What is Online Arbitrage?
Let's start with arbitrage first, shall we? So that's when you take advantage of a value in one market compared to another. If one is lower than the other, you may have an opportunity to make profit by purchasing on one and selling another. The best example of differing values on marketplaces is between eBay and Amazon. The same product you buy for £10 from a novice seller might be worth £20 on Amazon.
Online arbitrage is when you buy a new product from one website and you sell it via an online marketplace for profit. Yes, the same exists when doing it in brick and mortar stores – retail arbitrage. But the online strain is a whole different story. Primarily, the aforementioned marketplaces are the go-tos. As both are driven by third party sellers who can price however they want, eBay and Amazon don't always price match competition. This can mean that people that love to shop there might not check whether they can get a better deal elsewhere.
What are the Best Ways to Get Started?
Oftentimes, people will get their start by purchasing on a high demand electrical product on release day. People may have made their first sales by selling and iPhone 7 for £100 profit the day after release on eBay, or grabbing a Nintendo Switch straight after they dropped for £50 over the RRP. These require a lot of upfront investment. Although there might be a high demand, it's very competitive, making it better to start small.
As long as you have evidence that a product is selling for profit on the marketplace of your choice (by using Keepa for Amazon or the sold filter on eBay), you should consider whether to make the purchase. The next time you're hunting for deals on LatestDeals, HotUKDeals or somewhere like that, check whether you could make a profit on selling it on a marketplace. You would be surprised how many opportunities are out there.
Where Can I Find the Deals?
You still don't believe me, do you? I swear there are opportunities to make a profit everywhere. Here are some of the better ways to track down those goodies:
Sales. Clearance, 3 for 2s and all of these kinds of promotions will reveal a plethora of opportunity. A few Google searches will get you on your way.
eBay Searches. Filter for new products and scavenge. Use advanced techniques like negative searches for the best results.
Keepa.com. Set up price alerts for Amazon price drops and list them on eBay, Gumtree or the Facebook Marketplace for profit.
FBA Wizard Pro. The most comprehensive online arbitrage software around. Scrapes product selection pages for deals to sell on Amazon or eBay.
Where is it Best To Sell?
It depends on what you're sourcing. If you want to give Amazon FBA a go, you need to be approved in certain categories first. For example, if you planned to create an empire flipping out-of-season New Look stock, there will be a few more steps before you can get started. On eBay, you have a lot more flexibility, so is always a good place to start. There are other options out there too, but these sites are the two most popular online retailers in the UK, so it makes sense to sell on there, instead of elsewhere.
If you're a seasoned online seller with eBay, it's probably time to give Amazon's FBA a go. Those new to reselling may find it all a bit daunting though. Since I came across Amazon FBA, my eBay selling has dropped significantly. It's now around 20% of all my reselling income, when it used to be 90%. If I was ungated in all categories and there weren't as many restricted brands, it would be even less.
Will Online Arbitrage Make You Rich?
Done well, it's far more scalable than retail arbitrage. If you come across a particularly good, replenishable deal, hell yeah you can. Compared to treasure hunting, you usually need a bit more capital to get started. I'd say £500 is a solid amount to get going. It will take a couple or months to figure things out, but then things can escalate rather rapidly.
The ones consistently making high four figures and upward per month rely on outsourced deal finders, but that's for another post. All you need to know is that it's very possible to exceed your monthly wage through online arbitrage within a year.
What's My Experience with Online Arbitrage?
I've been doing online arbitrage before I realised it had a name. Once you find a wild misprice online, it makes you consider the possibilities out there. I was doing things manually for quite a while – to some success – but I've had much more luck once I found purpose-made tools.
I found eBay to be the most effective way to get rid of online arbitrage goods, until I was introduced to Amazon FBA. Now I use both for different functions.
For scalability, there are so many reasons why online arbitrage is favoured over retail arbitrage. That said, there are plenty of in-store flips that you can't get without going to get the items yourself.
The same can be said about using paid tools. You can spend hours search for one product with 20% ROI, when FBA Wizard Pro can find you 10 items with 100% ROI in half an hour. Learn the concept and trial it, before you spend money on these things, but just be aware that you don't have to do things the copy-and-paste way forever.
Online arbitrage is such a good way to make money because there's always a flippable deal somewhere; it's just a case of putting in the time to see it through. You soon learn that the best way to make money is to go for higher value goods with large mark-downs, but that obviously comes with risks.
This game is all about timing. Even with the best tools, you will take hits. Not every purchase will make you money, because things change all the time. Luckily, returns policies exist, so make sure you keep receipts if those quick flips didn't pan out as expected.
Any Final Tips?
You will get the Wickedest Guide to Online Arbitrage one day. Until then, just remember that the top advice is the same as retail arbitrage:
- Invest what you can afford to lose
- Aim for minimum 30% ROI on each individual product
- Only buy things you know will sell
- Declutter now, because you're going to need space for stock/boxes
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