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Is Retail Arbitrage Legal? Let’s See…

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Retail arbitrage is something I have mentioned before, such as in my how to make money in high school and how to make quick money in a day post.  I won’t get much into how it works since you’re probably familiar with it.  However, if you’re unfamiliar with the term, it’s a process of finding a product at a local retailer that you can sell for much more online.  For example, let’s say you found a video game on clearance for $5, but eBay shows you that it sells for $17.  This could profit you $12 before fees.  Find 10 of these days and you’re making a decent profit.

This is known as arbitrage.    And, while the term sounds illegal, it’s not quite.

In today’s post, I wanted to talk about the legalities of retail arbitrage if you’re looking to get into this to make some money on the side.  Many who want to get into this side hustle often wonder if it’s legal and I don’t blame you for researching.  I would have done the same as well.

As in all of my guides, I remain honest, never promoting garbage I don’t believe in.  Hopefully, you can take my word for what I say because I truly believe that honesty is the best policy.

So, whether you want to get into retail arbitrage and want to make sure you’re doing everything legal or maybe you’re just curious, let’s dive in and see what it’s all about.

Is Retail Arbitrage Legal?

NOTE:  First off, I want to state that I’m not a lawyer nor should you be using this post for legal advice.  Instead, I sourced what I found online and wanted to put it all in one place.

For most sellers, they either sell on Amazon or eBay when it comes to retail arbitrage and if you research this process online, you will sometimes find a seller who states they received a “cease-and-desist” letter stating that they can’t sell their product anymore.

Something like this can cause some worry, and I understand why you will want to make sure you’re doing everything legally.

The act of reselling a product is legal, and this is according to the U.S Supreme Court.  According to the court, retailers aren’t allowed to stop someone from selling their products, as long as the products were legally required, of course.  All you’re going to need is to make sure you legally acquired the item.

Referred to as  the first-sale doctrine, it gives purchases the legal authority to resell products produced by a manufacturer, even if trademarked.  In the trademark law, according to Hewitt Law, this first-sale doctrine gives anyone who purchased that item any immunity from trademark infringement on the basis of reselling.  However, this immunity can be lost if the product was materially altered.  This isn’t the case in arbitrage, however.

Even though this is legal, at least by the courts, there are some challenges you could incur, often in the form of harassment from the companies.  They do this because they would rather see the customer purchase from them, not some third-party seller online.  It’s also a matter of quality control.  It makes sense.



Challenges and How to Avoid Them

For starters, always make sure you’re selling products as brand new.  If it’s in the shrink wrap, this can assure your buyer that it’s most likely a legitimate product.  This isn’t foolproof, but it can help build trust.  Selling new isn’t required, but just make sure you’re honest in your description.

Next, always make sure that you have receipts for any item you’re purchasing.  As mentioned, as long as you purchased the item you’re selling, you shouldn’t have an issue.  A receipt will help prove this.  In some cases, Amazon may want invoices, so be prepared for this, too.

If you sell on Amazon, they will restrict you from selling various brands, so it’s important to know what you can sell.  This is an Amazon policy and it doesn’t mean you can’t sell the product, it’s just that Amazon doesn’t want certain sellers selling specific products.  In most cases, you can resort to eBay if Amazon doesn’t let you sell.  To see what’s restricted at the moment, refer to this Amazon page.

Lastly, always try your best to avoid counterfeit products.  You should be fine when dealing with local retailers; however, if you purchase from somewhere online, you are playing with fire per se.  While most products are authentic, this isn’t always the case.

Final Thoughts

In the end, retail arbitrate is not illegal as long as you legally acquire the product.  While Amazon or anyone for that matter may restrict you, it doesn’t mean you can’t resell that product elsewhere, such as eBay or the Facebook Marketplace.  However, Amazon or any online retailer has the right to terminate your seller profile.  It’s important to play by their rules.

Retail arbitrage is a great way to make some money on the side, and it doesn’t take much to get started.  For now, I would recommend the many YouTube tutorials as well as websites online that can help you get started in the field.  You can also check the out the best retail arbitrage apps to help you find a better deal.

That does it for now.

As always, if you want to comment on what I mentioned or add to it, you’re more than welcome to add to the comments below.  Thanks for stopping by!

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Tom Nathaniel

Hi! My name is Tom Nathaniel, and I created LushDollar to help share my honest thoughts on everything money. It's the Internet's most honest money site after all. I have worked in the finance industry since 2006, consulting with multiple Fortune 5000 companies.

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