In today's world, things have changed dramatically after Covid. There are a lot of options in the online world for earning and making a living. People are learning skills and applying them for online earning in many ways. One of them is online arbitrage. We will talk about in detail of retail arbitrage and online arbitrage in this blog.
Please read also What is dropshipping business and How to start?
What is online arbitrage?
Online arbitrage means hunting products online from Facebook listing, e-commerce sites and e-commerce stores and then selling them in other marketplaces. It means you can source the products from any market and then can resell it in any marketplace. If you can buy the products in bulk at low prices and then you sell it at a reasonable with a profit margin it's a dream. You can hook up with as many retailers as you want and buy as much as you can.
What is retail arbitrage?
Retail arbitrage is the more traditional method. For retail arbitrage, the source is usually a brick-and-mortar store like an outlet or retail chain. Or we can say that this is the practice of buying an item from one market and reselling it in other markets at a higher price. The item is usually bought from the original seller at discount and in bulk quantity and then resold for a profit elsewhere.
How to start online arbitrage or retail arbitrage business?
When you decided to start an arbitrage business then the next step is to find products. You can start this business module in these simple steps.
1. Product ideas
There are millions of products on Amazon and when it comes to choosing one product then it needs to be a fine and profitable product. You need to do manual search and need to use some tools to find the product. We will discuss later about the tools.
2. Product sourcing
One you finalized your product then it's time to make the strategy to source it. You can look a lot of places but some of the best are down under:
- Facebook marketplace
- Craigslist
- eBay
- Walmart
- Etsy
- OfferUp
- Let's Go
If a product goes on sale then it can sell fast so make sure that you are checking these and other marketplaces on regular basis so you don't miss out. When you are looking for an item then make sure it's price is less the half of what is this actual price on Amazon. This is because Amazon charges referral fee on every sale and storage and shipment charges also if you are using FBA (fulfillment by Amazon) model.
3. Validation of the product
After the selection you need to validate the product whether it's profitable or not. It can be profitable at the start but you need to keep an eye on it. If you do this before purchasing any items you’ll set yourself up for success and ensure you’re making smart buying decisions.
4. How to fulfill your orders
Do you want to store you inventory and fulfill order your self and you want to go with Azamon to do it for you? If you use the Amazon FBA then you need to send the inventory to Amazon, they will store in their warehouse and when you will receive an order they will ship the product to the customer. You will pay the fee for this but this the more convenient and easy method. If you plan to sell a little quantity then you can do it yourself but if you are going to grow the business then this is the best method.
5. Win the buy Box
This is the last but not the least point. Most of the products you acquire through arbitrage will already having a listing on Amazon the you need to compete with other sellers and need to win the buy box.
Buy Box refers to the white box on the right side of the Amazon product detail page, where customers can add items for purchase to their cart.
Not all sellers are eligible to win the Buy Box.
To get a sense of how incredibly important prioritizing the Buy Box is, consider this:
82% of Amazon sales go through the Buy Box, and the percentage is even higher for mobile purchases.
Understanding the way Amazon’s algorithms function will allow you to work toward increasing your performance on relevant variables, ultimately increasing your chances of winning the Buy Box and beating the competition .
The buy box has a different criteria including,
- Price
- Customer Feedback
- Order defect rate
- Length of time selling on Amazon
Tools for online or retail Arbitrage business
Tools are necessary for this business to maintain its performance and to grow your business. There are many tools available in the market and some of the famous tools are down under,
- Helium 10
- Keepa
- IP Alert
- Amazon Assistant
- Tactical Arbitrage
- Revseller
1. Helium 10
Helium 10 is an all-in-one software for Amazon businesses. You can use it in online arbitrage, retail arbitrage, PL, wholesale and dropshipping. This is the faster and most effective tool to find a product from their 450 million Asin database, View sales and demand, estimate profits and view customer insights.
Helium 10's keywords research tool helps you find the keywords which help you to rank higher in the search result. You can find your competitor's keywords also.
2. Keepa
Keepa gives you access to Amazon's top seller's list and provides updates on increases in the price of any product by setting up alerts. You need to subscribe their paid plan of $23 per month.
3. IP Alert
This is a useful tool and it notifies you if you are browsing a page for a brand that has filed an intellectual property complaint. It offers a browser extension and has 2 types of plans. $99 for annual protection and $199 for a lifetime deal.
4. Amazon Assistant
Amazon Assistant is Amazon's built-in tool for online arbitrage. It helps you to compare prices and minimize costs. It has a browser extension which allows you to compare the prices, ratings and reviews. It also allows you to place your product on Universal Wish List as well as receives notifications for new deals and orders. You need to create the Amazon account to access this feature.
5. Tactical Arbitrage
This is a very useful tool to have in your system. It makes online arbitrage relatively easy by enabling the user to search up to 1000 product stores and their categories. It has the feature of conducting a wholesale search, examining multiple data points and doing a reverse look-up. It also provides product's historical buy box price and sale rank data. It has a paid plan which starts form $50 per month.
6. Revseller
This is a chrome extension which helps to make faster and more informed decisions. It shows an on-page real-time calculator to see ROI and profit margins. It allows you to access the number of FBA and MFN sellers and allows you to take stock of your competitors and see if the market is promising or saturated. You can try it free for 30 days but after that, you need to subscribe paid plan of $99.99 annually.
Advantages of Arbitrage
Low Cost
To sell a product on Amazon you need less money. This is because you are only buying what the retail store or online store has in stock at any one time. With online arbitrage, you can buy as less or as much as you want.
Great entry to selling on Amazon
Retail arbitrage or Online arbitrage are great ways to start a journey on Amazon. it doesn't take long to start to make money and it is really easy once you know how to do it.
Less risk
Because you don't invest to buy stock in bulk quantity so there is less risk to get stuck at any point if your stock is not selling. It means there is less risk in this business module.
It's Easy
The whole process can be done at home at your computer. It is also easier than any other business model because you don't need to go physically to find products.
The Same Strategy Can Be Used On Multiple Selling Websites
Retail arbitrage and online arbitrage aren’t restricted to just Amazon. Sellers can sell products they find on eBay, Facebook Marketplace and other selling websites. This is a great way to scale retail arbitrage and online arbitrage and also diversify across multiple platforms.
Disadvantages of Arbitrage
Smaller profit margins
Because you are buying from other retailers not from the manufacturer or wholesale supplier it means there will be a less profit margin.
Hard to find deals
Amazon already has less prices and sometimes it can be hard to find a profitable product. It means you could spend a lot of time searching and only end up with a few items worth selling.
Not building a reputable brand
In this method, you can't build a reputable brand. Because you don't sell your own product. you pick a product from somewhere else and then start to sell but if the product is not available to your supplier then your business is also under threat.
Conclusion
Online arbitrage and retail arbitrage both are viable business models. You need to use right tools in choosing the profitable product and need to use right strategies to scale it on Amazon. You can use the advantages and can avoid the disadvantages.
