Many years ago I quit retail arbitrage and in this article I'm going to explain  why that is. For those of you that don’t know – retail arbitrage is a form of  product sourcing, instead of sourcing  your products from suppliers, you instead source your products from  retailers.

Retail arbitrage usually involves finding popular branded items  at clearance prices and retail stores  and in relisting it online other places, such as Amazon (another method is to enlist the help of dropship spy type of tools to source these products).

It is a very popular method to ship your retail arbitrage source products into the Amazon FBA warehouses and that the Amazon FBA program fulfill the orders for you.

In  recent years, the Amazon FBA retail arbitrage industry has had a huge boom and a lot of people have jumped on the gravy train, but there are two genuine real issues that people in the retail  arbitrage community are now facing and  it is these problems that make the  future of retail arbitrage uncertain.

This is probably going to be a reasonably controversial article, because I know that I've got a lot of clients that do retail arbitrage.

I want you to know that I’m not saying that retail arbitrage is bad, I'm just pointing out some of the challenges that's going to face in the upcoming years; and it's personally not right for me and I'm going to explain why shortly.

But first, I'm going to explain the problems that modern-day retail arbitrage is facing, especially Amazon FBA retail arbitrage.

These problems have left Amazon FBA retail arbitrage in uncertain future and I think that everyone who is doing this needs to know about them (and potentially move to aliexpress dropshipping instead)

Brands are restricting their products and this is only going to get worse

Brands are more and more registering with Amazon and setting up exclusive agreements with them, that means that only they can sell  their products on Amazon, for example if  you want to sell fitbit's on Amazon, you  need to be an authorized reseller.

Over time more and more brands are going to be restricting the products on Amazon.  They are going to do this for two reasons:

Firstly, they're going to do it so that they can have better control over their distribution channels and secondly, they're going to do it because they're  going to want to take the Amazon sales  for themselves.

If you are in the retail  arbitrage game, you need to be aware over  time that products you are buying could  at any moment become restricted on  Amazon and you could be left with a  bunch of stock that you're not allowed  to sell on there.

You also have to be  aware of the fact that as more and more products become restricted on Amazon, the  competition is going to become saturated  for the perks that aren't because of the  fact that everyone is going to be pushed  together and they're only going to be  able to sell unrestricted brands.

This is  one of the advantages you have if you  are a drop shipper or you buy products  at wholesale rates directly from the  supplier. If you're a dropshipper and you are usually dropshipping directly from  the manufacturer making you an  authorized reseller.

At worse, you were  selling directly from an authorized  reseller yourself and plus usually these  items are small branded items and they  will never get the same restrictions on  Amazon that the big brands are going to  eventually impose.

And of course, if you  are already buying products and  wholesale Lots directly from the  manufacturer then you yourself are an  authorized distributor, this means that  as a business you have more certainty, you were able to count on the fact that  you're going to be able to sell this  item into the future.

And of course, this  isn't a problem if your private labeling – you are in control of your product and  nobody can stop you from selling it.

When you buy a  product in a store – the warranty is no  longer valid

Here is a big problem with retail arbitrage, when you buy an item in  a store the warranty begins then and  there. For some items this isn't a  problem, if you're simply reselling  something like say Twinings English  breakfast tea you pick them up cheaply, well then the warranty concerns aren't  exactly relevant.

But for some items this is a  big deal – if you're reselling a GoPro you  picked up cheaply it comes with the  one-year warranty from the original  purchase.

So when you go ahead and try to  resell the item on Amazon, it's a really  great area to call that new a buyer  purchasing the item from you doesn't  actually have the same benefit to  someone who really buys it truly new, because of the fact that the warranty is  partially used.

In addition, some manufacturers will not honour the warranty if you can't prove that you  bought it from an authorized reseller. FitBit is a great example – you cannot buy a FitBit from a non-authorized  reseller on Amazon, but you can on eBay.

If you do – be prepared that FitBit may not honour their warranty, as they haven't  in the past. This makes the future of retail arbitrage and Amazon shaky –   they're fine with it now, but will they  truly be fine with it in the future?

Amazon is focused on customers having a great customer experience and a lot of customers truly just don't understand  what they're getting into when they buy  new products on Amazon that don't have  full warranties.

When they find out they get mad, which causes a massive headache  for Amazon and that is why I am NOT  certain that Amazon are going to keep  being so free about retail arbitrage  into the future. They may do nothing, but I suspect they will – I can't prove that, but it's just my hunch.

Drop shipping and wholesaling does not have  this problem, because you're buying  directly from the manufacturer, which means that you have the full warranty  and of course if you’re private labeling  then you don't have this problem, at all because it is you as providing the warranty, but I want to stress that these problems do not in any way spell total  doom or gloom for the retail arbitrage  industry.

Yes, these are real problems that the retail arbitrage industry is facing, but this doesn't mean that the  retail arbitrage industry is just going  to go and die.

For one thing, it is going  to take a long time for companies to  restrict the products on Amazon so  you're going to be able to take  advantage of retail arbitrage on Amazon  FBA for at least a few years yet if that  is your business strategy.

In addition thanks to the fact that Amazon is  restricting different categories – retail  arbitrage is life is going to be  extended. This is going to help you with the issue of increased competition and  saturation.