In this post we explain what is retail arbitrage and the 3 main types of arbitrage…
Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
Let’s give a simple example of an arbitrage opportunity. Let’s say you buy a toy doll from New York for $5, but are able to sell the doll for $15 in San Francisco. If you are able to buy the doll from New York and sell it in the San Francisco market, you can profit from the difference without any risk.
A private label product is manufactured by a contract or third-party manufacturer that is sold under a retailer’s brand name. As the retailer, you will specify everything about the product—how it’s packaged, what the label looks like, anything else that goes with it—you will pay the manufacturer to have it produced and delivered.
The opposite of this is buying other companies products (with their brand names on them) and reselling it, which is known as arbitrage.
Private label is mostly synonymous to a white label product. Where a white label product is a product or service produced by one company (known as the manufacturer or producer) and other companies (known as the marketers or entrepreneurs) rebrand the product as if they had made it. The only real difference is that with private labeling, you have more choice.