Updated: May 27
On edge about starting an arbitrage business on Amazon? You shouldn't be! With COVID winding down and a major growth in online retail sales (that isn't stopping), no time is better than now to hop on the wave and start building an online business than now.. and YES online arbitrage is a highly effective legitimate business model. Develop business skills, processes and become a thriving entrepreneur day after day, month after month. What starts as a side hustle can quickly become your main-stream of income.
What is Online Arbitrage?
Arbitrage in layman's terms is the purchase of an item from a marketplace at a lower price and effectively selling for a higher price on a different marketplace for a profit. You are not dealing with a manufacturer when you are sourcing for Arbitrage.
Here is an example - You purchase a pair of shoes from Ross Dress 4 Less for $5, you then head to Amazon and sell the shoes for $15 generating a $10 profit (there are fees and other factors that take from that profit, but we'll get to that later).
Pros of Online Arbitrage as a business
- Low barrier to entry
Starting a business on the world largest selling channel, Amazon - is quite easy. This is typically a 3-5 day long process that once completed you can start selling right away.
- VAST inventory catalog to source from
Hundreds of online stores make sourcing product a breeze. Find a product line at a store that has few sellers on Amazon? Congratulations you have successfully arbitraged.
- Work anywhere
For many this is a HUGE net positive. Work and grow your business anywhere. NOTE: You can really capitalize on this by partnering with a prep center(more on this below).
- High growth potential
Find an abundance of products that sell well? Awesome. Keep finding products and capital isn't an issue? Build your business as fast as you would like, there are no limits.
- Plenty of resources to help grow your business
Like a Honda Civic parts are easy to source and help is easy to come by - that is the same with Amazon Online Arbitrage. Help is in forums, subreddits and google searches. Tools and parts for selling like software and extensions are also abundant.
Cons of Online Arbitrage as a business
- Low barrier to entry
A low barrier to entry means you will be competing with many other sellers. Find ways to beat these other sellers and your business will THRIVE.
- Space, supplies and a location is needed
Using your own home to jumpstart your business is great! But, you may encounter spacial issues with garbage, boxes and inventory. You may grow too large to fit all boxes heading to Amazon in your car when dropping off at UPS. If you live in an Apartment this may be tough for a UPS pickup to be completed. To avoid all of this join a Fulfillment Company to take care of all of this for you - Like us! We can receive, have space and UPS picks up daily from our address.
- Ungating can be timely/tough
Amazon Requires "Ungating" for certain products. This is a genuine check on Amazons end and they will ask you for documentation on brands that require this clarification. They are looking to see if you are selling items from a certified distributor or supplier. This process can take 3 days to multiple weeks.
- Your time is used to prep and receive products
Every item you receive will need to be prepared to Amazons guidelines. Guides can be found on what they are looking for before receiving the inventory into their system - but it can be a little cloudy on what prep is actually needed.
Getting started with Online Arbitrage
1. Create a seller central account on Amazon.
Create a seller central account. You can pick between a 'Pro' Account or an 'Individual' Account. A pro account will avoid the $0.99 per item fee that comes with the Individual account by charging a $40 monthly fee.
Here is Amazons list of benefits of each account.
2. Learn the basics of your seller central account by using Amazons Seller University
This is incredibly important! Learn how to use your new found account - reports and inventory management are your friend with Online Arbitrage
3. Look into expenses that may effect your sourced product by sending and fulfilling with FBA
A general rule of thumb is to buy product that is selling for 3x as much as the buy cost so you can cover any selling fees. These
It is incredibly important to calculate your Amazon FBA fees before purchasing an item for your FBA store. FBA Fee calculator can be found here
Shipping fees are generally based on your location.
4. Number of Sellers
Watch out for the number of sellers on a listing! The more competition might bring about pricing wars that of which can lead to little to no profit on your sourced inventory.
5. Sales Rank
Look into the sales rank of your product and judge the sales volume of each product you encounter. There is an art to this and a great resource to view sales volume is Jungle Scout Sales Estimator
Here is the general workflow for selling a product on Amazon, that we recommend
Source Product and insure profitability and viability by researching number of sellers on your item and the selling rank. Essentially, find a viable product
Log your find on a spreadsheet - web address, buy cost, sell cost, sales rank, and quantity to purchase in each column
Add the product to your Amazon Inventory. This can be done during step one to insure you are ungated and selling eligible.
Determine a solid price to sell your item at and set that price before it's arrival at Amazon.
Tactical Arbitrage - EXCELLENT web tool to scan through hundreds of different department stores. Find the best prices on items to beat out your competition! Subscribe to our newsletter for future updates on how to use this effective product sourcing application.
Shipdif FBA Prep Center - Send your products to a single location and don't worry about the preparation of your products. Same day shipping to Amazon for most inventory. Save copious amounts of time and build your business with a scalable solution. Partner with a prep center to jumpstart your Amazon Business.
find us here
informed.co - Repricing tool, automate your pricing to beat out competition.
Sources for Amazon Sellers to find product
Here are some great sources to find products! Try to start with a general category like Toys & games and then find a subcategory - from that sub category look through different retailers catalogs to price check.
- Home Depot
- Dick's Sporting Goods
- Home Goods
Why you should join a prep center to electrify your Amazon FBA business.
Joining a prep center can be an incredibly valuable resource to your business. Guides, mentorship and a solid service for fulfilling your inventory to FBA will grow your company quicker than any solo venture. As a previous Amazon multi-million dollar seller joining a prep center was a step I should've taken way sooner in my Amazon career.
A few great reasons to join!
Avoid Amazon Restriction Mistakes
Avoid Sending incorrect box/weight sizes
You do not have to handle product - No shipments to your home, no need to pay for UPS pickups.
Software to track received & shipped inventory
Professionally prepared products - Experience less returns when a product arrives in new condition packaged properly!