How I Started a Multi-Million Dollar Retail Arbitrage Business
- Garry Ray is an Amazon seller from Smiths Grove, Kentucky.
- He got into retail and online arbitrage with his wife when they became empty nests.
- Here’s how he built his business, as told by writer Julie Peck.
This narrated essay is based on a conversation with Garry Ray, a 59-year-old Amazon business owner from Smiths Grove, Kentucky, and the co-leader of the Amazon Seller Tribe on Facebook. Earnings from his company, TSBG, LLC, have been verified by Insider with documentation. The following has been edited for length and clarity.
I grew up very poor in a very rural area of Kentucky, and as a kid was headed for the same kind of factory job my dad had. But I had a few accidents growing up that changed the course of my later career: When I was five, I got my right hand stuck in an old-fashioned flour mill and it was crushed. Even after five surgeries, I still have very little feeling in my hand and no index finger. Later, as a teenager, I struggled and lost sight in my left eye.
Without the money to go to college, when I graduated from high school, I tried to join the navy. I was tested very high and even went to the swearing-in ceremony, but they said I couldn’t join the services because of my eyesight.
I was crushed. I didn’t like being poor and I didn’t like having only a high school diploma. I had a lot of pride and a lot of motivation to succeed. As my life progressed, I started looking for ways to find that validation by doing business on my own.
In 1981 I started selling door-to-door insurance in rural central Kentucky and eventually became very successful. I’ve met a lot of very inspiring and important people, like motivational speaker Zig Ziglar, and I’ve traveled all over the world. But I was in a world where I was competing with or against highly educated people. When I submitted my resume, it didn’t look impressive.
Today, my wife and I run an online retail and arbitrage business. Last year, we made just under $2.4 million in sales by doing 90% of our purchases online. From that, my wife and I earn six figures, and all we do is run the business.
We had never sold anything on Amazon before
When my wife and I became empty nests, we got bored. I tried day trading for a while, and it was a real rollercoaster – eventually I lost money, so it wasn’t for me.
My wife is so good at finding deals that I used to trick her into believing that if we could ever find a job that allowed us to make money shopping, we would make a fortune. One evening I read about retail arbitrage on Facebook, so we decided to give it a try. In our first 100 days, we made sales of $117,000. It was in 2015.
I paid to take a class before I started and we watched a bunch of YouTube videos and then hit the shops. We went to Macy’s, Dillard’s, Kohls, Walmart, Target and others. It doesn’t matter which stores you shop at or how big they are – all retailers’ clearance departments are the “honey holes” for finding good products for arbitrage. It was very similar to my day trading experience, except in this case we had apps — primarily the Amazon seller app you get when you sign up for a seller account — so we could easily identify items that sell well on Amazon.
I had a small trucking business that I started a few years ago and then sold and we took $50,000 of the money and put it in a separate account to use for our arbitrage business . I work more with a greed based mentality and my wife works more with a fear based mentality when it comes to making money, so I told her not to worry about money, just enjoy shopping.
Here’s the ironic thing, though: Because Amazon sends out payments every two weeks, the most I could spend on that $50,000 pool was half that. Money was coming back from our Amazon sales so quickly that we no longer needed to use the money we had set aside.
We hired our first worker, a shipping and handling assistant, approximately 90 days after operations began. We paid her $10 an hour for 35 hours of work per week, and when we hired her, our monthly sales immediately jumped from $30,000 to $60,000 per month. We now employ six part-time workers to handle all the work for us, from finding the items online to shipping them to Amazon.
In building our business, the biggest challenge we’ve had is what I call the “squirrel mentality”
I really had to fight to stay focused and not move on – that’s the main obstacle for us. Once you achieve some success, there are so many distractions in the form of other opportunities that can seem appealing that sometimes just staying put is a challenge.
In Amazon arbitrage, there is no category that is better than another. What makes selling work is the imbalance between product location and customer demand. For example, at our first summer sale, we came across these sticky fly tapes, and they sold like nuts. Why? Because the farm stores in our area of Kentucky had thousands of them, but in Kentucky the flies are normal, not excessive. However, in the west, at cattle feed lots and hog and dairy farms, the flies are terrible and carry infections, and these farmers had apparently bought all the local supplies, so they turned to Amazon . American sellers found products – fly bands – in areas where demand was just average and sold them to them.
One thing to know if you’re just starting out is that online arbitrage – buying products online and reselling them online – generally won’t give you as big a return on investment as retail arbitrage, which is buying products in-store, like Kohl’s or Macy’s or Walmart, to sell online. Usually online, you won’t find the discount that you would find in a physical store. But shopping in a physical store takes longer, so it’s a trade-off. It all depends on your interests and what you are capable of doing.
As far as stores to source from, it’s honestly every company that sells something. A warehouse at Dillard may have a surplus of a certain high-end handbag and need to sell them, so they place them at a huge price online only rather than shipping them to all of their stores. That’s where we come in: we buy them and put them on the world’s largest e-commerce site.
The best strategy is to choose which products to buy based on their ranking on Amazon
For each category, Amazon has the particular items available listed by rank. For example, in “shoes” there may be 16 million separate items. Item number one is the best and most sold, and would probably sell around 15,000 pieces per month, and the item at the bottom of the list probably sells one every three months. So, the lower the ranking, the more these items sell each month.
Basically, using this strategy, we’ve had success with all kinds of articles. For example, in Kentucky, we had never heard of lawn shoes. Here, we don’t wear special shoes for gardening, we just wear old shoes, but in some parts of the country, people want specific garden shoes. So one year we sold over a thousand pairs of garden shoes that were overflowing the shelves here in Kentucky at the farm shops, but were in high demand in other parts of the country.
Additionally, you should treat your inventory on Amazon as if it were a mutual fund – go shallow and wide. Build up to 1,000-5,000 items in your store with one to four pieces in each of these SKUs. Then, if the price drops, it doesn’t hurt because you have plenty of other SKUs that you’re going to sell for a profit.
People looking to get into online retail and arbitrage need to surround themselves with the right people
If they choose to learn it on their own, they can, but it will take a long time. I started by joining a group to learn how to do all of this. I think it cost a few thousand dollars, but as you can see it was well worth it.
That guy on Facebook who taught me is gone, but Facebook has a lot of great resources, like the group I co-lead to help other people learn how to be successful on Amazon. We teach people, step by step, exactly how to sell this way and provide exclusive strategies and tactics related to both buying your items and selling them. Also, we have vendors like my wife and I who have been doing this for years and new vendors, so it’s a great support system for all of us. We have over 500 members now, and over 120 of them are making $1 million or more in gross sales.
It’s actually how I spend most of my time now, and it’s incredibly rewarding. If you surround yourself with people who can tell you the right buttons to press and give you shortcuts, it can accelerate your success exponentially.