How reselling one volleyball on Amazon made me $156,938.32:

This is the power of Amazon and discontinued products. We made $156,938.32 in profit from one item without much effort and this is how we did it:

We’d been doing retail arbitrage for a couple years, focusing mostly on clothing shoes, and toys. At that time, we didn’t focus a lot on discontinued products, but that has changed. Discontinued products continue to be a staple in our inventory and they should be in yours. We’ll tell you how we found the product, the apps, and data we used to determine how much to buy, and why it didn’t require much effort to maintain. Since we found this deal through retail arbitrage, let’s define what it is and how we do it.

What is Retail Arbitrage? (For those who don’t know. Skip Ahead if you do)

Retail Arbitrage, or simply “RA”, is the process of finding and purchasing items at a brick and mortar store for a low price, and re-selling those items for a profit. WIth RA sales, discounts, and coupon stacking are key!  While shopping, you would use an app (we use Scoutify) to scan the merchandise to see 1) If it is currently listed on Amazon and 2) If it will be a good buy. Every seller has their own criteria as what constitutes a good buy. When scanning an item that is already on Amazon we analyze the sales rank, sales velocity, current inventory, number of competitors, buy box sharing, and pricing history.

Finding the Lead

One of our good friends told us that he was interested in learning retail arbitrage. After a couple of conversations and a few quick lessons, he went to Academy Sports & Outdoors to turn his new found knowledge into a profit. The first good item he found was a Louisville Slugger baseball bat. Not wanting to make a bad buy, he messaged us the item’s UPC and cost for us to check and confirm if it was a good deal.  Academy was selling the baseball bats for $100 each. On Amazon the bats were selling for a minimum of $229! After Amazon fees, that was close to doubling your initial investment on each buy. My friend proceeded to ask if he should buy them all, and we responded, “If you don’t buy them, we will.”.

Being the smart guy that he is, he took our advice and purchased all 200 bats they had in stock in only 2 transactions.  He ended up making $90 a bat which is $18,000 altogether. We wanted to see if we could purchase more bats at that price so instead of going to another Academy store we researched who the manufacturer was and called them. It turns out the manufacturer was Amer Sports (a multi brand company, including Wilson). They informed us that they no longer had any Louisville Slugger bats in their inventory, but they gave us access to their closeout/discontinued list. We began digging through the list and found a popular beach volleyball that was being discontinued.

The Power of Discontinued

When a product is no longer being made manufacturers liquidate their inventory at a very deep discounted price. If the product has been something that people are loyal to, they’re willing to pay a premium as it begins disappearing off the shelves and becomes harder to find. Think about it, if a girl is looking for the ONE makeup product that has made her feel the most beautiful for the past 5 years and she can’t find it in stores, where do you think she’ll look to find it? That’s right, Amazon.com.

If a product has been popular on Amazon for a long time it’s search ranking will remain high regardless of its sale price. Often with discontinued goods as the supply and number of sellers decrease, the price will increase while STILL remaining at the top of the search results. Basic supply and demand.

Striking Gold

Wilson was liquidating 20,000 beach balls and we had to decide how many we were going to purchase. Powerful apps like Keepa, AMZspecty (or How Many?), along with Amazon analytics such as best sales rank help us make educated purchasing decisions. Unfortunately, at that time, Amazon did not provide the sales rank for the volleyball (sometimes Amazon does this). The sales rank gives you an estimate of the monthly sales velocity and helps you determine how many units you should buy.  So we resorted to using the review rate to gauge how many volleyballs were selling per day. Approximately three percent of buyers leave product reviews on Amazon. When we looked at the listing that customers were leaving two to three product reviews daily for the discontinued volleyball. This led us to assume at least 1000 units were being sold a month.

We decided to do a test order of 1000 units since there were still some unknown factors. Amazon was still in stock and we didn’t know if they would share the buybox with third-party sellers, or if they would lowball the price making it hard to compete. Additionally, we still didn’t know the sales rank and actual sales velocity. Ordering 1000 units seemed like a “safe” risk. At the time Amazon was selling volleyball for $39. We are able to negotiate the cost of the ball down to $13 a unit, which netted us $20 in profit per unit.

 

 

(This is the Keepa graph when we discovered the volleyball) (Prices ranging from mid 30’s to higher than 45, and AZ staying in stock consistently)

We blasted through those 1000 units within 30 days!  We knew we were on to something. We called Wilson to order the other 19,000 units, but they only had 8,000 volleyballs left. We bought every last one. Thanks to Keepa we were able to see that Amazon had sold that model for up to $54 in the past. Because of that, we knew we could also get away with selling it at that price. With a buy cost of $13 that’s a healthy profit margin of 43% and ROI of 128%.

Now, this is where the magic happens. We locked down all of those remaining units of that volleyball model, and we knew it was only a matter of time before the big retailers sold out.

Using apps like AMZspecty, we were able to know how much stock our competitors had. Once we placed the order with Wilson, we decided to play the waiting game. We did not want to get into a bidding war on Amazon and have to compete on price to get the buybox.

Sure enough, after 46 days and 13 hrs of checking the listing hourly, we saw that everyone else had finally gone out of stock. It was our turn go in! We began selling the volleyball at $45 and slowly raised it to $55 without seeing a decrease in sales velocity. We were blasting through units and raking in the profits because there was nowhere else anyone could get that volleyball. It was the go-to beach volleyball, and had great reviews when searched online.

 

 

(Keepa graph from the time Amazon went out of stock and we first began selling. Notice the bottom graph indicating the # of sellers decreasing)

When it came to fulfillment, we went with FBA ( Fulfillment by Amazon). So after receiving the 8,000 units, all we had to do was a quick prep before shipping some of them to Amazon (we didn’t send them all because it would cost us more in storage fees).  After that, there wasn’t much to do besides setting our price and restocking our inventory at Amazon when we started running low.

After selling more than half of our 8,000 unit inventory, we realized why Wilson discontinued the volleyball. – a new model had been released.  We found out because it popped up on Amazon. But the beauty of a well-nurtured listing on Amazon is that it’s there to stay. While the other listing had the newer model and a lower price, our “old” listing still showed up higher in search rankings. Our model also had way better reviews (it turns out there were a lot of unhappy customers with the newer version), which was to our advantage.

 

(Keepa graph when the majority of the other 3rd party sellers went out of stock )

After one year and seven months, we finally sold out. When it was all said and done, we profited $156,938.32 with an ROI (Return on investment) of 132%.  That’s how a simple retail arbitrage buy led to a couple of big wholesale buys that didn’t require much effort. This is just one example, but there are many more. We continue to purchase popular, brand name, discontinued products because they continue to be in high demand. There’s no need for us to market the products or invest in advertising. If done right, discontinued products sell themselves.

Below are some screenshots from our inventory management software (InventoryLab)

 


Software we use:

InventoryLab (for inventory management, tracks profits, sales, refunds, valuations etc):
https://bit.ly/2Sgysqm

AmzSpecty (for checking inventory levels of competitors)

https://bit.ly/2JgXYrC

Keepa (for tracking sales rank, competitors, buy box offers, etc)
https://keepa.com/