Amazon, Retail Arbitrage, Target

Brick & Mortar Retail Arbitrage – Sourcing From a New Store

I just returned from my first Target retail arbitrage trip and it was a moderate success. I’m not new to the retail arbitrage game, and in fact have been doing it full time for almost a year. However, this was my first trip to Target of what will likely be many in the next few weeks. In the past year I’ve established a nice process for adding stores to my sourcing roster and I’m only in the beginning of this process for Target.

The basic outline of the process is the following:

  1. Online Research – Pretty much exactly what it sounds like, just google and read, google and read, etc. You’d be amazed at how much of the leg work is already done and written about online. Things from price change schedules,  store layouts, and actual items that can be resold for a profit available in stores right now. Not all stores will have a lot of information available but Target fortunately does. I won’t rehash what I’ve read, but you can check out some good info at some of these sites: Target Addict, All Things Target, Totally Target. Some pieces of information that I always try to learn in this step of the process are the following:
    1. What’s their Return Policy? –  Not hard to find, but very important to know. I’ll often refer to minimizing risk as much as possible, and returning inventory is probably the best way to do it. If you get a few units live for sale with enough cushion to return them within the source stores return window, then instead of risking the entire purchase price, you lower your risk to only the transactions costs (shipping, gas to and from store, etc.).
    2. Store Plano-grams – I was not familiar with the word “planogram” until I got into retail arbitrage. All it means is the layout of the store. If you’ve visited enough locations of any chain retail store you may have noticed that they may have multiple layouts or every store is the same. Either way, their corporate offices issue planograms that tell them the exact layout of the store all the way down to location of each product. If you have this information it can be a huge time saver.
    3. Coupons – It’s important to know what sort of coupons they usually offer, what they are offering now, and how they handle their coupons. Some stores permit you to use coupons more than once or multiple coupons at a time. Some don’t. Either way, the more you know, the more you can use this information to your advantage.
    4. Miscellaneous Information from Other Resellers – I try to use the work/time others have put in as much as possible. If other resellers/frugal experts frequent a store and want to post useful information I’m more than happy to stand on their shoulders to go higher. I’ve read articles from other resellers that resulted in several hundred dollars worth of profit on a first trip to a new store.
  2. Hit the Store – I try not to waste too much time doing step 1 before actually getting to the store. I’ve found I can read about this stuff til I’m blue in the face, but until I set foot in the store, it’s all abstract theory. I need to walk the aisles, start scanning, and just start to get a feel for the store.
  3. Buy some Ish! – This part is important and for many people the hardest part. It took me a month and about 15 trips to my first store (Staples) before I bought my first product to resell. And you know what? I still had to return it! I’ll be honest, I’m prone to over-excitement and silly mistakes. Fortunately I’m usually smart enough to learn from them and not repeat them which in the words of the immortal Bob Ross, that makes them happy little accidents not mistakes. So if you want to make money in this game then you’re eventually going to have to buy something to resell. No matter how much due diligence you do, I guarantee you’ll make some dumb mistakes. But this is where minimizing risk comes in, if you are minimizing your risk each step of the way, then the mistakes shouldn’t cost you more than time.
  4. Evaluate – Now it’s time to find all the mistakes you made. Was the product restricted? Sales rank only good in the last week and sh*t before that? Found a different product page with a lower price? Product ring up at a different price than on the clearance label? If you have the patience and attention to detail, you can typically avoid these mistakes before buying something. Unfortunately I’ve made all of these mistakes, and usually at least once in a each new store. This is where my over-excitement sometimes gets the better of me. But that’s why I go through every product at least two or three times before actually shipping it to Amazon just to make sure I checked everything. As you go on, you’ll find that those silly little mistakes diminish quickly, don’t fret, that’s why we minimize risk. Once I’m sure I didn’t miss anything I’ll ship the inventory off to Amazon FBA or add it to the return pile. It’s important that your evaluation doesn’t stop here, I check new products a few times a day to see how the price is moving and whether it’s a seller. Keeping in mind that return window that minimizes risk, I’m ready to abort with plenty of time to get the inventory returned if it’s not looking good.
  5. Rinse and Repeat – Now it’s just a matter of refining your process and expanding your scope. As I said, I’ll be in Target ALOT over the next few weeks, and not even the same one. I’ll hit as many different ones as possible just to get a feel for the different store layouts and clearance pricing. I’ve found going back to the same location is monotonous and results in my brain tuning out stuff that it should be paying attention to. I’ll also be buying (and likely returning) a wide variety of inventory.
  6. Scale! – This is a component most people don’t do and in my opinion they are leaving money on the table. After I’ve learned a store like Target, it’s time to scale my operation. If I can go into one Target and walk out with $500 in profit in an hour. Why the hell would I wait for that Target to restock before I make more money. Instead, I’ll plan a day of sourcing where I’ll map out a route that can hit dozens of stores in a day. So if I spend four hours on a Monday scouting a few different Target locations. I can walk away with a sourcing list of dozens of products. I can evaluate those products more closely that evening and narrow them down into a solid buy sheet. The next few days I’ll hit as many locations as possible to grab any of these items I can find.

Step 2 is where I was today with Target. I spent about an hour and half walking the aisles, scanning products, and checking on the things I researched online. For example, Target has a schedule in which they mark down inventory based on the category:

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

So today being Monday, I spent most of the time in the Electronics section. Having done retail arbitrage for some time, I’ve started to develop an internal instinct/memory for products that are found in most stores and with that I can walk through an Electronics aisle and spot abnormal prices. This really helps me get a feel for a store and how its priced versus Amazon . As I’m going through the store I’m also trying to identify things like what the clearance stickers look like, are they grouped together, what do the end caps look like. All of this information by itself may not be useful, but after hitting a store a couple dozen times in a month, odds are I’ll begin to know it better than the employees.

Today I ended up buying about $250 worth of inventory. Tonight I’ll spend the evening evaluating it to make sure it’s profitable. I’ll try to post the results sometime tomorrow.

 

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