There are a lot of misconceptions about Walmart arbitrage. It is not the same as discount retail, it is not an option for someone who doesn’t have allot of money to invest and there are even people who think it is a scam. There are two schools of thought about this, one says that Walmart is benefiting from retail arbitrage, the other says that retail outlet owners are taking advantage of the cheaper prices offered by Walmart. Here’s how it works.
Every time you walk into a Walmart or Sam’s Club store, you pay full price for merchandise. The merchandise goes into the discount section and is priced lower than what it would be in the retail section. Sam’s Club stores and Walmart pharmacies also offer some extremely large discounts on their products, meaning there are salespeople there who work around the clock trying to win over customers. This means that the merchandise goes to the discount section and is priced lower than it would be in the retail section, resulting in a loss for the store owner.
What is happening is a simple equation. When a person walks into a Wal-Mart or a Sam’s Club store and pays full price, they are essentially paying two stores for the items. Instead of paying at least 50% more for the item, they are simply getting two items for the price that they would have paid at the store. This can happen in just a few of the stores that are known as discount retailers.
Retail arbitrage allows these outlet owners to get the products that they need for a fraction of the cost. It is a great way for them to make money, but it is also very risky for them. If they lose, they can literally lose everything. This is why it is very important that they keep the books in order and make sure that they know exactly how much money they are making with every transaction.
Many people wonder how this happens when they are buying their goods at retail prices. The answer is that the retailer does not actually sell the product, but rather, they are buying it from the wholesale manufacturer. In exchange for paying a higher price, the manufacturer allows them access to a massive amount of products. In turn, the retailer pays a fee to the wholesale company, who then adds retail price to the product and re-lists it as a retail outlet.
Some people mistakenly believe that they are getting a better deal than they would at a regular retail outlet. This is because they are buying directly from the source instead of through a third party. However, in reality, what happens is that the retailer is paying wholesale prices, not retail prices. They are receiving product at a reduced rate and are passing that savings along to you, the consumer. Think of it like paying half price for an item, but keeping the profit.
Walmart has used Walmart arbitrage more than once to increase their profit margin on their merchandise. For instance, when they started offering black jeans, they didn’t have a very large supply so they could offer them wholesale, and consequently, sell them cheaper than any other store could. Since the manufacturer sells only a certain amount of each item per location, Walmart was able to buy that manufacturer’s supply at a much lower price than any other store could, allowing them to pass those savings along to you, the consumer.
If you are in the market for purchasing any sort of merchandise at a cheaper price, then you should definitely consider Walmart. Not only do they have hundreds of locations throughout the United States, but they also offer the opportunity for you to purchase in bulk for even less than you would expect to pay at a retail outlet. It is a win/win situation for both you and the manufacturer. You save money on your purchases and the manufacturer makes more profit.
