In this article, we’d like to share a book reselling business model you may have never heard of and a few insights about the benefits and challenges of running a book reselling business based on bulk used book supply. Tune in!
Online Book Arbitrage vs. Retail Book Arbitrage
Let’s define online book arbitrage and retail book arbitrage and then discuss how the business model we’d like to introduce in this article differs from both.
The major difference between retail book arbitrage and online book arbitrage is the SOURCING METHOD.
Retail arbitrage means you physically visit retail stores (in our case, bookstores, thrift stores, garage sales, etc.) and scan items to find books that sell below market value, then resell them online for a profit. In online arbitrage, you find books selling below market value and resell them online (e.g., on Amazon or eBay) for a profit.
Nowadays, it’s easy to enter the book reselling business, and both the above-described business models are well suited to get started and learn the basics. You can choose one or another depending on personal preferences, skills, and resources. Each model has its own advantages and disadvantages, so it’s important to do research and understand which model aligns best with your goals and strengths. However, after a while, you can hit a glass ceiling in terms of profit. To move on, you’ll have to be on a constant lookout for new business models. Here’s one of the options we’ll be describing further on.
Next Level Book Reselling: A Business Model to Grow Your Book Arbitrage Small Biz into a Company
There’s a business model in the book reselling niche that will help you grow your small business into a company with 7-figure profits, and it definitely deserves your attention. Well-described by Omar Mohit, the founder of BookzPro, it’s a sort of book reselling arbitrage where you source and buy used books in bulk from non-profit and donation-based organizations like Goodwill, Salvation Army, Savers, and other local chains and then resell them on Amazon for a profit.
In other words, in this business model, you’ll be creating a SYSTEM that can process a huge amount of books fast and operate large volumes. Here’re its characteristics:
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Book condition |
Used books |
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Book genres |
Various (from textbooks to thrillers to kids’ books) |
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Titles |
Unique inventory; no repetition |
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Sourcing |
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Sources’ reason to sell |
Lack of storage space and labor to handle all the donations received |
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Purchase volume |
Over 30,000 unique titles in each shipment; truckloads |
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Processing |
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Payout comparison and decision making |
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Processing stats |
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Purchase prices |
Books are purchased by weight.
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Profitability |
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Challenges
Like any other book reselling business model, this one comes with strings attached. Here’re some of the challenges you may expect when you choose it:
- Most likely, you will have to go six or seven months without seeing any cash because you’re growing while your earnings are financing the inventory.
- You will have to constantly monitor return on inventory, the key metric that illustrates how much liquidity you are generating versus how much inventory you are holding at any point in time, in real-time.
- You should also be able to employ pricing adjustment algorithms in order to win the buy box, as well as know what percentage of the buy box you are currently in so that you don’t have to compete with others.
- You must constantly find new inventory sources, as the availability of books can vary depending on the donations received by non-profit organizations.
- Additionally, you must invest in storage space and logistics to manage the large quantities of inventory received in each shipment.
Overall, this book arbitrage business model can be quite profitable if you understand the book market and can source inventory at a low cost.
Comparing Margins for Various Book Reselling Business Models
Judging by the interest in the topic and the number of people doing business on Amazon, used book reselling is profitable. However, as in any other business, you need to understand how to organize it and how to control your finances, profit, and losses.
Let’s take a look at some hypothetical numbers and compare the potential profitability: the gross profit margin (the percentage of profit made on the selling price before any expenses are deducted) and the net profit margin (the percentage of profit made on the selling price after all expenses are deducted). The former is useful for comparing the profitability of different products or transactions, while the latter is more useful for assessing the overall profitability of a business or activity.
In online book arbitrage, you typically purchase books from online marketplaces such as Amazon or eBay and then resell them on the same platform or on other marketplaces. The profit margin in online book arbitrage can vary widely depending on the price of the book, the seller’s fees, and shipping costs.
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For example, you purchase a book for$5 on Amazon and then resell it on eBay for $15. Here‘re your numbers:
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In retail book arbitrage, you buy books from thrift stores or other retail outlets and then resell them on online marketplaces or in person. The profit margin in retail book arbitrage can also vary widely depending on the factors we’ve mentioned earlier.
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If you purchase a book for $2 at a thrift store and then resell it on Amazon for $10, you’ll have:
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Once again, remember that these numbers are based on the examples of the two fictional books. Also, remember that the profit margins can vary widely depending on the specific circumstances of each transaction. With different prices, fees, and expenses, as well as such factors as time and effort required to source and resell books, these examples can only be treated as examples. Yet, you can get an illustration of the potential profit you can expect from selling used books.
Bulk buying book reselling business (where you source books from donation-based nonprofits and sell them on Amazon or elsewhere) has:
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This means that after they’ve collected all the earnings and subtracted the costs of the books and other expenses, they have a net profit margin of 10%. This is a relatively good result if we take into account the fact that there is no one-size-fits-all answer to what constitutes a good gross profit margin and net profit margin for a book arbitrage business.
Ideally, you would expect something like this:
- Gross profit margin around 50% or higher
- Net profit margin around 20% or higher
Most Amazon sellers get a profit margin of 15%–20%, depending on their category (according to Sellerapp). Half of the sellers (52%) see profit margins higher than 10%; 27% see profit margins above 20% (according to JungleScout).
Yet, it’s important to remember that these are just general guidelines and statistics data based on a selected representative group. Additionally, it’s essential to understand that for a growing business, it’s hardly possible to reach such results fast and maintain them for long. Nonetheless, book arbitrage is a niche with great potential.
Return on Inventory as a Key Metric For a Book Reselling Business
It’s important to note that while book arbitrage can be a profitable business model, it also requires a good understanding of market demand and pricing trends for books, a significant investment in inventory and storage space, and an utterly critical approach to inventory management.
It’s a given that being a book reseller, you have to carry inventory, and often more than what you sell each month, as you need to buy ahead of time. This means it’s crucial to always know the real-time value of your inventory. You have to understand how much you paid out of pocket for your inventory and how much you are generating from it every month. That is how you estimate your return on inventory.
Book arbitrage also carries the risk of being left with inventory that was purchased for a high price but is now being sold for a lower price.
Managing large quantities of inventory can be challenging and require efficient logistical processes. If you have $2.5 million in inventory and a six-month period before seeing any profit, a large amount of the earnings will go toward financing inventory.
If you are in a growth mode and have a large inventory, you must arrange your funding to cover any shortfalls, as running out of cash can risk your business. You’ll also need to be prepared to fund the additional inventory in advance.
Bookselling Tools
To manage the business, you will need a proper tool. The best-case scenario is finding a software solution that caters to all bookseller needs: product sorting, online item listing, and managing orders from thrift stores or bookstores. Alternatively, you can choose one of the available inventory management systems (check our article Book Inventory Management Software: Comparative Overview to get more details), or you can consider using BookScouter as one of your bookselling instruments.
BookScouter gives access to real-time buyback prices, which is a huge advantage. Having such information as a part of the payout comparison process helps identify the most suitable sales channel for a book when it’s being processed. Therefore, many seasoned book resellers get a BookScouter Pro subscription and implement its powerful Pro Tools into their business processes and systems.
Conclusion
All in all, book arbitrage is an attractive and profitable business. Yet, the most attraction comes from the fact that nowadays, everyone can become a successful book reseller and make a full-time income from it. Book arbitrage has a low barrier to entry: anyone can start with a small investment and grow their business over time. It also allows for flexibility in terms of working hours and location, as well as other pros depending on your business model.
Yet, whether you choose online arbitrage or retail arbitrage as a way to enter the niche and generate your first income or shift to the business model we’ve highlighted in the article, after some time, you’re bound to grow and start scaling your business. At all times, you need to remember a few things. First, the ability to identify the potential profitability of a book by researching price differences and demand is an essential skill. Second, you should understand or be willing to learn a lot about the financial part of the business to make it generate a good profit margin. Besides, you should never underestimate challenges, from the necessity to carry out effective and efficient inventory management and inventory value management to sourcing-related problems to competition.
Overall, the key takeaway is that book reselling can be a profitable business for those who are willing to invest time and effort to research and find profitable business models. It’s not a get-rich-quick scheme, and success requires hard work and dedication. Finally, we hope that you’ve got a few insights from this article and will be able to improve your business using this information.
If you’re in a book reselling business or are planning to give it a try, we highly recommend checking the following articles:
Retail Arbitrage Experts Roundup with Tips, Ideas and Strategies for 2023
Top 10 Questions about Starting a Used Book Selling Business
All You Need to Know about Resale Value
Best Book Scanner Apps Overview
Restricted Inventory Tip
How to Prepare Your Book Business for a Recession
