Online Arbitrage for Beginners
For a newbie seller on Amazon, online arbitrage is a great way to start raising money. This is because it implies low-cost entry and low risk.
If you resell a discounted toy that costs $10 on Brickseek for $20 on Amazon, this is an online arbitrage. Sounds easy, right? The trick is finding what to resell.
This post will tell you in easy words what online arbitrage is, how it works, and disclose its upsides and downsides.
What Is Online Arbitrage?
Online Arbitrage (OA) is when you find a cheaper-priced product online and resell it for profit. It’s one of the ways to sell goods on Amazon.
Online arbitrage aims to make money from the price difference in online stores and marketplaces.
3 Important Things about Online Arbitrage Before You Start
When you start any business, you need to answer three questions – whether this business is possible (and profitable), worth it, and legal to do. With OA, all answers are positive.
Is OA possible to do?
Yes, prices on Amazon are usually higher than on some other marketplaces. You can earn 30% and up, and that’s not a bad income.
Is OA worth it?
Yes, if you are ready to learn and invest your time in finding a profitable item to sell - product research. It does take time, but there are seller tools everyone uses to do it quicker and more reliably.
Is it legal?
Yes. Reselling is a legal business. Moreover, for online arbitrage, you don’t even need a license.
Any seller can do this if they have some experience and if they are equipped with the right product research tools. That is market-proven by thousands of Amazon sellers who’ve done OA before and earned with it.
3 Benefits and 3 Challenges of Online Arbitrage
You’ve probably heard many success stories of the sellers that started on Amazon with OA and raised a lot of cash. That clearly tells about OA pros. But you may wonder if there are downsides to it as well. We will tell you about the most essential of them.
3 top benefits of OA
Quick, easy, and low-cost to launch
The main upside of this sales model is that you can start it with little money and fast. It’s also quite easy to launch. If you simplify it, it works like this: you register an Amazon account, find the right product, and fulfill it with Amazon FBA to the customer. FBA allows you to outsource to Amazon the product fulfillment, including its storage if you choose to go for this fulfillment model.
Related: How Does Amazon FBA Work. Is Amazon FBA worth it in 2022?
How much money do you need to start an OA business?
A lot of sellers start OA business with $500 to $2,500. The monthly investment includes an Amazon Seller Central Professional subscription that costs $39.99/month, 15-20 units of 2-3 different products (for instance, a unit may cost around $10, and you can resell it for $20 on Amazon), and a monthly subscription for product research Amazon seller tools (for example, Seller Assistant App subscription is $15/month).
Your product costs will include the cost of goods sold, taxes, Amazon charges, and Fulfillment by Amazon fees if you use Amazon services to fulfill your products. You’ll also need to include inbound shipping costs – packaging, printed labels, etc. to send products to Amazon fulfillment centers. To calculate all expenses accurately, you can use the FBM&FBA calculator.
How much time does it take to launch an OA business?
More than half of Amazon sellers managed to launch their business within 3 to 6 months. You can do it even faster with online arbitrage because you don’t need to produce the product like private label sellers. Also, new sellers must wait 30 days for their first payout after selling the product.
OA is a great way to learn to sell on Amazon without significant risk. This is because even if you choose the wrong product and fail with it, this won’t cost a fortune.
Unlike wholesale, with arbitrage, you don’t have to buy many products to resell, and the average cost of profitable online arbitrage products typically ranges between $10 and $50. However, you’ll gain priceless experience and won’t repeat your mistakes in the future.
You can scale this business as you gain experience and earn money to grow it. Also, it’s an excellent complement to other business models in your Amazon store.
Thousands of product ideas
With OA, you can source products almost everywhere online. Your profitable products may be discovered on discounters, other online platforms, and even in China.
3 major challenges of OA
Time-consuming product research
This is by far the biggest downside of arbitrage. Product research takes a lot of time and occupies up to 80% of all sales processes OA merchants spend on sales.
Finding a profitable product (product research) is significant because it determines how much you will earn. It means you must find the item you can resell with a good margin. It shouldn’t generate problems, like extra shipping costs (oversize), trigger intellectual property claims, and more. Otherwise, you’ll have problems selling it instead of making a profit.
Related: How to Find Profitable Products for Amazon Online Arbitrage
High competition on Amazon sometimes brings up real price wars. Sellers often use pricing and repricing tools when they fight for their customers. Therefore, it’s sometimes challenging to calculate profit margins. To mitigate that, you need to analyze the product’s price history. That is, how the product price looks over time. It gives you a hint about how much you can sell a product.
Selling restrictions and IP claims
There are certain products and brands on Amazon that you can’t resell or need approval to sell. You must check that in advance to ensure you comply with Amazon regulations. They don’t like when sellers violate those and may suspend your account. It’s possible to reinstate it but better to avoid suspension.
Also, the brands you resell can issue intellectual property rights (IP) claims, and you must stop selling that product. You need to know if that happened to the product before.
Tip. To proactively avoid restriction policy violations and IP claims, you can use Seller Assistant App’s Restriction checker and IP Alert functionality. The Restriction checker shows a closed red lock icon on the Amazon search or product pages if the product is restricted. If it has IP Alerts - it shows a red triangle.
Is Online Arbitrage Still Profitable?
Yes, this is a profitable model; you can start it with little money and still earn. The good thing about OA is that you can launch this business quite fast and cheaply.
Time to launch online arbitrage
The average start time is around three to six weeks. This includes establishing the whole sales process, from opening an Amazon account to listing a product on Amazon.
Cost to launch online arbitrage
You can start OA with little money, something like $500. However, sellers typically invest more in their setup, somewhere between $1,500 and $ 2,000. That’s up to you how much you will invest in this business. You can quickly scale it as you grow profit.
Online arbitrage profitability
Online arbitrage is profitable on Amazon. Since you don’t invest huge money upfront, you’re not likely to raise a 7-figure capital immediately. However, you can gain decent money working from home.
When you resell your items, a per-item profit of $10-15 after all the fees and shipping costs is quite achievable. In fact, if a profit is lower than $4, sellers don’t bother to resell such a product.
In the starting months, newbies don’t earn much, up to $500 monthly. However, you can earn $2,000 and more monthly after a while.
How Does Online Arbitrage Work?
As said, the idea of OA is earning money from reselling.
Selling with online arbitrage step by step
- Step 1. Register an Amazon seller account.
- Step 2. Find a profitable product online
- Step 3. Check if it’s profitable to sell it with FBM & FBA calculator.
- Step 4. Purchase the products and wait for the products to arrive at your home.
- Step 5. List the items for sale on Amazon if you’re going to fulfill them yourself or repackage and send them to the Amazon warehouse if you outsource fulfillment to Amazon.
- Step 6. Monitor the sales and adjust the price as needed to ensure a profitable sale.
- Step 7. When an item sells, ship it out to the customer or let Amazon handle fulfillment if you're using their fulfillment service.
- Step 8. Repeat the process to continue growing your business.
How to Get Started with Online Arbitrage?
It’s not complicated. You need an internet connection, an Amazon Seller account, and the right seller tool to help you.
Related: How to Sell on Amazon for Beginners - Complete Guide
What do you need to start?
- registered Amazon seller account - create a Professional one – it costs $39.99 per month and saves you money if you sell more than 40 products monthly;
- FBM and FBA calculator – it helps you account for all costs, taxes, Amazon fees, and logistics costs.
- product research seller tool – it will show you how well the product sells and potential problems with the product;
- enroll in Amazon FBA – it will help you store and deliver goods to the customer;
- make an agreement with a prep center near you to help you prepare, label, and pack products to deliver to the Amazon warehouse - it can be an Amazon prep center or third-party company;
- $500 and up to invest.
Tips to Do Online Arbitrage for Beginners
- make sure that the sourcing price of the product you found is really low – compare it with the product’s price on Amazon over time (check price history);
- use the FBM&FBA calculator to calculate profitability before you buy a product, not after, and carefully account for all costs;
- familiarize yourself with product research basics – this is the most important part of the online arbitrage process;
- make sure the product doesn’t belong to a restricted category or may trigger any problems like IP alerts, oversize, etc.;
- use product research seller tools for better and more efficient results;
- don’t price products too low;
- use Amazon FBA to deliver products to the customer.
Why Is Product Research So Important?
This is easy. It determines whether you will earn money or not and how much.
To ensure you earn, make it before, not after, sourcing the product.
When you find a popular listing on Amazon, you must ensure it doesn’t trigger any problems (restricted product, IP complaints, etc.) and discover the low-priced offer online. The process of selecting profitable products to resell is called product research.
The simplest way to approach such a complicated task is to use Amazon seller tools because they automate the most significant part of this analysis. One of the best options is Seller Assistant App because it combines all necessary product research functions with the FBM&FBA calculator and shows all data and alerts on the Amazon search or product pages.
Is Online Arbitrage Good for You?
Online arbitrage is good for everyone who wants to earn money, is not reluctant to learn, and doesn’t have much cash to throw into the business upfront.
With the right tools, it’s much easier now.
Online arbitrage is a great sales model because it allows everyone to earn money to everyone, even if you’re a beginner on Amazon and don’t have a lot of money. With the right seller tools, it’s not so complicated anymore.
Seller Assistant Аpp is one such tool. It’s an all-in-one app that incorporates the features vital for product research. Advanced IP Alerts can immediately tell you if a product has any sales restrictions or has led to problems with account health in the past. It combines an FBM&FBA profit calculator, Quick View, Stock Checker, and Restrictions Checker in one tool.
Try Seller Assistant Аpp now. Register for our 14-day trial. Grow your Amazon business with confidence.