Online Arbitrage: A Complete Guide
What is online arbitrage?
Online arbitrage is the practice of finding low priced items from on online source and reselling that item on a different market. It’s different to retail arbitrage in the sense that it’s done completely with an online store or online marketplace. Common examples of online arbitrage include finding discounted items on a retailer’s site (ex. Walmart) and selling that item in a marketplace like Amazon or eBay. The average Amazon seller salary is anywhere between 24,000 and 81,000 annually. Online arbitrage sellers are some of the highest earners with many doing well over six figures per year.
Many sellers do a variety of online arbitrage practices, but most of them involve selling on online retailers like Amazon or eBay at the end. Online arbitrage sellers use software to help them find good deals on products and they consequently sell them in a marketplace for a profit.
Where can you do online arbitrage?
Online arbitrage is amazing because you are only limited by your creativity and the amount of platforms you can sell on. The most popular places to do online arbitrage is on major ecommerce marketplaces like Amazon, eBay, etc. These are the best places generally because there is a lot of demand from consumers on those marketplaces.
Amazon is the best place to do online arbitrage because it has the most demand. When doing online arbitrage on Amazon, your biggest problem will be finding profitable items. Amazon already has hundreds of millions of customers, so if you can find profitable online arbitrage items, you will definitely succeed. Amazon sellers are some of the best when it comes to utilizing online arbitrage sourcing.
Additionally, Amazon allows online arbitrage and retail arbitrage sellers to use their FBA warehouses. When you find an online arbitrage product, all you need to do is ship into Amazon and Amazon will ensure the customer receives the product in 2 days or less. This is huge because online arbitrage sellers get access to Amazon prime members and that can increase sales significantly. This is much easier for most sellers than going to brick and mortar stores and looking for profitable deals for hours at a time. With online arbitrage, you can check the selling price of the product and easily add it to your list.
There are many online arbitrage sellers that have scaled to millions of dollars on Amazon because they are able to focus mainly on finding good products and Amazon’s fulfillment network takes care of everything else like returns, customer service, etc. This business model is great for sellers that are looking to scale their online and retail arbitrage operations.
eBay is another great place to do online arbitrage. Most people rave about having an Amazon business, but eBay has a lot of opportunities to sell profitable products. With eBay, you can use auctions in addition to the buy now features. Online arbitrage on eBay works well with finding high selling eBay items from other sources. You can source it from online stores and net the price difference.
eBay is a great place to shop for specific items like electronics, shoes and more. If you can find a high selling product on eBay from another source, all you have to do is list it and ship once it’s bought. eBay is great because it allows you to list hundreds or thousands of items. To sell eBay at scale, you’ll need to have a lot of listings and sell whenever an item is sold. Gathering a bunch of online arbitrage products and listing them should be the focus for sellers.
Sellers who do online arbitrage for eBay source products from Amazon, other ecommerce sites and physical retail stores. Sellers can take advantage of seasonal offerings
What are some types/examples of online arbitrage?
There are a ton of creative ways to do online arbitrage. If you do a quick Google search for “sell ___ for cash”, you can find a lot of opportunities to do online arbitrage. A popular one is book buybacks. There are many sites that will buy books back from students year round.
If you are able to find the books those sites want at another website, you can send it in to them for a profit. For example, you can target chemistry textbooks. Many sites will pay close to $100 if not more for newer versions of chemistry textbooks. If you can find someone selling it on eBay, Amazon or any other place, you can purchase it from them and send it to the buyback website and make a profit. There are virtually limitless options to do online arbitrage, but it’s to focus on one avenue and stick to it.
Is online arbitrage scalable?
Yes, online arbitrage is scalable. Depending on where you decide to sell your products, scaling can be easier or more difficult. Scaling an online arbitrage business depends on your ability to source and buy products in addition to shipping it to the customer or ecommerce provider. If you sell on a platform like eBay, you will have to ship every order sold yourself to the customer.
It’s very possible to scale to huge sales numbers on eBay, but that will likely require getting some additional help to fulfill the orders. If you can source, buy and ship efficiently, you will be profitable and scale regardless of the platform, but your overhead won’t be the same.
In contrast, if you use Amazon for online arbitrage, your main focus is to find products, buy products and ship to Amazon. It’s relatively easy to establish a system in which you can do this profitably and repeatedly. With Amazon FBA, scaling will go much quicker than other platforms because there is more demand on Amazon. If you can make a sale quicker, you can get your profits quicker to reinvest in a new product to ship to Amazon.
This makes a cycle that can grow your business dramatically in a short amount of time. Additionally, Amazon will take care of all of the shipping, handling, customer returns, etc., this truly allows you to focus on growing your business. Many online arbitrage sellers that have significant scale have to deal with a lot of customer questions and returns. In contrast, Amazon FBA takes care of all of that and you can just source and ship products.
How can you get started with online arbitrage?
Now that you have a good idea what online arbitrage is, it’s time to actually take steps to make your first online arbitrage. Below are actual steps you need to take to go from where you are now to making your first sale with online arbitrage:
Seller application(s): Assuming you’ll want to sell on eBay and/or Amazon you need to take the steps to get approved to sell on each platform. Amazon is a lot more difficult to get approved on, but it has a huge ROI if you can get started on their platform. If you don’t get approved and no longer want to sell on Amazon, make sure you delete your Amazon seller account to protect your data.
Basically anyone can start selling on eBay immediately. If you provide eBay with your banking information or Paypal account, you can list your first product right away. Although eBay has little to no friction in getting started, you need to be aware of their fees. They have different fees for different kinds of products, so make sure you’re profitable before listing your product.
Amazon: Amazon has a rigorous selling application. You will need to provide your name, address, banking information, any tax information, credit card and you may have to submit a few documents. Amazon is not like eBay at all in regards to the selling application. You need to make sure everything is exactly as Amazon requested or your application will be rejected. Although Amazon’s seller requirements are hard, it’s the best platform to do online arbitrage. You can make higher profits without having to deal with customer service. Here’s a complete guide linked here for the Amazon seller application.
Find an online arbitrage software program or lead list:
The second step is finding a good online arbitrage tool to use or a lead list. Some sellers are in groups where they share leads, you can try joining one of these groups for guidance and to get some leads. Lead lists can be helpful, but it’s probably not best to base your business on the leads another person provides you. This can be good to sell a few products, but the owner of the lead list is likely using another software program to get their leads. If it’s a free lead list, give it a try and you can use the profits from that to buy a good software program.
A software program does the hard work of scouring online sites for you to find deals. Depending on how good the software program is, you can find tens and maybe hundreds of good sourcing opportunities. Most of the great programs are paid and you have to sign up for a monthly subscription to use them. These programs can also be used for wholesale products and some retail arbitrage.
Once you have decided on a tool to use, it’s time to source. Scour through the different product recommendations your tool provides and you can choose a profitable product. Once you decide on a product, purchase it and send it to Amazon FBA after it arrives at your house. It’s a very simple process; if you do it a few times, you’ll get the hang of it. Different tools will recommend different products, so explore several of them and choose which one works for you.
Most sellers who do online arbitrage use a software tool to help them find leads. Below I’ve mentioned some tools you can explore.
Tools that sellers use:
Tactical arbitrage is by far the best online arbitrage software tool for sellers. It’s the most powerful tool on the market for online arbitrage because it can scan deals for sellers 24/7. Sellers are able to set parameters on searches like which site TA should search, what price points, what amazon best seller rankings, profit margins, etc.
Anything you can think of as an online arbitrage seller to find deals, Tactical Arbitrage can help you find it. Although it’s a very powerful tool, it’s a little pricey. The Tactical Arbitrage product they have costs $70/month. They have a free 1 week trial where you can test it out for yourself. With one week, you can definitely profit more than $70 and that can pay for the membership.
It has a ton of features like reverse searching, wholesale, flips, etc. It’s used by thousands of sellers and is honestly the best product on the market for online arbitrage. If you are a brand new seller with very low funds, try it out for one week and see the results for yourself.
BuyBotPro is another good online arbitrage tool. It’s an online arbitrage virtual buying assistant. It has features that Tactical Arbitrage doesn’t have like checking for private label products. BuyBotPro scans thousands of items from different sites and gives you a variety of good purchasing products to choose from.
It gives further information like competitor stock, estimated sales and more. It costs $34.95/$44.95 depending on the options you choose. They provide a free two week trial before they start charging you.
FBAMultiTool is famous for its accurate Amazon FBA calculator, but it also has a good online arbitrage program. It has a chrome extension that allows you to see the basics of any product on Amazon like its Keepa graph, FBA prices and more. Their tool currently only works for sellers in the U.S. and Europe markets. It’s one of the more affordable options for online arbitrage.
They offer a free 24 hour trial and their plans start from $19.95 per month. Their largest plan is only $29.95 per month and it can support up to 8 devices. It’s a good program overall and it’s definitely worth checking out their free 24 hour trail because that doesn’t require any commitments.
Final thoughts on different tools
If you are taking online arbitrage seriously, I think the only real option sellers have to really scale is Tactical Arbitrage. This is because Tactical Arbitrage gives you free reign on how much products you can source. With their program, you can be sourcing 24/7 because it can be run overnight. Many of these other paid programs and lead lists offer you a certain amount of deals per day. This makes no sense if there’s another option where you can get hundreds of leads per day.
Additionally, I personally have used Tactical Arbitrage before. Their customer service is good and they even refunded me when I forgot to cancel my 7-day trial the first time I used their product. There’s also a ton of other programs within Tactical Arbitrage like wholesale searching, reverse searching and more. The sky’s the limit when using Tactical Arbitrage, it’s just more expensive than the other options.
Advanced online arbitrage tips:
Once you are familiar with online arbitrage, it’s important to spend time every day learning how online arbitrage sellers run their businesses. Below are some tips that online arbitrage sellers use to maximize their profits and improve their productivity.
Once you use online arbitrage tools to find a good product to resell, you can use coupons both online and in-stores to maximize your profit. If you are already making 20-30% profit on a product, using a coupon or discount can increase your margins dramatically. Many online sellers use extensions to get added discounts on products.
Coupons are very seasonal in nature. Sellers must be aware of when specific stores have their seasonal marketing campaigns and take advantage of those periods. It can be overwhelming to overthink of how much impact coupons can make. Just start with trying to find coupons for the items you are already purchasing. Once you do that, you’ll eventually run into products that you can use multiple coupons on.
Online arbitrage sellers can also use cashback sites and cards to get additional perks for their inventory purchases. Cashback sites are basically the middlemen for online purchasing. They direct customers to specific websites to go shop and they get a referral fee. They reward customers by giving them cash back after purchasing a certain amount of products.
As an online arbitrage seller, you’ll likely spend thousands of dollars on sites, so cashback can be a great way to get a few hundred dollars back. Some popular sites for cashback include Rakuten, Ibotta and more. Some bank cards also give you a certain percentage in cashbacks if you spend money in a certain category (ex. groceries). These small savings can result in thousands of dollars in additional profit at the end of a year. All you need to do is sign up for their programs, let the savings compound and cash out.
Use a prep service
A good portion of online arbitrage sellers use prep services to handle all of the shipping and handling for their Amazon products. As a beginner online arbitrage seller, I would recommend having the items you purchase online get sent to your house or office first to ensure quality.
Once you have a system set up for your business, you can start looking at prep services. Using a prep service allows you to send the purchased items directly to a 3rd party that will fulfill them for you to Amazon. This means that online arbitrage sellers would only have to focus on finding and buying the products and the rest is handled.
Prep services take a small cut to handle and ship the products and you can account for that when you are sourcing the product. They may take anywhere from a few cents to a dollar for most online arbitrage items. The prep centers will receive the inventory, inspect it, label it and send it to an Amazon FBA warehouse. Many advanced online arbitrage sellers use prep services to scale their business past six and seven figures annually.
Discounted gift cards
Believe it or not, gift cards are being sold online for less than their value. People who receive gift cards from a friend or family member may not want to use it so they’ll sell it online at a discounted price. For example, someone can sell a $100 gift card online for $90. This is an opportunity for online arbitrage sellers to get even more profit. If you are already deciding to purchase a product from a retailer like Walmart or Lowe’s, looking for a discounted gift card can save you even more money.
There are many places to find discounted gift cards like eBay or Raise.com Once you go to their website, just search for the name of the retailer and the words “gift card”. An example of one would be “Home Depot gift cards”. Once you search for this, you should get results. Below is an example of what I saw when I searched for Home Depot gift cards on eBay.
As you can see there are a variety of coupons and gift cards available to purchase. Doing this can help add more profits to your online arbitrage bottom line.