If you’re looking to earn some extra money as a digital nomad or lifestyle solopreneur, online arbitrage is a great option.
Selling online from the comfort of your home is a dream business for many people, but as a solopreneur you might be crippled by a lack of investment, or perhaps you just don’t fancy trawling the shops looking for bargains in order to manage a traditional retail arbitrage business.
If that’s the case, online arbitrage is likely a business venture you’ll love. Not only can you start with a very small investment, but you won’t even need to get out of your PJ’s!
With online arbitrage, you can buy online at discounted prices and sell the purchased products on Amazon at a higher price and make a profit in the process.
In fact when I was teaching my Amazon FBA course a few years ago, many of our students started with online arbitrage to generate the funds needed to get started with private labelling. Done well online arbitrage can be extremely lucrative!
So let’s explore this opportunity further.
What is Online Arbitrage?
Online arbitrage is a process in which you buy products from online retailers and then resell the products on a different online marketplace like Amazon, Facebook Marketplace, or eBay at a higher selling price to make a profit.
Retail arbitrage works the same way, except when referenced it generally refers to sourcing products at physical stores.
As the name suggests, with the online arbitrage business model, you don’t need to go to the effort of sourcing products from physical retail stores. You have the freedom to source your products from thousands of online retailers, which saves on time, mileage, gas, and possible frustration.
You don’t require any special license to start this business, and it is very much the same as retail arbitrage with the only difference being that you look for profitable deals right from your home.
Due to strict copyright laws, an important question often asked is – is online arbitrage legal? I’m happy to say, Yes, it is! The first-sale doctrine categorically mentions that you have the right to sell the product that you have purchased.
So, as long as you have the purchase invoice and/or receipt with you, you can sell the product.
How Does Online Arbitrage Work?
The modus operandi of online arbitrage is not very different from retail arbitrage. Here is how it works:
Search for Discounted Products
To start your online arbitrage business, you need to buy products at discounted prices. Instead of visiting brick-and-mortar stores, you go online and look for profitable deals at online retailers such as Walmart.com and Target.com.
Find the Same Products on Amazon
To engage in online arbitrage on Amazon, you’ll need to search Amazon’s website for the same product you want to purchase from your online discount store.
For example, if you found products X, Y, and Z on Target’s website, check whether those same products, that is, X, Y, and Z are listed on Amazon or not.
Look For Products That Sell for a Higher Price on Amazon
Let’s assume that you can purchase products X & Z for $4.99 each and product Y for $7.29 on Target.com.
But on Amazon, products X & Z are selling for $16.28 each and product Y is selling for $7.29.
It becomes evident that selling Y on Amazon will not bring in profits for you, but sourcing products X & Z from Target.com and then selling them on Amazon at $16.28 each will generate high-profit margins.
The logic is simple! Always look for products that sell for a higher price on Amazon.
Order Products and Relist via FBM or FBA
Once you have identified the products that can generate profits when sold through Amazon, order those products and on receipt, relist them on Amazon via Amazon FBM (Fulfillment by Merchant) or Amazon FBA (Fulfillment by Amazon).
NB: If you select FBA, you must repackage the products and ship to Amazon, however Amazon will then distribute on your behalf and deal with any customer issues.
How to Make Money With Online Arbitrage?
To earn with online arbitrage, you need to start by finding profitable products. But this is where many new online arbitrage sellers make mistakes.
The first rule of thumb is to find what people want to buy instead of just stocking things that you like. This means you need to take the guesswork out of the equation.
Here is how to do that and earn a good income with an online arbitrage business:
Step 1: Choose Popular Niches
Most online arbitrage sellers start by choosing the most popular niches that usually generate consistent sales over the long term. Some of the most popular niches are home & kitchen, toys & games, books, beauty & personal care, grocery & gourmet food, etc.
This is a safe route to take and certainly how I’d recommend you start if you’re new to the online arbitrage game.
However, as you gather experience you can experiment with new products or niches that don’t yet have standard average pricing. This means you can test pricing levels and gain the opportunity to generate high-profit margins.
Step 2: Use Tools to Find the Best Deals
Exceptional product research is important to build your online arbitrage inventory. While you can always perform manual research, using some tools will help you save valuable time.
After all, saving time is the primary difference between online and retail arbitrage businesses.
Most Amazon sellers start with basic online arbitrage tools like BrickSeek, SlickDeals, and DealNews. These free tools or websites will show you the best available deals from various online retailers. You can pick individual items and compare their prices on Amazon.
More successful Amazon sellers use more advanced tools like Tactical Arbitrage and JungleScout to perform bulk searches, find high-converting keywords for listing descriptions, and more.
My personal favorite is Junglescout for online arbitrage, retail arbitrage, FBA and pretty much all Amazon product selling business models.
Learn How to Build Your Own 7-Figure Amazon FBA Business
Part of the Junglescout suite of excellent FBA tools, the learning academy is a comprehensive video training library containing hours of content, including training videos, webinars, and interviews with successful Amazon sellers.
Whether you’re just starting your business, or growing your brand, get expert training from Amazon sellers without the hefty price tag.
Step 3: Calculate Profitability Using FBA Calculator
Once you have found profitable products online and you have also compared the Amazon listing prices, you’ll need to calculate the profitability. Amazon Seller Central has an Amazon FBA Revenue calculator for that.
To use it, enter the ASIN number (that you can find on Amazon listing’s product information page) into the calculator and then enter the product price and the product cost to calculate the net profit and profit margin.
Step 4: Assess Demand Using BSR & JungleScout Sales Estimator Tool
Before you start online arbitrage sourcing, you must assess the product demand. For this, you will need the Best Sellers Rank from the Amazon product listing page.
Grab the rank and feed it into the JungleScout Sales Estimator tool. Then provide the Amazon Marketplace (that is, the country) and the product category.
The tool will give you the estimated number of sales per month. You can then purchase inventory accordingly.
Step 5: Sell High!
Once you assess the profit margins and the estimated sales per month, you can start listing the products for Amazon online arbitrage!
How to Get Started with Online Arbitrage?
Unless you are a registered Amazon seller, online arbitrage on Amazon is not possible. Even for profitability calculations using Amazon FBA Revenue Calculator, you will need an Amazon seller’s account.
The steps you must follow to get started with online arbitrage on Amazon include:
1: Sign Up for an Amazon Seller Account
Visit Amazon Seller Central and click on the “Sign up” button. On the next page, you will see the list of documents and details you will need to register as a seller on Amazon’s online marketplace.
Proceed to create an account. You will have two options – Individual and Professional. For the Individual plan, you don’t need to pay any monthly charge, but you will pay a charge for every item you sell.
For the Professional plan you need to pay $39.99 a month, but there will be no charge for each item you sell.
For the Individual seller account, Amazon will charge you $0.99. Therefore, when your Amazon sales exceed 40 a month, it makes sense to switch to the Professional plan.
You can also select FBM or Amazon FBA. Signing up for Amazon FBA will mean that you don’t have to worry about fulfilling the orders yourself. You just need to create a profitable inventory and ship the products to Amazon’s warehouse to start selling online.
2: Go to Brickseek.com and Search for ‘Deals’
Go to Brickseek.com and from the top menu, click on ‘Deals.’ On the left, select Online and then select all retailers except Amazon. As you’ll be selling on Amazon, you want to find deals off of Amazon.
3: Look For Products With 40%+ Discounts
To make a decent profit using Amazon online arbitrage, you’ll need to purchase product products that are heavily discounted. Typically, looking for products with 40%+ discounts is a good rule of thumb.
The greater the discounts, the greater the profits, after paying Amazon fees including the Amazon FBA fee, shipping costs to the Amazon fulfillment center, and storage fees at Amazon’s warehouse.
4: Find the Products on Amazon and Calculate the Profitability
Once you have isolated the heavily-discounted products that you want to sell through Amazon, it is time to check the profitability.
Go to Amazon and find the products one by one. For each product, check the selling price. The selling price on Amazon must be significantly higher than the discounted price.
Now use the Amazon FBA Revenue Calculator to calculate the exact profit you will earn and the profit margin you will enjoy.
I also recommend checking the sales rank for each product and using the Junglescout Amazon sales estimator tool I mentioned above. This will give you a fair idea of whether the product is in demand or not.
However, remember that if other Amazon sellers are selling the same product, they will be on the same product listing page.
Assuming that there are two other arbitrage sellers, then you must divide the estimated number of sales by 3 (two other sellers and you) to get a more realistic estimate of the number of sales you can expect per month. This is, however, based on the assumption that all three of you win the Buy Box.
5: List & Ship to Amazon
After you have found the profitable products, purchase inventory, list them on Amazon and set your selling price. Ideally, select products that provide 40% to 50% ROI. If you choose Amazon FBA, ship them to Amazon’s warehouse.
Learn How to Build Your Own 7-Figure Amazon FBA Business
Part of the Junglescout suite of excellent FBA tools, the learning academy is a comprehensive video training library containing hours of content, including training videos, webinars, and interviews with successful Amazon sellers.
Whether you’re just starting your business, or growing your brand, get expert training from Amazon sellers without the hefty price tag.
Where to Source Products for Online Arbitrage?
For online arbitrage sourcing, you’ll be shopping online. If you have a specific online retailer in mind, that’s great. However, I recommend using multiple sources for online shopping or online product hunting. Here is a quick list of online stores:
- CVS
- Walmart
- Target
- Walgreens
- Vitacost
- Christmas Tree Shops
- Big Lots
- Best Buy
- DSW
- Disney Store
- The Home Depot
- Rite Aid
- Sierra
- Ulta
- Academy Sports + Outdoors
Online Arbitrage FAQs
Is retail arbitrage worth it in 2022?
Yes, retail arbitrage on Amazon is still a good choice in 2022 because there are many discounted products that you can find only in retail stores. Walmart is a very good example. There are many discounted products that you can get only through in-store purchases.
Many brick-and-mortar stores offer higher discounts than online stores! You can even get dirt-cheap products from liquidation stores, yard sales, and thrift stores.
Is Online arbitrage easy?
Yes, online arbitrage is easy. The only challenging part is finding profitable products. There are various tools like Jungle Scout and Tactical Arbitrage that you can use to easily find products and learn about a product’s sales history, current sales rank, etc.
Such tools accumulate all the information you need in a single place to assist you with the buying decision. While products like Tactical Arbitrage are pretty expensive, you can quickly recover the investment because they allow setting parameters to ensure you find products that will give you high-profit margins.
Online arbitrage can be a profitable business if you have the necessary patience to find the right products.
What is the difference between online arbitrage and dropshipping?
In online arbitrage, you need to buy the products you want to sell and then, either store them and fulfill them by yourself, or you can participate in the Amazon FBA program and let Amazon handle the storage and shipping.
In dropshipping, you don’t need to buy anything. You just need to find products and list them. When someone buys the product you listed, you will send the order to the supplier and inform the customer that the product is on its way. The supplier then ships the product directly to the customer.
Online arbitrage gives you more control but for extra overhead costs. Dropshipping is cheaper to start, but you will be dependent on the supplier for fulfillment. This has its own set of challenges!
How much can I make by doing Amazon arbitrage?
It all depends on two factors – the selling velocity of the products you want to sell and the product procurement price. Typically, you will make money on Amazon when the selling velocity is high and the procurement price is low.
The first few months might be a bit slow because it takes time to understand the supply chain and put all systems in place. However, once you master everything and you are in control, the earning potential through Amazon arbitrage will only be restricted by your time and capital investments.
How to Make Money with Online Arbitrage: Summary
Online arbitrage is not a get-rich-quick scheme. It takes time to understand the system and then source products that will sell at the right price and make you money. Understanding Amazon’s selling fees and finding the right products are the keys to success.
As an Amazon seller, you’re best bet is to leverage tools that will help you to find quick-selling products and buy them at the lowest possible price.
If you’re sitting on the fence, let me say this. The barrier to entry is so low with this business model, it’s worth a go! All you stand to lose is the cost of a couple of discounted products and your pride.
Good luck!
