Secrets of Doing Online Arbitrage in 2023!
Arbitrage sounds like a term from the financial dictionary – but don’t let that fool you. In trading, arbitrage is the practice of making a profit by exploiting the price differential between two or more markets.
One of the newest forms of arbitrage is “online arbitrage”. It takes place on online marketplaces such as eBay, Amazon, etc. Sellers using this method typically buy a product at a discounted price online and then sell it at a higher price on the same or another platform.
If you are interested in making money with online arbitrage, read on to learn more about how it works and how to get started immediately.
What is Online Arbitrage?
Online arbitrage, or OA for short, is the act of buying something online (from online retailers like Walmart) and selling it on an online marketplace (like Amazon) for a profit. It seems all you need is a computer, yes and no. This type isn’t a “get rich quick” scheme. If you don’t want to end up out of pocket and holding plenty of inventory you can’t sell, you need tools, data, and a systematic approach to identifying profitable deals.
For example, let’s say a popular toy sells for $10 at Walmart but sells for $15 at Amazon. So, you can buy the toy at Walmart to sell it on Amazon for a profit of $5 (not considering the seller fees and commissions). The opportunity for an online arbitrage transaction arises from the difference in price between the two markets.
Is Online Arbitrage the Same as Retail Arbitrage?
These two business models are pretty similar, but they are not the same. In retail arbitrage, you must source products in dollar stores, thrift shops, and brick-and-mortar retail stores such as Walmart, Target, etc. This means you must go out daily, visit different stores, and use the Amazon seller app to scan the items and find out how much they’re going for on Amazon.
Meanwhile, sellers who choose online arbitrage can stay home and look for products online in their pajamas! It’s a convenient business model, especially if you’re not a fan of going out daily.
Is It Profitable to Start Online Arbitrage in 2023?
Yes! Arbitrage has been around for a long time, but online arbitrage has recently been introduced. This business model is filled with opportunities. It’s an excellent option for anyone who wants to start an online business and run it from the comfort of their home.
Some factors can affect online arbitrage profitability, but once you get a hold of everything, the profits come rolling. The most crucial factor is sourcing products and knowing what the consumers need so, you can offer them. The other important factor is listing your products adequately and using relative keywords so they can appear in the search results. You can also use Amazon PPC (pay-per-click) ads to put your products in front of more customers.
What Are the Pros and Cons of This Job?
Like any business model, online arbitrage has its pros and cons. Knowing these before you start can help you make an informed decision about whether it’s the suitable model for you.
- It is relatively easy to start online arbitrage as you don’t need significant capital. All you need is to create an Amazon seller account and source products at a low price.
- Because you’re selling branded products already in demand, marketing or product development costs won’t apply to you.
- You can make a high-profit margin if you choose products wisely and your prices are competitive on Amazon.
- Online arbitrage can be time-consuming as it requires constant sourcing of new products and monitoring prices.
- Scaling an online arbitrage business can be challenging due to the lack of control over product offerings and the ever-changing eCommerce landscape.
How Much Do Top Online Arbitrageurs Make?
Online arbitrage offers a lot of potential for anyone who wants to earn at least $1,000 a month. Most Amazon sellers who use this business model earn at least $1,000 per month in sales, while some super-sellers have a salary of $100,000 each month.
How Much Money Do You Need to Start Online Arbitrage?
Online arbitrage eliminates some expenses like gas money and other expenses that come with retail arbitrage. However, there’s still a minimum capital you need to have to start an online arbitrage business.
If you’re not that serious and just want to test it out, about $100 should be enough. However, if you take this business seriously and want to succeed, you need at least $1000 to start. This amount can cover inventory sourcing, Amazon fees, and other expenses like buying sourcing lists or using analyzing tools and software.
How to Start Doing Online Arbitrage?
If you’re interested in online arbitrage and want to know how you can get started, here’s what you need to do:
1. Create a Seller Account
Go to https://sellercentral.amazon.com and click on the Sign-Up button. From there, you will be prompted to create a seller account. You can choose between two types of seller accounts: Individual or Professional.
If you plan to sell fewer than 40 items per month, you can opt for an Individual seller account where you pay €0.99 per item sold. Otherwise, you can sign up for a Professional seller account, which costs a fee of $39.99 per month. Note, however, that both plans incur additional selling fees.
Also, consider whether you want to place your order with “Fulfillment by Merchant” (FBM) or “Fulfillment by Amazon” (FBA). If you use FBM, you are responsible for storing and shipping your orders. In contrast, FBA orders are stored in Amazon warehouses and shipped by Amazon. (Note that FBA has additional costs).
2. Find Products to Offer on Amazon
There are several ways to purchase in-demand products. One of the easiest is to buy sourcing lists, but you can also look for products on online marketplaces such as Walmart, Target, etc.
In general, you should look for an item that has sold fewer than 100,000 on Amazon, as there is no oversupply for these.
3. Create a Listing for the Products
Log in to your Amazon seller account and click “Add Product”.
You must search for the product you want to list and select it from the drop-down menu. Then, you need to create the product listing, including the product title, product images, bullet points, and other details.
4. Send Your Inventory to Amazon (FBA Option)
You can skip this step if you fulfill your orders yourself (FBM). However, suppose you want Amazon to store and ship for you (FBA). In that case, you will need to send your inventory to an Amazon fulfillment center.
To do this, open your Seller Central Dashboard on Amazon, click “Manage Inventory”, and select the products you want to ship.
5. Optimize and Monitor Your Listings
The last step is ensuring your listing is optimized as much as possible to rank high in search results.
This means using relevant keywords in your title and product description and running ads for your product to promote it to potential buyers.
It would help if you also kept an eye on your arbitrage business by regularly checking your Amazon seller dashboard. This allows you to identify potential problems and take appropriate action.
Online arbitrage is a numbers game: you must source and sell a sufficient quantity of products to make a profit. You also need a lot of patience, as it can take time to build a solid arbitrage business on Amazon.
Still, online arbitrage can be a great way to enter the world of online trading with relatively little upfront cost and risk. Once you get the hang of it, you can expand your inventory and take your business to the next level.