What is the Amazon Retail Arbitrage Policy?
Amazon retail arbitrage is a policy that allows customers to sell digital products from one online retail outlet and buy it from an additional outlet. In order to comply with the policy, an online retail outlet needs to sell a certain number of digital products. The numbers are published on the Amazon website. If an online retail outlet meets the criteria, then it can sell its products to customers by fulfilling orders for purchases made by customers who have chosen to make their purchases at the website over one of the other retail sites. Amazon pays the difference between the cost of the item purchased in the second store and the price paid by the customer to the first place.
One of the most important things to know about Amazon retail arbitrage is that it only applies to certain products. Items that are sold in conjunction with each other, or items that can be combined in a series, are not eligible for the policy. However, any digital product that is sold individually is eligible for this retail arbitrage policy. Any product that can be bought, such as books, is eligible. Also, all products that are part of a membership site, e-books included, are eligible for the retail arbitrage program.
Amazon uses many different methods in order to determine the price of a product. Some of these methods are determined by supply and demand, while others are more indirect. For example, when a customer searches for a particular item on the Amazon website, an estimate of the lowest possible price is provided. If the customer searches for the same item at two or more online retail outlets, a different price is provided to account for competition. In essence, Amazon is determining the price of the item in order to determine whether or not the customer will stay or go. If the customer chooses to stay, the minimum price applied to the item is increased, and if the customer goes elsewhere, the minimum price is decreased.
Each time an item is listed on the Amazon website, an order is placed. When this order is received by the online retail outlet, the price of the item is added to the sales total. If there are no orders for the item, it does not enter into Amazon’s retail arbitrage program. Instead, it is placed into the special inventory category. The price in this category is set lower than the retail price, and thus, is considered a secondary market or “second position” price.
The second method of pricing is called “cost-to-sell.” This pricing method is used with some items that are sensitive to price fluctuations, such as those in the case of currencies. If an online retail outlet receives a shipment of a foreign currency, and the value of the dollar drops suddenly, the online retail outlet will charge extra money for the purchase. The cost-to-sell price will be higher than the retail price.
Sometimes, it is expedient to charge the highest possible price for an item, regardless of whether the online retail store has a profit margin. Amazon, for example, does not operate in any country under a sole national economy. Instead, each of its retail stores are based in their own countries. A German-based retailer could set the retail price of German wares at a far higher amount than a British-based retailer.
The retail arbitrage policy was created as an attempt to level the playing field between online sellers and online shoppers, so that the retailer who made the largest profit could also take the lion’s share of the online market. For this reason, the retail arbitrage system has always been a little bit tricky. Some retailers have attempted to use loopholes in the system, such as purchasing an item from a different country for a lower cost than they initially paid for the same item. In the past, if a competitor captured this loophole, they could undercut the price of the product to Amazon, which would force Amazon to lower their retail price and therefore entice more customers to buy their products.