like you said you were seeing the same things that you are scanning over and over. For retail arbitrage, you would increase your area that you're sourcing from. We like to travel, especially me. That when I find a hot product, I'll travel all up-and-down California sometimes Nevada. Stopping at stores to get that particular product. If you find a hot product you just increase your sourcing area, you know the amount of stores you're going to instead of just the ones in your town.
Pat Flynn: Do you call them up beforehand and make sure they have it in stock?
Cliff Leroux: I do not. A lot of times I do not. Because I am make sure that there is enough stores on the way. If I'm going to Big Lots and I'm heading you know up North towards Nevada, going to Sacramento. I know that they got 7 of them in that area.im bound to find some is my reasoning. But as far as once you know that this is something that you like to do, retail arbitrage does end up morphing into something else. You've had other guests that talk about private label and wholesale. Those do produce the bigger numbers because you can scale them more.
Pat Flynn: How does that work?
Cliff Leroux: You mean transitioning from retail arbitrage to wholesale [crosstalk 00:24:46].
Pat Flynn: Yeah, for people who don't even really know what that means. Like how is that different?
Cliff Leroux: It's different because again you're not going to retail stores to source your products. You're searching out manufacturers that will allow you to buy in bulk and so the game changes a little bit because you're ordering pallets of material of as far as wholesale goes. You're ordering pallets of material and you're doing it at a certain price point. Usually your margins and your profit tend to be a little bit lower but your volume increases. If that makes sense.
Pat Flynn: Profit per product is lower but because you're getting so many more you'll actually will end up making more money.
Cliff Leroux: Right and you end up having ... A lot of times you can make deals with the manufacturers especially of you're the one to bring their product to the Amazon marketplace where you can say I would love to be your sole vendor on Amazon to sell these products. We've seen a lot of people have great success with that and then they have ... They're the only vendor for that product on Amazon. It cuts out competition as well. You don't have to fight with other sellers for price points. It's a gradual step from retail arbitrage. You're sourcing at stores and then and like you said you eventually start to see the same things and there's only so much you can do unless you travel and increase your sourcing area. It's like just a ... We call it an evolution of business as far as the Amazon seller goes. Because you're looking to grow and increase volume and then you're just adding something else to your retail arbitrage business model.
Jessica Leroux: I would say that that transition or evolution actually it takes quite a while. Because we find that new sellers can get to about 6 figures in profit within 1 to 2 years. Working by themselves maybe with a spouse or a family member and working either a lot parttime or full time. That's where we find that people start to go okay, but now it's hard to go past 6 figures doing retail arbitrage. I feel like it's pretty hard to not have enough stuff to get to that point and that's usually when people start to feel okay, now what? A lot of the people that we work with are similar to us were they don't want to have a million dollar business. It's not easy to run a million dollar business. A lot of times, so we find when somebody is getting started they're going to have one of two goals in mind. Either one they're looking to add an income stream, a side hustle. They want to you stay home with the kids, they want to pay for vacations, pay for cars that kind of thing.
Jessica Leroux: Or they want to build like a brand and a huge business. Depending on where they are in that spectrum that's going to really determine do they stick with retail arbitrage or did they go to another business model. Because people ask us all the time, why don't you guys do wholesaler private label. For us it's always been about the lifestyle. We don't want to work full time hours and with having other businesses now. We've been doing our blogs since 2012. We bought niche site recently. We have other things going on that we can't ... We don't want to work full time with all of them. To us it's like we don't want to work 8 hours each a day. We home school too. We were having this conversation with our son the other day because we're like you know we don't want to work all day everyday. He's like, "Yeah we don't want to do that." Because he doesn't know what it's like to have 2 parents that work full time.
Pat Flynn: Yeah, I mean are our kids are the same way and we're just truly blessed for the business type that we have to allow us to have a little bit of freedom and so I can see that for sure and I would imagine that going down that route would add a lot of other headaches that aren't there if you're just kind of doing it on you're own. Like you are right now for example. I could imagine that obviously if you're ordering pallets of stuff, you got to put those pallets somewhere and that's [crosstalk 00:28:50].
Jessica Leroux: You need a warehouse or you need-
Cliff Leroux: A forklift.
Jessica Leroux: Employees and different insurances. That's amazing for a lot of people but for us and a lot of people like us, its just not what we want at this point in our life.
Pat Flynn: Right, and that's why you're selling family as you're known, the sellingfamily.com. Family being the most important part that. Good for you for not just going because there is money there and you guys would probably crush it but then what would that give you. You're working for your family and you're successful in that way already. That's awesome. When it comes to this other stuff that you're doing now I'm curious because this was nothing that was mentioned before. You bought a niche site. Tell me a little bit about that. Why would your goals there?
Jessica Leroux: Yeah. We bought a niche site. It's related to Apple products which we're a total Apple family. For us it was we wanted to experiment a little bit and see what it's like to have a different type of business that one, we didn't start and then two is in a totally different realm than what we've done before. Just to have another income stream because we had some money that we had available and it was like, well it's not really making us any money. What can we do to have our money make money. Instead of investing it in stock market we're like well let's try investing in a small business. We invested and it makes money with ads and since we bought it it's continued to make money and I feel like that's the only goal we can have really is to have it continue to make money. It's been fun. We've only had it for about 4, or 5 months I think.
Pat Flynn: That's cool. How time intensive is it for you at this point or is it kind of just on auto pilot?
Jessica Leroux: It could be on auto pilot but I like to tinker. I spend a couple like 4 or 5 hours a week on it but I don't have to. It's just when I have the time.
Pat Flynn: That's really cool. Going back to Amazon and selling and stuff, when you had mentioned that if you do this retail arbitrage you can make up to 6 figures if you kind of commit to it and put a little bit more time into it. In what range of 6 figures is it, 100,000 is it $999,999. What range are we talking about so people can consider. Hey maybe this is something I could do for my job and I know some people have heard episode 99 and have quit their jobs because of it. Isn't that amazing?
Jessica Leroux: It is. So amazing.
Pat Flynn: What range are we talking about here for potential income. Then I'd love to get into a little bit of the biggest mistakes and other hidden things that we might not know about. What range are we looking at here for top level before one might need to consider if they wanted to get more income going down the private label wholesaler route?
Cliff Leroux: I would say Pat to be honest, anywhere between 1 and 200,000 for retail arbitrage.
Pat Flynn: That's profit.
Cliff Leroux: That's profit correct. That's right. And that's if you're hitting hard and you've committed.
Jessica Leroux: That's a full time.
Cliff Leroux: Yeah, full time commitment to your Amazon business. We have seen a few people go higher than that but to be on as they are few and far between that hit those higher numbers with just retail arbitrage. Like I said most people they end up evolving and adding something to their retail arbitrage business like wholesale or private label to get to those bigger numbers. If they're going for a million or anything higher.
Pat Flynn: Got you. I'm just trying to get in the heads of my audience right now. I think one thing I forgot to ask was what was the name of the app that they could get that if they wanted to just scan.
Jessica Leroux: You do need a seller account to even log in to that to even try it. Is that true Jessica? Yeah Amazon seller app it's made by Amazon the company and it links directly to your Amazon seller account. Which is really important because it will tell you exactly what you're restricted in and not restricted in.
Pat Flynn: Okay, got you. Okay, fantastic. When I was trying this I remember kind of just trying it out for a month and just letting it sit. I'd see some sales here and there and that was pretty cool then I'd see the income kind of put into my bank account which is pretty amazing. But then I remember several months went by and I started to get some notices from Amazon saying like, "Hey your inventory hasn't moved for a while. You can try changing the price. You can do this and that." And then several months later I just let it sit and then I was like, hey warning you might want to do something with your inventory here or else you might need to pay some fees. I'm just curious about those kinds of things for people who want to dabble in this first. What are some of those kinds of costs or potential sort of things that we might I come across. Just so we know what to expect.
Jessica Leroux: That's a really good question because it is so easy to send stuff in and then decide it's not for you, but then you still have the inventory. We've experienced that with a lot of people. One of the things that's really important is if you go with the paid Amazon account is that if you stopped selling consistently, that you downgrade your account. Because can immediately eat up your profit if you're paying Amazon $40 a month just to keep your stuff there. The next thing is it's really important that when you first buy products that you don't just buy it anything that seems like it's going to make money. That you really, one thing we haven't talked about its ranks. Amazon will give you a bestseller rank and we just say as an easy rule of thumb, try to only buy things that have a rank of under a 150000. Because that tells you it's going to sell pretty quickly.
Jessica Leroux: We see people will buy things with these huge rank. Like 300, 400, 500,000 ranks but they're like but it's going to make me $50 then it just sits there. An item just sitting there really doesn't help you at all. It just eventually will cost you money because Amazon does long term storage fees which means your stuff has been here longer than they want it to be so get rid of it or pay us. Then if you're paying for any extra tools or anything like that, you don't want to just let the stuff sit there and you're paying for that. Does that answer the question or does that not really [inaudible 00:35:16].
Pat Flynn: No, it does. I'm just truing to think ahead for everybody here as they they go and give this a shot. Just to go over a hypothetical example for people, I signed up for a seller account, I get the app, it's connected. I drive to a Walmart. For example and I walk in, I see this giant store where do I go? Let's start there. When I walk in.
Jessica Leroux: when you get to Walmart the first place you're going to go is figure out if they have a full aisle of clearance or if they just have N caps of clearance.
Pat Flynn: I'll be like, "Hey thanks for welcoming me. Tell me where the clearance aisle is?" To the guy who is saying hello as I come in.
Jessica Leroux: Usually the clearance aisle will usually be around the seasonal staff or the lot and garden area. Then if it's NCaps you walk around the outside of the store instead of the inside. If you're walking through the main aisles you won't see them but if you walk behind and on the back edges of the source, that's usually were clearance is held.
Pat Flynn: I see a clearance N cap and there's a bunch of random things on there. I know just from experience that that's a good place to start because the store is trying to get rid of those things and that's why they're discounted because they're trying to make room for new things. That's a great place to start. I open up my app and then just literally item by item just go for it.
Jessica Leroux: Yup, so you're going to open the app and it's going use your camera to scan the barcode of the product. It's going to pull up the information on Amazon. It's going to tell you a few things that you really need to pay attention to. One is how much it's selling for in Amazon. Which doesn't do you any good without knowing the rest. Two how much you would pay in fees in order to sell that product and then there's a spot where you can input your cost, so whatever it says on the clearance tag you input that into the app and then it's going to tell you how much you would make in profit. It will ... I don't remember if that tells you ROI or not. I think it does. But then it's also going to tell you the category that it's in, and the Amazon bestseller rank. The Amazon best seller rank is the one that's really important to look at. You want to make sure you're at least under 150,000. Then one thing is make sure that your product is going to be profitable enough to make it worth it.
Jessica Leroux: Because what we see a lot of people do is they'll find something for a dollar and then see that they're going to make a dollar in profit. You're making a 100% return on your investment which if you're investing in the stock market we would invest a million dollars if we had it. But $1 at a time makes it really difficult to scale and to even really test the business. Because you have the cost of your boxes, the cost of your tape. To do that $1 at a time is very difficult. What we like to recommend when people are getting started is don't buy anything that's going to make you less than $5. If you're you're going to sell one of something and it's only going to make you $2. It just really isn't worth the time. It's a learning experience but in the end it really will have not been worth it. Then not just how much you're going to make on the item total but how much did you have to spend to get there.
Jessica Leroux: This mostly comes from the type of people that we work with. Mostly from being somewhere to ourselves. Most people don't have a ton of money to get started. I'm not going to say spend $30 to make $5. That just doesn't make a lot of sense when you're getting started. If you can sell a 1000 of those things, great. But retail arbitrage is not going to find that many so it's not going to work. So I recommend not going under 40% return on investments. If you spend $11 then you can get your $5. But if you're spending $10 I don't want you to make four. You got to keep both of those in mind. I'll be honest. That's where lot of people go. But just because that makes it hard. It's hard to find things that meet all of your criteria. Unfortunately when people don't follow that criteria in the beginning is when they start to see, well, I sold a whole bunch of stuff but I didn't make any money and we hate to see that happen.
Jessica Leroux: We try and be really, really strict on people and then we say okay, once you've done that, then loosen it up and take whatever profit margin you want. If you want to go to for volume, go for volume, if you want to go for 30% ROI go for it. We have sellers like somebody we did a success story on our website. He got to $10000 a month in sales in 4 months using our teaching but almost a completely different model than what we teach. Because he was having a really hard time finding stuff where he could make high profit margins so he decided I'm cool was taking 20%, 30% margins. He was able to get to like $3000 in profit a month in those 4 months but his sales of volume is very high.
Pat Flynn: And I even remember running through the store once in finding some really, really expensive products like refrigerators and things like that. That I as he bought a mini refrigerator and sold it and I actually made like 50 bucks on that one product. For me that was worth my time and it was a fun experiment.
Jessica Leroux: $50 one time. Even if you spend $200 on it, it doesn't meet fully what I would give as a rule. But $50 Is one time makes so much more sense then selling 5 $1 items.
Pat Flynn: Right and I think the refrigerator was going for like ... I ought it for 60 and it was being sold for over 100 on Amazon. I was like, okay, I can do this. I was like, are there anymore and it was the only one. It was just big to ship and stuff like that. I get these products, I go home, I follow the instructions on Amazon. I input that item into Amazon and it kind of walks you through that process which is kind of cool. One question that I had as well just trying to think ahead for everybody is I remember that I actually had to set the price of that product that it was going to be sold for on Amazon myself. I just kind of got stuck there and I know you have courses and lot of free stuff to show people how to do that but any advice Cliff or Jess on just pricing strategies. Because it can tell you how much it's going for, but then you can kind of like move it faster if you lower the price but then you don't make as much.
Pat Flynn: I was stuck at that point.
Cliff Leroux: That's the common thing that most new sellers come up against is their not sure what the price of that. We always recommend that you price what it's currently. When you scan the product and you see the current buyer box is selling something for $20 we recommend putting in at $20 when you send it in. As you become a more experienced seller you're going to notice things like how many sellers are on this particular listing and okay, well I see there's only 2 other people selling this, it's got a great rank. I'm going to increase my price while I send it in and so if they sell out I'm the last one left and I'll command a higher price. That comes with experience and learning but to start off with we always tell people to just sell it for what it's currently going for. Because that's the easiest thing to do. Now the prices on Amazon when you're selling, sellers come in-and-out daily. Sometimes it goes down, sometimes it goes up. It's a real roller coaster sometimes when people are selling products.
Cliff Leroux: We always recommend just mask the current buyer box price and then watch it as it's going in and then when you get your email from Amazon that your product has successfully been checked in just double check it. Go through your inventory and make sure that all of your prices are lining up with what they're currently selling for and then adjust as needed.
Jessica Leroux: I think that's one of the things too that like you were mentioning where stuff just kind of started sitting. Is because the prices do change so often, it's important to go into your account every few days at least and make sure that your stuff is still selling competitively. Because of it's not ... Sometimes it's just adjusting a price 25 cents will get you back into where a buyer can see you. Then one thing on pricing day they don't pricing too that I want to mention is with using FBA which is where Amazon fulfills your orders, the customer doesn't have to pay a separate ... Sorry. Shipping fee. And so if you're looking at somebody who's selling a product and they're not using that fulfillment by Amazon program you may see that they're selling something for 1499 plus 499 shipping which essentially is $20 to the buyer. You're going to price competitively matching their price plus shipping.
Jessica Leroux: Because when somebody buys it from you they're not going to pay a shipping fee so you don't want to charge them $15 to be competitive when in total it's actually costing them $20 to buy from the other seller. That's one of the big mistakes that we see as far as pricing is matching somebody who's a merchant fulfilled seller where they're shipping it themselves versus price matching to somebody who is price plus free shipping.
Pat Flynn: I see. So you would, in that case if it's up to a self shipping merchant price of that closer to 19 versus 15?
Jessica Leroux: Whatever their total is. Just take their combined price, the price plus shipping.
Pat Flynn: Just add the together. Straight up.
Jessica Leroux: You don't have to even really compete with them. You don't have to try and go a dollar less than them or anything because Amazon thrives on their prime buyers people who paid into their prime membership and so they paid to get free shipping so a lot of times people actually pay more money into an SBA seller than they would to a merchant seller but that's again like Cliff was saying there are so many different pricing strategies. For just sending your first stuff, the most important thing is just making sure that you are competitively pricing with price plus shipping not just their price.
Pat Flynn: Cool. To finish off here and then we have some resources for all of you really quick who want to just dive deeper into this and learn more about this. I think that this is going to have the same effect as episode 99 for people who just want to try something new and get started and perhaps have never even heard of this thing called retail arbitrage but based on episode 99 and the last time you guys were on any other big changes or things to look out for since the last time you were on and we talked about this, if not we can just we can just call it because I think people are ready to go. Anything else we should know about before diving into this world? We'll have maybe each of you share one thing maybe.
Jessica Leroux: Cool. I think that one thing that has changed so much since we were on 5 years ago is that Amazon has become more commonplace. That more people know about it. Unfortunately I think that one of the biggest misconception that's happened since then is that it is so easy and I mention this in the beginning. I see a lot that people don't treat it like a business because, if we like to try ... I feel like entrepreneurs like to try a lot of side hustles right?
Pat Flynn: Yeah.
Jessica Leroux: And there are a lot of side hustles that you can start without spending hardly any money and you don't ... Having to pay for a bunch of stuff recurring but with Amazon you have to pay for inventory, you eventually have to pay for tools and all these things. It's really important just to remember from the very beginning that it is a full on business. It's not a brick and mortar business but you do have way more expenses that come into ... Especially because you have to buy inventory. Treat it like a business from the beginning and know what your expenses are. That's the thing that I see the most common as people I think I mentioned this already is that people will get to a point where they're like dude I sold $500 worth of stuff but I don't think I made any money. I think that's the biggest thing is that knowing up front that this is going to take some work. It's going to take some time but if you're willing to put in the effort and really treat it like a business then it can be something really amazing.
Pat Flynn: Well, how would you recommend before I get to Cliff to keep track of your expenses so you don't lose sight of that?
Jessica Leroux: Very first starting out the easiest ... Well and a note that it's the easiest but they the least expensive way would be to use a spreadsheet and just track how much you paid for every single item, any extracts expenses that you have like when you're buying boxes and tape and paying your pro merchant fee and all that stuff. Putting a good detailed profit versus loss, I use go daddy to keep track of all of my income versus expenses so that I know okay what's going out is less than what ... Going out is less than ... I'm saying it backwards to east time. What's going out is less ... I'm saving [inaudible 00:49:00] again. Sorry. You know what I'm trying to say. [inaudible 00:49:05].
Pat Flynn: You spend less than you male or you make more than you spend.
Jessica Leroux: Yeah. You're bringing in more money than what you're putting out in business. That I think it's like 10 bucks a month or something. At a point you'll do something like that but in the very beginning at least just keeping track of what's going out and what's coming in.
Pat Flynn: Amazing. Thank you Jessica. Cliff any final words?
Cliff Leroux: No, I think we've covered it you know like Justice said treat it like a business and then I think our biggest advice would just make sure you're using that Amazon seller app to scan the products. If you go out and you decide give this a try because that will be your biggest a help and partner for finding out which products are restricted. I think that's our biggest advice and take away.
Jessica Leroux: Yah. if you don't use the app what we had find is people say, "I see that this is selling on Amazon for 10 bucks and I can buy it for a dollar so I'm going to make $9." No, that's not going to work. Definitely use the app.
Pat Flynn: Yeah and know the rankings and those kinds of things which obvious is a very important thing. Awesome. Thank you both for being on again and I appreciate it. We'll definitely link to all the things we talked about. The app, websites, the other episode that you guys were on back in the day. Before I let you go Jessica where can we go to get more info. What else do you have going on. Tell us all the things.
Jessica Leroux: When we are on last time. We were at jessicaleroux.com. Since then, we switched to thesellingfamily.com. If you go to the sellingfamily.com/SPI you can get a free 7 day email course which will take you through what we talked about today but in much more detail, more walk through the style. If you're somebody, you just want to totally jump in and you want somebody to guide you step-by-step then we also have a course called the Amazon bootcamp. What I like as if people go through the 7 day course first and that really will give you an idea okay, this is something I really want to do.
Cliff Leroux: Pat too, I've been sharing on the YouTube a lot of are finds. If people are curious about [crosstalk 00:51:15] been selling and how much profit we're making on certain items. I just kind of got into YouTube about 2 and half months ago just to do it for fun and increase our brand for people to see it and have some more exposure. If yeah, if people are curious about some things that we've been selling and finding you couldn't check us out on YouTube with search the selling family. I have lots of videos up there. I have some tips and tricks on just all things Amazon.
Pat Flynn: Yeah, cool. Here awesome. Great job. Thank you for that. I didn't even know you had that YouTube channel. I'm going to go check that out right now and good luck to you both and I hope to chat with you again.
Cliff Leroux: Thanks Pat.
Jessica Leroux: Thank you so much.
Pat Flynn: All right, I hope you enjoyed that episode with Jessica in Cliff. It was such a pleasure to bring them back on the show. I'm hoping that this episode will have an impact just like it did back in episode 99. Now if you want to check them out and get a free how to get started, all the kind of things you need to know beyond this episode, all you've to do is go to the selling family.com/spi one more time, thesellingfamily.com/spi and obviously you can get that link and all the other links and resources. The app, the websites that you need for this process. You can get them all at the show notes on the Smart Passive Income blog if you want to go directly there just go to smartpassiveincome.com/session377, one more time smartpassiveincome.com/session377. Hey, thanks so much for listening in today. I appreciate you so much. If you have the time head over to iTunes or wherever you're listening to this podcast and leave a quick review an honest one would be greatly appreciated.
Pat Flynn: If you likely hear here just hit subscribe. If you haven't already .I look forward to serving you in the next episode until then you are amazing, keep up the great work #team Flynn For The Win. Cheers.
Speaker 3: Thanks for listening to the Smart Passive Income Podcast. At ww.smartpassiveincome.com.
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Cliff and Jessica Larrew
I revisit one of our most popular episodes ever to find out what's new with Amazon retail arbitrage from Cliff and Jessica Larrew.
- What Amazon retail arbitrage means and how it works.
- What’s changed about the business in the last five years.
- How much of a starting investment you need to make to give it a go.
- The reason why certain items can be so profitable, and what to look for.
- How to setup an Amazon Seller account and get the app.
- How restrictions impact what items you look at and how to get them removed.
- How long it takes to improve your status and move up the ladder.
- Jessica and Cliff’s hard and fast rules about profit margins for beginners.
- The hidden costs you need to account for when you’re making a purchase.
- The limits of retail arbitrage, and what people do who want to move past them.
- Where most beginners make mistakes.
Note: Some of the resources below may be affiliate links, meaning I receive a commission (at no extra cost to you) if you use that link to make a purchase.
- The Smart Passive Income Podcast Episode 99: Buying Stuff and Selling It on Amazon (For 6 Figures a Year!)
- The Smart Passive Income Podcast Episode 266: How to Start Selling on Amazon with Ryan and Nick from Online Selling Experiment
- Amazon Seller Central
- The Selling Family on YouTube
- The Amazon Seller App