Are You Going to BS Me in This Article?
It's not my style. Before I started I read a range of estimates of “just £50” to “at least a grand” as start-up capital for online arbitrage. Having learned the game, starting by taking a few Ls, I know the cushion you need to make sure you don't run out of cash before you really nail the concept.
This budget question has to be the top one for people considering online arbitrage with Amazon FBA. As the concept is so simple – finding things on online retail sites that are cheap enough to sell for profit on Amazon – it's the kind of thing lots of people are likely to want to try out. But how much money do you really need at the start if you're going to do this profitably?
Your success depends primarily on your attitude to make this business succeed, but also the expenditure you will personally have to take on. Your situation may mean you can avoid some elements, while you may want to dive in and take on more from the beginning.
Let's kick things off with the things you can't skip over.
Amazon Pro Seller subscription – £30
Every month, serious Amazon sellers have to spend £30 to give them Pro Seller status. This provides them with Buy Box preference, the ability to be ungated in desirable categories and generally more respect from Amazon. Tick this box from the start.
Product Labels – £6
There are two labelling options for your Amazon inventory; one where Amazon does the hard work for you and one where you apply a sticker on each of your products. I've always labelled from my side because it leads to less problems and I would advise you do the same. Paper and tape is not an adequate alternative here; labels are required. These are the ones I buy.
Box labels – £4
As well as the labels for the products, you need labels for the boxes you send into Amazon. There are usually two per box shipment and although you can get away with the paper and tape method here, you'll save so much time by getting this from the very start. These are my choice.
Total unavoidable expenses: £40
Essentials That Can Be Found for Free
I'm going to say that the majority of the preparation tools for online arbitrage are accessible for most for free. You're going to need boxes, tape and bubble wrap. If you work in an office, I'm sure you have some of this floating around. If you're currently an eBay seller, this shouldn't be a problem.
You're going to have to pay for all of these eventually, but it's always best to keep this all to a minimum. I would be especially offended if I heard that anyone that reads my blog actually pays for boxes, when you can get them for free from supermarkets and Freecycle.
This section is a list of things that although you may not need for your very early days in online arbitrage, you're definitely going to need eventually. It's best to cover them off as soon as you can, so you can get the momentum flowing. You don't want barriers in your way later down the line – especially when you've fully figured things out – so tick them off pronto.
Company Formation – £12
Things are so much easier for you as an Amazon seller if you're trading as a limited company. It only costs £12 to set up, and it can be done online in minutes.
Printer – £70
Back to things that can be found for free. I'm going to guess that there's a printer somewhere in your life. You may already have one at home or you may be able to get away with using one at work (if you're in that kind of environment). The reasons you may need to get one in the very near future is because Amazon requires laser printers and because you're going to do a LOT of printing very soon. You need one nearby. I recommend this Brother one.
Scales – £15
Get the weight of your shipment wrong and Amazon suspend your account. They do not play. Go get yourself some bathroom scales to make sure you’re all above board. These are the ones I have.
Sticker Removal – £4
I can't tell you how annoyed you'll be the first time you tear a box thanks to the stickiest sticker of all time being placed on it. Save yourself the hassle and get this non-odourous, non-staining solution. Just get this.
Total recommended non-essentials: £101
Tools to Speed Up Sourcing
I personally believe you need to find your first deals manually before you give online arbitrage a go. Try it out on eBay first and see how you get along. Make sure you have Keepa, iZally's FBA Profit Calculator and Stock Stats on your Chrome before you get started. Don’t buy any stock at this stage; just prove to yourself that you can do it.
If you figure out what categories have the decent deals in, and you can find them consistently, then it might be time to speed it up with a tool like Tactical Arbitrage and their online arbitrage suite.
Jump ahead to software before you find the deals yourself and you're probably going to struggle. Use your 7-day $1 trial with Tactical Arbitrage to see if you can find enough deals to make your money back for the first month, and start your online arbitrage journey off properly.
It is possible to find deals with no software at all, but it’s very time-consuming to find enough consistently part-time.
Recommended sourcing software: $107/month (around £80)
Price drops and returns are inevitable. There are ways to minimise them both, but you need to see some of your stock bring lower ROI than expected and some to bring you absolutely nothing. For this reason, I wouldn't invest less than £500 and aim for products that would bring at least 50% profit for the first few months.
What You Don't Need When You're New
I'm going to save you some money now. Don't buy the following until you've sold well for a couple of months:
- A repricer
- Feedback request solutions
- A USB scanner
You’ll know when it’s time for those ones. You might decide that you want to sell in a category that requires polybagged goods. In that case, you may have extra expenses like an Impulse sealer, heat gun and the bags themselves.
Non-essential recommendations: £100
Highly advised software: $129/month (around £100)
Total Required: £740
A £1,000 budget is a strong foundation for an online arbitrage business. If you think this is the right business for you, it’s a large sum to commit, so make sure you do as much research as possible beforehand. That £500 of stock can disappear quickly if you don’t have a comprehensive understanding of Amazon FBA, the Buy Box, and online arbitrage beforehand.
I started with most of the equipment already, so only needed to spend money on stock. My first £200 brought me around £40 profit, because I didn’t know nearly as much as I thought. It wasn’t until I was £1,000 deep in stock purchases before it started to come together and I was making healthy profits. Even then, it took a few months before I figured things out properly.
I’m saying you need a grand there because I know how easy it is to make a mistake that eats into your profits. Some may have made it work with less, but you’re more likely to make it work if you have a safety cushion to fall back on.Twitter. If Twitter's not your thing, give us an email.