In recent years, Amazon has become a retail powerhouse. While many think of Amazon as the e-commerce behemoth that fills retail outlets all over the country, there are a number of additional, less visible retailers that have found a home on Amazon. That’s why it’s very important to have a strategy for retail arbitrage when investing in Amazon.
The investment process begins with researching what the retail investor wants from Amazon. For example, if an investor wants to make money on medical supplies, then the product the investor wants to invest in may be another health industry, such as blood pressure or heart medication.
Once the investor decides which category he wants to invest in, he then selects one of the major categories of Amazon and invests accordingly. If the investment is in Amazon’s hardware segment, then he will invest in Amazon’s flash drives, its DVD/CD burning equipment, and Amazon’s pen drive, etc.
Now, after this investment is made, the investor can select his investment options. In a single investment category, there are generally three investment options:
First, investors may opt to invest in index funds. In the stock market, there are many index funds. The investing goal is to buy a large number of stocks in a given stock sector at a low cost.
Investing in index funds is a good way to get exposure to small cap stocks and expand an investor’s portfolio. There are also “retail arbitrage” ETFs and index mutual funds that do not invest in stocks but rather to buy and sell stocks in different sectors at varying prices.
Next, there are retail arbitrage opportunities in real estate. Investing in real estate is also a good vehicle for retail arbitrage.
With real estate, buyers pay less for an item than they would for it, and sellers sell it for less than they would, making it easy to purchase products that are well below their cost to get a big profit. To find retail arbitrage in real estate, investors look for properties that are well below their value or which are almost sold.
Then, investors can narrow their search for the best investment option by the property type. They can invest in rental properties, commercial properties, vacant land, or even in a building that is still being constructed, but that may soon become occupied by someone who is interested in leasing or renting the space.
When an investor looks for real estate to invest in, he must determine which category he is looking for, real estate or retail arbitrage, then select the best investing vehicle for each. This process will then allow him to invest in the best investment opportunity and get the return on his investment in a short period of time.
Finally, if the investor does not feel he can find enough good investments or the real estate is already occupied, he can invest in Amazon stock. When investing in a private company, investors need to keep their eye on the prize and do some careful research.
Investors should use Amazon’s earnings conference calls and annual reports to stay on top of trends in the retail sector. From there, they can select a strategy for retail arbitrage and find a good investment.
