Many people still don’t know how you can earn money on Amazon FBA without leaving the comfort of your home. Online arbitrage is one of the few business models that allows you to do just that. Online arbitrage suits all Amazon sellers anywhere from being a phenomenal side hustle to even a large-scale business.
Now thanks to technology, online arbitrage is easier than ever and certain programs can even help you source inventory while you sleep.
With the continual growth of eCommerce coupled with the shift away from brick and mortar stores, now is the best time to get into online arbitrage. There are numerous reasons why selling online arbitrage on Amazon is a great idea. When done correctly, this business model shares all the benefits of retail arbitrage. At the same time, it can be done without the endless time-wasting of going from department store to department store.
What is online arbitrage?
First, arbitrage is the act of buying something in one market and selling the same thing for a profit in another market. Online arbitrage is simply that. You source inventory from an online marketplace like walmart.com and resell it for a profit on the Amazon marketplace.
There are no limitations or licenses needed in order to get started. Simply create an Amazon Seller’s account, acquire inventory, ship it into Amazon FBA, and wait for sales.
Those who are already familiar with retail arbitrage probably have a good grasp of the potential of online arbitrage. Although online arbitrage is a great business for some, it is not for all. Here are my thoughts on the Pros vs Cons of Online Arbitrage over Retail Arbitrage.
- Much more time and energy-efficient as you won’t have to physically scour endless isles with a barcode scanner or drive to different department stores
- Much easier to scale as you can order as much inventory as you want, not limited to what’s left on the shelf
- Products arrive directly to your home and you can reuse the packing materials
- Can search through an infinite amount of inventory
- More technological knowledge needed
- Profit margins may be lower than retail arbitrage
- Risk of mismatching inventory (Listings not being identical across marketplaces)
Does it still work?
Just like in financial markets, arbitrage is the way markets become more efficient. The only reason why arbitrage is so profitable is that markets are and continue to be inherently inefficient. Over the course of decades, with the inclusion of algorithms and computers, financial markets are becoming more efficient thus decreasing the profitability of arbitrage.
Despite technological advances, arbitrage is still here and especially prominent on Amazon. Over time, we can expect online arbitrage to slow down and become harder to churn regular profits. However, we still see online arbitrage being very profitable in the future, especially in 2020. Although for some, technology may hurt business but others it can aid them in scaling their business even faster. Nowaday’s there is wonderful software available that makes sourcing inventory incredibly easy and reliable. The key is to stay within the curve and on the right side of technology.
How do you make money?
Like in any business, the secret sauce stays consistent: buy low, sell high. Sounds easy right? Anyone in business knows that is too good to be true and business, especially in the beginning requires grit. The key to being successful with online arbitrage is to leverage tools, data, and a methodical approach to find the right products.
Online arbitrage may be tough in the beginning. However, once you get started you will begin to define your very own standard operating procedure in order to simplify the process. This will lead you to understand your revenue and margins and in the end, reduce your risk and consistently sell inventory at a profit.
The Profit Equation
The profit equation is undoubtedly the most important aspect of reselling goods on Amazon. This way we can ensure that products will ensure profits after the initial investment all applicable fees.
The list of costs sellers have to factor in:
- The initial investment for inventory
- Amazon Fees (FBA fees, storage cost)
- Inbound Shipping Cost
- Selling Price on Amazon
There are numerous free extensions and profit calculators available. This helps you calculate all fees that vary on the type of item you are selling. Amazon provides a free profit calculator on their site. All you have to do is plug in an ASIN or Product name and there it will allow you to calculate your potential profit.
How to get started?
The very first step to selling online arbitrage on Amazon is the same across all Amazon business models. First, you need to make an Amazon Sellers Account. In order to do this, you can sign up using this link.
The best way to sell inventory on Amazon is to opt into the FBA program. This will allow your inventory to be available for Amazon Prime. Amazon buyers love to take advantage of their Prime privileges. It is proven that sellers who use Amazon FBA get consistently more sales via more buy box representation.
For those who are not aware, the Amazon buy box is the box Amazon customers use in order to actually purchase the product. The buy box is rotated between different sellers based on different criteria like price, seller feedback, and if it is FBA or not. Sellers who do not opt for FBA oftentimes do not get Buy Box representation. As a result, they lack the volume of sales they need to be successful.
Not only does FBA benefit Amazon customers but it benefits Amazon sellers equally. By opting in for Amazon FBA, Amazon ships your products for free, handles fulfillment, returns, and customer service. It makes selling on Amazon so much easier by eliminating the hassle of running the store yourself. This ultimately gives you more time to allocate to optimizing your business and sourcing more inventory.
As a beginner, physically shipping inventory to Amazon FBA may be tricky but lucky for you we have a full guide on just that.
Guide to Sourcing Inventory for Online Arbitrage
Now for what you all have been waiting for. Here is exactly how you can get started sourcing online arbitrage inventory for profit on Amazon.
Here a comprehensive list of online marketplaces where you can source inventory:
- Disney Store
- Academy Sports
- Home Depot
- Christmas Tree Shops
- Sams Club
- Office Depot
- Best Buy
- Big Lots
- Dick’s Sporting Goods
- Sierra Trading Post
- Barnes & Noble
Sourcing inventory for online arbitrage for beginners can be really rudimentary. As you scale your business you can start incorporating more tactical approaches. For example, you could recruit paid software to help scrape data from websites to fit your exact buying criteria.
For this reason, I will explain online arbitrage sourcing into two parts.
As you can see from the huge selection of online retailers, there is no shortage of options to do your online arbitrage sourcing. You can begin sourcing goods by visiting several online retailers and looking for items on deep discount or clearance. You may experience an onset of decision fatigue and analysis paralysis from the sheer volume of items. This will hurt your ability to know what is a good deal or not.
For this reason, I recommend the website Brickseek.com. Brickseek will take a lot of the guessing game away from the process. They conveniently show you exactly how deeply the discount is from the original MSRP. This makes sourcing good deals for arbitrage incredibly easier.
The steps to online arbitrage
- Go onto Brickseek.com
- Click Deals on the upper left corner, and filter to see all retailers except Amazon.com and filter to only see online deals.
- Find potential deals by isolating items that are discounted more than 40% off.
- Next, go to Amazon and search for the same exact product
- Analyze the difference of the price between the online retailer and Amazon to calculate teh profit after fees and shipping cost
- If profit looks good, check the BSR rating in order to gauge how quickly the item will sell. Avouid products that have a hig hraniking as you do not want to risk tying up capital or worse, accumulating Amazon extended storage fees.
As you can see the rank is incredibly low. Under 20,000 in the Sports category and just 34 in the Protective Flooring sub-category. This item will be sure to sell rather quickly.
If all checks out, verify your eligibility to sell that item
Sometimes Amazon gates certain brands and categories to limit the type of seller who can sell that product. If gated, apply for approval. Here is our guide for un-gating products if you would like more information.
If all checks out, purchase inventory and ship it to Amazon FBA
Additional Tip: In the beginning, avoid any oversized items. This way you reduce the risk of expensive storage fees and save on super expensive shipping costs. Start small!
For Advanced Sellers
As you can see, sourcing products is incredibly easy. All it requires is an internet connection and patience. The limiting factor is the amount of time you take to scroll through potential purchases.
Once you become an advanced seller, you will have learned all the ropes of selling online arbitrage on Amazon. It will time to recruit the help of advanced software to do the searching for you.
If you are serious about selling on Amazon you will want to utilize an online arbitrage software like Tactical Arbitrage. Softwares like this cost money. However, if you are serious about selling on Amazon the upgrade is well worth it and will pay itself in no time.
The benefit of using an online arbitrage software is that it does all the searching for you. You give the program your strict criteria and it will find exactly what you are looking for. It will automatically
- Cross-reference the Amazon database to make sure that the item is profitable
- Make sure the rank is low (within your input)
- Give you insights on the competition of whose selling the same product
The best part about software like tactical arbitrage is that it does all the looking for you 24/7. The software will continuously search and keep updating even when you are sleeping and ready to provide its findings once you log in again.
These technological advances will easily set you a step above your competition.
How to Supplement Online Arbitrage Profits
Always be on the lookout for coupons and discounted gift cards. This is an easy way to decrease the investment dollars spent on purchasing goods for resale. Chrome extensions like Honey are also a great way to receive cashback on inventory sources. Honey will automatically input the best discount code possible at checkout to further increase your ROI for arbitrage.
Another great resource is to apply for a cashback credit card. Nerdwallet has a great post presenting the best credit cards for online shopping. It’s free money! Just for using the right rewards credit card, you can optimize your cash flow and earn great rewards up to 5% back.
Additional Expert Tips
- Consider hiring a VA to help you source products
- Diversify between products. If you see a good deal, don’t just go all-in on one product. This way that if for whatever reason it doesn’t work out as expected you do not lose a sizeable amount of your capital.
- Be Patient. Don’t be so quick to jump on a so-so deal because you are pressured to make money quickly. It is a recipe for disaster as you may end up having to sell products at a loss or accumulate long term storage fees.
- Keep track of profits and expenses in a Google sheet. You need to meticulous of every dollar coming in and out of your Amazon business.
- Seasonal products are hit-and-miss. Make sure to double-check Keepa data to limit your potential downside.
- Fully automate your hands-on business by hiring a Prepper. They will take delivery of your inventory, package it properly for a fee and send it off to Amazon FBA. This is better to do in the later growth stages of your business.
- Ask for help if needed. There are plenty of Amazon groups were tons of knowledgeable people who lend helping hands to beginners.
- Always be looking to Auto-Ungate different brands and categories. This gives you access to limited markets and a larger array of products to sell on Amazon.
- Always be trying to win the Buy Box when it makes sense (Don’t tank the price of listings)
- Outsource as much as you can. The costs associated are usually worth it as it frees up more time for you to find more profitable deals. The outsourcing costs can easily be offset by the increase in revenues and make your job easier at the same time!
Other Tools To Look Into
Keepa and CamelCamelCamel are must use websites for any Amazon seller. These two websites give you the most data at your fingerprints for free. Here you can see the prices that specific products sell over time, the rank of products over time, previous stock-outs, and other great data.
When you click on a product and view its rank or price through the Amazon listing you don’t actually get the full picture. You only get the rank at that specific time. Perhaps that product is selling especially low or high right now. Also, perhaps that product’s rank is lower than normal due to maybe being a seasonal item.
These are the answers to questions you need to know before investing thousands into new inventory. This will allow you to make a better risk assessment in order to mitigate failed arbitrage opportunities.
As you begin to grow and scale your online arbitrage business, you will find the absolute need for a repricer. It is almost physically impossible to maintain the buy box on your own in terms of pricing. Once you grow your business to a certain amount of SKU’s, the volume of price changes needed will demand a lot of your attention. This service frees up your valuable time to make more important business decisions.
A repricer will help you make sure your prices remain competitive while maintaining profitability 100% of the time 24 hours a day. You can set certain strategies and Aura leverages artificial intelligence in order to find the sweet spot between competitive prices and maximum profitability.
Nothing is more annoying than doing all the product research just to find out, in the end, the product is gated. CheckPermission is a good tool that will automatically notify you on every Amazon listing page whether you are eligible or not.
InventoryLab makes Amazon selling easier by accumulating all the information you need to make a buying decision all in one place. It is a great “scouting” app.
InventoryLab will conveniently present to you:
- The sales rank of the item
- The ability to enter in your cost and immediately calculate both your net profit and ROI
- Hotlinks to do additional research, in particular, to check your eligibility to sell the product