Online Arbitrage for Beginners (Step-by-Step Guide)
What is Online Arbitrage?
Online arbitrage simply refers to buying items at a lower cost from online sources and selling them online. It is a way of generating cash that does not restrict you to brick-and-mortar stores. You can carry out the full transaction of sourcing for products and selling them right from your living room.
At times, you do not even handle the products physically as they are sent directly to the online marketplace. OA is a possible venture but is not as easy as it sounds. It involves accomplishing some legwork for you to make it. This is particularly so if you are just getting into the reselling business. Read on to learn more about OA.
Is Online Arbitrage Legal?
Yes, it is a legal activity recognized by the government. Anyone can engage in online arbitrage. There are, however, some concerns that can create problems down the line. These concerns also affect sellers’ reviews and ratings.
A scenario that is becoming common is if you as a seller advertise goods on, say, Amazon. An interested buyer makes a request and pays. You then get your online retailer, say Walmart, to ship the goods to him.
When the customer receives the products from elsewhere instead of Amazon, he is disappointed. He complains and gives bad reviews. The customer may sue you because you gave out his details to a third party without his consent.
Some manufacturers or brands restrict those who should sell their merchandise. If you happen to resell their commodities, chances are that you may land into trouble. They may use the intellectual property clause to arraign you in court.
Some online sites like Amazon have strict measures concerning the condition of items you can sell. They discourage the sale of counterfeit products.
It, therefore, calls for a proper understanding of which brands you can resell. Understand the entire process and stick to the rules and regulations of the online sites you resell your items.
How Do You Get Products for Online Arbitrage?
Finding products for online arbitrage is not as complicated as it may seem even as a beginner. It may involve thorough research or hit-and-miss until you find sites and establish systems that work for you.
The best place to start is where you are familiar. If you already frequent certain physical stores like Target, try their clearance sections on the internet.
Consider sourcing your products from these large retailers who have an online presence. They tend to have items in large quantities at low prices. When they have clearance sales, you can buy as much as you want without fearing that the items will run out.
The more you carry on with online arbitrage, the more you will stumble upon other online retailers who may not be well known. They could have deals from time to time or clearance sales that will appeal to you.
You can also check niche stores for items you want to resell. It is unlikely for other resellers to flood there, as they are not as popular. Any deals they could be offering will be in your favor.
Use promotional sites to identify sales. Countercheck the product price with that on the marketplace to be sure you will have good margins. Draw up a sales list to help you with sourcing. This needs to be updated daily.
Register for emails in the stores that you identify. You can also sign up for any reward programs they could be having. The emails will alert you when they have new stock, low prices, or clearance deals.
The Process of Online Arbitrage
We illustrate how to do online arbitrage below.
- Research current prices of items that you may want to sell on the online marketplaces.
- Read and internalize the selling guidelines on the platform you will use.
- Be aware of the fees and costs you will pay. It varies from one category to the other. There could be other fees like the seller’s fee and shipping costs.
- Visit an online retailer’s website.
- Search for items that you want to sell or those that are low-priced.
- Place an order by filling a form with your details.
- Within a few days, depending on the store’s timeline, you will receive your goods at home.
- Unpack them and confirm that everything is intact as per the order.
- Make your listing on your preferred online marketplace. Set a price that is realistic yet gives you good margins.
- Ship your items to that marketplace, or wait to ship them to the buyers directly.
Can You Make Money With Online Arbitrage?
There is a lot of money with online arbitrage. It does not matter that you are buying online for reselling in the same place. If you take your time and discover items (that are in demand) for rock bottom prices, you can sell them on their. You will make good profits as long as you price your products competitively.
The inefficiency of markets creates a loophole for online arbitrage to continue thriving. This is what arbitrageurs exploit. It is hard to tell for how long this would carry on because there are technological advances happening with each passing day.
The use of algorithms and personal computers are streamlining the financial markets. If it continues this way, the markets will tend towards efficiency. This, in turn, will reduce online arbitrage’s profitability.
The increased use of technology in this business model is twofold. It will benefit some and hurt others. Those who benefit can scale their businesses faster while the rest give up. You can continue to reap from OA by staying ahead of the game in terms of technology.
Maybe you are wondering why you can make money when all that buyers have to do is go online and buy from where you source your items. That is why businesses exist, because most people do not want to trouble themselves searching and comparing prices online.
Some do not have the time. Still, others have it in their minds that only a particular place subscribes to their tastes and style. That is why even if an item is cheap on, say, eBay; some customers will still purchase it on, say, Amazon every time they need it.
This is how arbitrageurs thrive with some sourcing products on eBay and reselling on Amazon. Other seasoned arbitrageurs buy on that same marketplace and resell there at a higher price. Therefore, you can make money with online arbitrage if you are patient, research deeply, and become creative.
What You Need to Get Started with Online Arbitrage
Ensure you have the following before embarking on the online arbitrage venture.
- Stable internet: otherwise, you cannot get online.
- A computer: it is a better device than using your phone especially when browsing for products for sale.
- Cash: this is seed capital for paying the goods you source for reselling. In case you do not have any starting capital, start by selling items in your possession that you no longer need. This will create cash for you to start buying from online retailers.
- Selling account: this is necessary on the platform you will use for reselling. You need to sign up before you start your operations there. If it is on Amazon, go for the ‘individual’ account, as it has no monthly fees. You can always change once you get used.
- Tools: they are many and will aid in online arbitrage sourcing. Using them will help you know where to find items cheaply. They will also check the price history on marketplaces and make the arbitrage process smooth running. These tools are free like Keepa or paid ones like ASINspector. For more on this, check further down this article.
As you get into this new line of business, it is sensible to recognize how beneficial and detrimental arbitraging online can be. OA is worthy to consider because of the benefits it offers. These include the following:
- It is easy to start as long as you have the will power and the right attitude. The cost of starting is low, as you need only a few items to start. You can do it as a side hustle without any setbacks.
- The process is straightforward as you can make price comparisons from your comfort zone. Incorporating appropriate tools simplifies the process further.
- Online Arbitrage saves you time as you do not have to move physically from one store to another in search of commodities to resell.
- When searching for resale items, you have an infinite inventory to go through on the internet.
- There is no limit to the number of items to order. You can place a huge order, which ordinarily may not be available in retail stores on location.
- OA is not physically involving since you can identify online deals and post them on marketplaces on the internet.
- No time limitations because the internet operates throughout. If you want to source your items, you can do so anytime. Buyers can make purchases whenever they have time.
- You can do it remotely from any location worldwide.
- Your items for resale arrive at your door. You can use the packaging boxes they arrive in for onward delivery to your customers.
- It is possible to save cash or increase your profit margins using cashback sites.
The drawbacks of OA include the following
- You may miss the physical retail store offers.
- There is a need to organize a way of getting valuable leads consistently to be successful.
- It takes time to acquaint yourself with sourcing online arbitrage software. You should possess some technological knowledge.
- There is fierce competition from other sellers with the same products. You must go the extra mile to make your product stand out.
- It is possible to mismatch your stock especially if the listings are not the same in all the online marketplaces.
- All the many stores you need to source your resale items can overwhelm you.
- At times prices tank before you receive your inventory. This is particularly so if you are not using any tool or software. It may lead to losses.
Online Arbitrage Sourcing List — Best Online Stores
Online retail arbitrage can be confounding with the presence of a wide variety of stores on the internet. Sourcing for products (leads) for resale from these stores requires a strategy. You can source manually, through automated software, or through the purchase of lead lists.
Manual sourcing requires patience and practice. It is better to start this way as a beginner to avoid spending limited cash on software or lists. Start with a few online retail stores. You can identify more as you get used to online arbitrage sourcing.
The manual process entails searching for online retailers without any software or lead list. Counter check leads or products of interest with those on the marketplace you will use for reselling. Decide whether it is a valuable lead. If it is profitable, make a purchase.
The following are some of the best online stores to get you started.
- Home Depot
- Best Buy
- Disney Store
Once you learn how OA operates, you can incorporate sourcing lists, which you purchase or build over time. These lists streamline the sourcing process as it takes only a few seconds to find leads. This is in contrast to sourcing manually which can take several days.
Buying an online arbitrage sourcing list enables you to have direct leads. All you have to do is to analyze it again and buy what will benefit you. Many agencies sell these lists usually from Monday to Friday. You receive them each weekday in the morning as a spreadsheet.
It consists of leads that you evaluate to see if they have the potential for reselling. Such leads go for $50 – $300 monthly. Some services that sell the leads normally put some people on a waiting list.
The reason being they do not want to share their online arbitrage list with so many individuals as it may be diluted and defeat the purpose it should serve. Beware that the lead lists may or may not work, as they are not methodical.
How to Decide Which Products are Worth Reselling
Examine marketplace trends on the internet: be on the lookout and study the way products sell on your preferred marketplace.
Go through customer reviews: they will give you an idea of what is trending or what they specifically need. Find reviews on marketplace sites like eBay, Facebook, and Amazon.
Check keywords: If you have an idea of the niche or product, you want to concentrate on, use Google to see what people are looking for. It will give you an idea of how frequent people conduct searches. You need some knowledge of keyword research and SEO.
Identify items with high margins: it is all about profits. The less the cost price and other associated fees the more profitable it will be. Think of shipping by avoiding bulky products when starting.
Be alert: for any deals or clearance sales that may be upcoming. Join forums like Reddit and those on the online marketplaces. You will learn of upcoming sales and online stores offering them.
Assess eligibility: Find out if there are any restrictions on the sale of the item.
How to Calculate Potential Profit
The whole point of arbitraging is to gain good returns from what you invest. That is why you must be clear on what your potential profit will be when you identify items for resale. Consider all the costs and fees. They include inventory costs, shipping costs, seller’s fee, and online marketplace fees.
Some sites like Craigslist or Letgo have no seller’s fee. The profit would loosely be the difference between the selling price of your item and all the costs/fees.
Other sites like Sheepbuy don’t charge a commission on sales, allowing you to make higher profit margins compared to Amazon or eBay.
Let us say you buy an item for $10 and list it on a marketplace online for $30. Assume the seller’s fee (deducted by the marketplace) is $8 and the shipping cost is $3. The profit would be $30 – $(10+8+3) = $9.
This is how it would be but there could be other costs like taxes that need to be incorporated into the calculation to get a clearer picture. Some online marketplaces like Amazon and eBay have apps that can help you calculate the potential profit easily. Other independent vendors also have tools and software to help you calculate more accurately.
We discuss this in detail in the section further down this article.
Evaluate How the Products are Selling Online
An analysis of the sales history will give you the true state of affairs. Even if an inventory projects an image of churning lots of cash, the reality on the ground may be different. It may not be making any sales at all.
It is not just about huge profit margins. How long it takes to sell also counts. Otherwise, you will tie in cash that you could reinvest in more inventories.
Check the sales ranks of the products you want to sell on your preferred marketplace. A lower number means it sells well. Other than the current rank, assess its sales history.
Manual evaluations may take forever especially if you have several items and want to list on two or three sites. As you progress, you can use tools to ease this process. CamelCamelCamel and Keepa have Chrome extensions to help you track an item’s history.
Determine Best Online Marketplaces to Resell Online
Consider various factors before settling on a particular site. This requires thorough research. Popularity is important since a popular site has a wide customer base. It implies that you can sell faster. Examples of popular sites are Amazon and eBay.
Understand the product categories to know if your item is eligible. Some sites sell certain items only. Find out if such sites would suit your products.
It is crucial to know the listing fees and any other associated fees. Some sites have more than one fee depending on the type of account you sign for, the number of item categories you sell, and the duration you take to sell.
Examine the site for any other costs; whether you are the one to ship, or they will ship free, ship for you and charge you, or ship and charge the buyer. The guidelines governing selling are different from site to site. Ensure you are clear about them.
To maximize your profits, find a marketplace where the commission you’ll pay is low or none at all. Sheepbuy is a great place to resell since there isn’t any commission on sales and if you’re just starting out, you can sign up to the free basic tier and enjoy up to three active listings at any given time, absolutely free. Find out more here.
Though the location is not an important factor, some people are sensitive and may want to sell their items within their locality. In such cases, the best sites to use would be Craigslist or Facebook Marketplace.
Best Online Arbitrage Software & Tools to Streamline the Process
Once you understand the process of sourcing for products, it would be better to shift to an automated process. The tools and software will save you time, as they are faster and more efficient. You can decide to use free or paid tools.
Some are Chrome extensions and others are web apps. They come in handy as you look to increase your inventory. These tools serve various purposes such as product sourcing, price history, repricing, and rank history. Read on for more information.
Free online arbitrage tools or chrome extensions
Invisible Hand – is an extension that does price comparison. It gives you alerts for lower prices on a retailer site for the items you are sourcing. The alert is displayed as the Invisible Hand’s green logo.
This extension can present online arbitrage opportunities for you. This is by enabling you to discover marketplaces to sell your products. It can also reveal retailer stores to buy from.
PriceBlink – mainly searches for low prices and coupons that can save you cash. This browser extension is a good way of confirming whether you have the lowest price or not. While using PriceBlink, ensure the items it proposes from other sites match what you are reselling exactly.
CamelCamelCamel – is also an extension that normally works hand in hand with Keepa. Clicking on the extension takes you to the item’s price history. It will alert you through emails whenever there is a drop in prices. A graph on the CamelCamelCamel site will display the comparison between Amazon and other third-party sellers.
HowMany – as the name suggests, this extension lets you know the number of items a competitor has in stock. This information is crucial in knowing whether to compete with them or let them be. If they have a few items, you can take them on.
The same cannot be said for those who have many items unless you are ready to match them up with your inventory. It is worth noting that this tool offers 5 free scans daily. If you would like to make use of it more than this, you pay for the monthly subscription.
Honey – is a great extension tool that helps you keep your purchase cost to the absolute minimum. It will aid you in identifying and applying for ideal coupon codes just before you finalize your online order.
You do not have to go through multiple coupon sites looking for them. Honey does this for you. It also extends cashback to its users in addition to analyzing the sales history of items.
Paid tools and software
JungleScout – is both an app and an extension with a free alternative. As one of the best research software, it gives you an estimate of sales per month, ratings and reviews, and rankings. It helps you project the number of items you may sell each month while enabling you to identify new niches.
Choose one of three categories of the app for an annual subscription. The main attributes of JungleScout are
- One-user accounts.
- Provides daily sales estimates.
- Shows sales history and price history.
- Tracks ratings.
- Displays scores for listing quality and product opportunity.
Keepa – is partially free with limited usage. This free version allows you access to some of its data. The paid version has monthly subscriptions and offers a lot more. It helps you know the price, rank, and sales history of items along with the number of resellers for every item you intend to purchase (for reselling).
It is an Amazon tracker. When on that site, Keepa’s plugin will show a chart that will aid in product purchasing decisions. It allows you to prompt it to give you alerts whenever there are price reductions. Other attributes are
- The detailed price history is presented in graphical form for quick glancing.
- It offers timely alerts when items are available.
- Its browser extension displays price history as you search for items.
Tactical Arbitrage – is a reliable and popular tool that searches resale items in more than a thousand retailer sites. It mainly focuses on Amazon’s marketplace. To sell your merchandise faster, Tactical Arbitrage customizes parameters for such metrics as ROI and Sales Rank.
Some of its distinct particulars include
- Sources for products from more than 500 third party sites that you can buy cheaply and sell at high prices online.
- Performs a reverse search for items on the marketplace to identify cheap online retailers.
- Is an analysis tool for wholesale lists.
- Analyzes product variation so you are aware of the ones that sell on online sites. It is best for clothing and shoe analysis.
Source Mogul – considered the best software, it goes through several hundreds of sites to identify your items and compare them with Amazon. The search does filters according to your specifications. You can let it search as you attend to other matters.
Once it completes you can then analyze the matches it displays. The main characteristics are
- Combs through the general and specific categories and types.
- Avails reports for sales ranking.
- Examines brand restrictions.
- Gives pricing histories of each item.
- Unlimited searches of about 400 websites.
ASINspector – is a chrome extension that is also available as a mobile application. It shows the sales history of items and can provide an analysis of the bestselling pages. It is easy to use but keeps opening tabs every time you search.
New sellers will find this extension appealing, as it is affordable. You only make a one-time payment. Other features include:
- Exposes the sponsored adverts of competitors.
- Points you to relevant resale items.
- Analyzes keywords.
- Has a good user interface.
- Saves your search history in case you need to refer to it at a later date.
- Has a profit calculator.
Online arbitrage tools or software can enable you to identify ‘hidden’ deals and profitable niches through price comparisons. They give you an edge in listing and selling your items way before your competitors jump in. Product sourcing tools accelerate this move.
Tools that convey pricing and ranking history can help you know what is on-demand and has stable prices. They also give you a clear understanding of what your expenses are and how to manage them to make profits.
Note that using arbitrage software has some downsides. You cannot be 100% sure of getting any meaningful outcome. Scanning a whole site may not yield much for you as a new seller. It may also show several results that may not apply to you.
This could be that the items are restricted. It takes quite a while before a new seller understands and gets used to the software. New sellers end up frustrated and some easily give up. Those who proceed with the software get overwhelmed with all the data before them.
Patience is the key here. Take time and learn how to use them bit by bit. Let these tools help you scan items across different retailers and marketplaces. They can enable you to access product pricing from those sites, which can give you an edge over other resellers.
Go for sourcing tools that can scan as many stores as possible. They should also be able to scour the marketplaces they offer comparisons with. These tools need to do different types of calculations.
These tools play a great role in helping resellers to reprice items competitively. They are necessary because most outsourcing tools do not have this function. Examples of repricing tools include Sellery, BQool Repricing Central, Boostmyshop, and myPricing. Use them to:
- Instantly update your prices as soon as your competitors adjust theirs.
- Re-price the items you source.
- Make swift changes in prices without eating into your margins.
11 Online Arbitrage Tips
After looking at all aspects of reselling online in the above sections, let us now concentrate on online arbitrage ideas and tips that will help you succeed and beat the competition.
#1: Utilize Cash Back, Coupons, and Customer Rewards
In business, every dollar counts. If there is a way to save on inventory costs, it is with cashback sites. Since you will be buying from online stores anyway, it will be an added advantage to buy through these sites. It will supplement your profits by decreasing the cost of your resale items.
Cash backs Are available on cashback sites, which pay you for buying from participating retailers. You need to sign up on these sites after researching genuine sites that pay. Whenever you want to make purchases, you need to go to your retailer’s site via the cashback sites.
That means clicking a link on the site to access your retailer’s site. The rebate site is an affiliate site that is paid cash for driving traffic to a retailer site. A part of this cash is what you will be paid and it ranges from 1% – 10%.
Ensure that once you use the cashback link, you follow through and make a purchase before leaving the retailer’s site. This will enable the site to register your purchase and credit the rebate site. If a retailer offers a 5% cashback on goods worth $500, you receive $25.
Though small, this amount counts for something since you are in business. This is what to anticipate when using these sites:
- They enable you to search for online retailers by name or class.
- The amount of cashback depends on what you spend and which store you buy your resale products.
- They have up-to-date authentic coupon codes.
- You receive payments as checks, cash through PayPal, or gift cards.
It is a good idea to choose your rebate site wisely. Look out for one that has the highest cashback percentage, your preferred method of payout, and reasonable payout minimums. Do not forget to read the rules governing these sites.
Examples of popular cashback sites are ShopAtHome, Fat Wallet, Ebates, Mr. Rebates, Main Street Shares, Rakuten, Be Frugal, and TopCashBack. You can also make an application for cashback credit cards like Nerdwallet.
A chrome extension such as Honey, illustrated above, will help you access cashback. Tools that can help you compare and monitor percentages across various online stores include Cashbackmonitor and Cashback Cat.
Gift cards: they can boost your profit margins. Do not pass up an opportunity to buy gift cards that sell for less than they are worth. Online retailers frequently offer out-of-stock gift cards at discounted rates.
You can make purchases using the full amount. For instance, if you buy a $150 Target gift card for a discounted amount of $140.37, you can purchase merchandise valued at $150. This is a discount of 6.42%.
The percentages differ from site to site and season to season. It is mostly 1% – 30%. Sites that offer gift cards for a lower face value include Raise and Gift Card Granny. Ensure you buy legit cards from reputable sites to avoid losing money.
Coupon code: you can access them through emails. It is better to set up an email account dedicated to such promotions and communication from stores. The emails can be too many for your liking because many stores will be emailing you frequently.
Some chrome extensions that aid you in locating coupons are PriceBlink, RetailMeNot, and Honey. A manual way to do this is to search for ‘retail store name + coupon’ on Google.
Customer rewards: Enroll in a loyalty program in stores that offer rewards so that you enjoy discounts regularly. The stores will award you points that count for reduced prices in your future purchases.
Some stores will permanently reward you with discounts each time you buy from them. This significantly reduces your inventory costs. Finish Line and Target have such loyalty programs.
#2: Experiment Selling on Other Platforms besides Amazon
Buying and selling products in the competitive online market is an issue that continues to bother businesses. This calls for people to start working smart and not hard. The problem is that some people do not think out of the box.
However, smart people in the industry are now aiming far to become and remain successful in the arbitrage industry. Amazon is a great place to do online arbitrage as one of the biggest online marketplaces. Do not only concentrate here.
You can maximize your profits and stay in business by looking beyond this site. Try selling your products on other platforms as well and you will be surprised at the outcome. Here are some reasons to try other marketplaces:
- Competition on Amazon is fierce as it is not only from other sellers (since you are not the only one doing online arbitrage) but also from Amazon itself. Amazon can enter your storefront, view your product list, and sell the same products at a lower price. This is because they have many resources and connections to do so.
- Online arbitrage on Amazon may fail to be productive since the marketplace favors its buyers more than its sellers. Though it is a good thing, some shoddy buyers tend to exploit this. They make false claims and unwarranted returns knowing that they will get away with it.
- As a merchant, you may fail to get what you expect as Amazon sometimes controls product prices. This means that you cannot sell a product for more than it would cost on other platforms.
- Selling on platforms like eBay, SheepBuy, and Etsy will help you reach potential customers worldwide.
- It will also give you relative visibility because with Amazon, buyers receive your products in Amazon-branded boxes. This limits your exposure.
#3: Keep Track of Inventory
To be a successful arbitrageur, you should monitor your inventory. This ensures that you are aware of your stock levels. It means you use fewer resources to fulfill the shipment of products to your customers and enhance their experience.
As a result, many sellers are now investing in ways to improve the management of their inventory. Keeping track of your inventory comes with many benefits, including giving your customers exactly what they order. If you invest in monitoring your inventory, you will not be caught off guard when your supplies run out or are low.
Making quick deliveries to your customers once they place their orders will not be an issue. This will give you a good reputation in the online marketplace you use. In the online arbitrage business, this translates to good customer reviews, high ratings, and recommendations. It also builds trust.
Tracking your inventory means that you balance your resale products. You will not purchase limited stock or excess stock. Limited stock can work against you when a buyer places an order only to find you have no products left or they are not enough. Excess inventory will hold cash that you could use differently or source items from other categories.
Thanks to technology, you can keep track of your inventories using your computer instead of a hard copy. Hard copies are a challenge and contribute significantly to losses because you cannot back them up. They are also not easy to examine or analyze hence placing you at risk of sustaining losses rather than profits.
Using the excel spreadsheet to manage your inventory may work if you are starting. However, if your online arbitrage business scales, investing in more advanced software will do the trick. You will no longer have to struggle with poor handwriting and misplaced figures anymore.
#4: Hire a Virtual Assistant
With the many tasks that await you every day, you may find it difficult to attend to your daily job and monitor your arbitraging hustle at the same time. It would be best to hire a virtual assistant especially when your business starts growing. A virtual assistant will take some load off your shoulder.
Some of the advantages of hiring a virtual assistant include:
- spending less money and time. The assistant will take care of the monotonous admin work that can be annoying as you concentrate on the core business. Some duties he/she can perform include sourcing and updating lead lists daily. He/she can help monitor the retail pricing and the sites with deals or clearance sales.
- customer satisfaction. Buyers appreciate services that satisfy them. Since you want to stay productive and not overwhelmed, the assistant will ensure you have items and can ship them out promptly. He/she can take care of inquiries and communication with clients. This includes addressing any grievances they may have.
To hire a VA, be very specific about your needs. Let him/her know what exactly he/she will be doing. For instance, if it is finding five leads a day, then let him/her know.
Let the VA know the duration you will be hiring them and how much you will pay them per hour. You may need more than one VA because sourcing is time-consuming and you need the best leads. If you hire several of them ensure you have a suitable channel of communication for efficiency.
#5: Focus on Profit Margins — Not Revenue
Placing too much focus on revenues and not profits in online arbitrage can lead to failure. For you to have excellent profit margins, you should research intensively and scrutinize your numbers. What you see as sales screenshots on online platforms does not give you the right picture.
Those are just sales or revenue figures. They do not say what the actual profit margins are. If you are not keen, you will aim at getting those sales figures, which may not be realistic to you as an individual.
Place your focus on the profit you want to achieve and let the hype around you (about sales) not derail you. This also means that you should desist from competing with others who lower their selling prices.
#6: Track All Expenses
Constant cash flowing tends to blind most arbitrageurs, yet it does not imply pure profits. To ensure you are making sufficient sales that can give you a tidy profit, keenly factor in all the expenses you incur. The most obvious cost is that of purchasing your products for sale.
Note down how much they cost. Depending on the platform you choose to sell your items, you need to know their charges in all aspects. Most have monthly subscription charges, seller’s fee, listing fee, referral fee, and commission from the total sales you make, among others.
Do not forget other costs like storage, shipping, and packaging fees. If you hire a VA and use sourcing tools, lead lists, and software, be sure to note all that down. As you can see, all these costs add up and can significantly reduce your profits.
If you are not careful, you could even run into losses. In case you go the Amazon route and choose to have them fulfill your order (FBA), there are costs that you expect to foot. They include monthly and long-term storage fees and discharge fees.
You also need to factor in the transportation costs to their warehouse. All these are in combination with the others mentioned in the previous paragraph. You now see the need to have a keen eye on your expenses. It will help you save your time, cash, and heartbreak.
#7: Start Small
Exercise patience when starting. Take time to learn the ropes and get used to doing things the right way. Resist the urge to earn a quick buck (however enticing the deal seems) as it can backfire on you.
Not taking time may see you make blunders, sell your goods at a loss, or sell them for a long period. A long period means you may accumulate storage fees. Starting small infers that you will properly internalize the process of demand, sourcing, and pricing.
You will learn firsthand which items work for you on which online marketplaces. It does not matter whether you want it as a side hustle or full-time income stream, starting in this way will chart the way forward. You will not burn out or encounter massive losses.
#8: Copy what is working with Other Resellers
There is nothing wrong with being a copycat if it will teach you a thing or two. Check what successful sellers are doing and apply it to your own business. It is even better to use a tool to keep you up to speed with what they are doing.
Consider Storefront Stalker, which is a Chrome extension. It will reveal all the products in a seller’s storefront. Enter this data into another tool, say, Tactical Arbitrage, and start reaping through reverse engineering.
You can also get ahead of your competition by bundling resale items together. Make a listing of similar products that will make you stand out as the only one selling in this manner.
#9: Sell Evergreen Products
To ensure continuity identify what sells throughout the year. Seasonal products are very attractive but keep off them as you start. Cases abound of buyers who make returns such as Christmas trees or skiing boards long after the season is over. They leave you wondering what to do with the returns.
#10: Focus on Getting Good Reviews Online
Good reviews can make the difference between online success and failure or fast and slow movement of your goods. To get such reviews, ensure you offer excellent service to all your customers. Happy customers will not hesitate to leave positive reviews.
When positive are not forthcoming, identify customers who have bought simple items seamlessly from you and ask them for feedback. Do the same for those whose issues you have positively resolved recently.
All you have to do is ask for a review without indicating a positive one. That way, you will not go against the conditions of most marketplaces.
#11: Automate Processes with Software
Automation takes over the tedious and monotonous work of manually sourcing items and testing their viability. As a starter, you can do the manual way the first few times to get the hang of it. Once that is clear in your mind, automate the process. When you begin automation, you may start with the free tools (so as not to use up all your inventory capital). This helps you to understand them as you progress. Using this approach helps you understand the software well enough to know what works where.
Does Amazon Allow Arbitrage?
Yes, Amazon allows arbitrage. Many people do arbitrage in this marketplace though there are rules governing it. It is wise to keep all your invoices (these should be from manufacturers/authorized dealers) in case Amazon requests them.
Note that Amazon may not recognize receipts from retailers. From time to time, they make such requests, to verify that the goods you are selling were legally acquired. This mostly happens if you are selling products whose manufacturer cares who should sell them.
That is to say, if you are not an authorized seller and the manufacturer or trademark owner discovers you are selling, he/she may complain on Amazon. He/she would say you are selling inauthentic products. If you have no proof, your Amazon account would be suspended forever and you will lose any money they owe you.
Therefore be careful not to sell items from such manufacturers. Besides, desist from selling counterfeits, as explained in detail in the preceding sections. To have a successful arbitrage venture on Amazon, you will need to register with them as a seller first.
Decide on a selling method that works best for you. You can choose to sell and ship your items to buyers personally through FBM. You may also allow Amazon to have your inventory and ship it to buyers on your behalf through FBA.
It is up to you to weigh and select a method that is more advantageous to you. Download the Amazon Seller App. It allows you to scan the bar codes of items and their prices on Amazon. At the same time, you can see the possible amounts you can sell in a given category.
You can then proceed to search for items to sell on Amazon. The tips already discussed above will help you in making the right choices and decisions. Once you identify your products, check their profitability through the app.
- As you focusing on success, look out for the following to avoid failure on Amazon:
- Have realistic expectations. You cannot make it overnight, not even after reading about others who have succeeded that way. Losses also do happen. That is the hard truth.
- Keep emotions out of online arbitrage. Use the data on Amazon to your advantage.
- Outsource or delegate once the business picks up. This will leave you more room to think about scaling and increasing profits.
- Set systems to ensure organization and efficiency.
- Invest your time and money. If you have a team, invest in them as well so that they deliver.
- Uphold money management.
- Do not expand too fast particularly if you are a beginner. There will always be time to scale after some experience.
- Be flexible
The Bottom Line
The OA business model is a clear one that a newbie can embark on and see the outcome within a short time. It involves identifying items online that are cheap and could fetch a higher price on other sites on the internet. Time and patience are of the essence since learning the arbitrage business is progressive.
You can use automated tools and software to fast track the sourcing and selling experience. Once you have solidly understood the inner workings and are making progress, consider outsourcing some tasks to concentrate on other things. This article has comprehensively answered the question, “What is online arbitrage?” All you have to do now is to start.