If you’ve decided to start an online arbitrage business on Amazon, there are certain steps you need to follow to be successful. For example, it is important to choose profitable products and to create an effective marketing strategy.
In this article, we will provide important tips on how to grow your online arbitrage business and become more successful.
What is Online Arbitrage?
Online arbitrage is the act of buying products from an online store at a discounted price and reselling it at a higher price on marketplaces like Amazon. Online arbitrage sellers make money by generating a margin and therefore, making a profit on resale.
For example, major brands may carry out destocking operations or sales throughout the year – winter and summer sales – which can be a great opportunity for online arbitrage sellers. You can also search on the internet for wholesalers or online retail shops that offer discounted sales on luxury or electronic products. Then, you can easily resell them on Amazon.
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Is Online Arbitrage Still Good for Making Money?
Yes! We can’t give you a definitive number regarding how much money you can make with online arbitrage because it depends on many factors. However, we can say that your short-term profit potential depends primarily on your capital. The more funds you have to invest, the more products you can buy. A larger stock allows you to sell more.
You should also make more money when you research and source products that sell much faster. You don’t want to stay with excess inventory for long and miss out on arbitrage opportunities.
What Are the Privileges You Need to Start Online Arbitrage?
Not much! The most important thing is to create an Amazon seller account, and you’re good to go. When creating your account, you must choose between Professional and Individual plans. The Professional plan allows you to sell more than 40 products per month by paying a flat fee of $39.99. The Individual plan is most suited for sellers who see this business as more of a side hustle. It limits you to 40 products per month, and you must pay a $0.99 fee for each product.
You must also verify your account by providing a business address for Amazon. They will send you a postcard containing a verification code to that address.
The second important requirement for starting an online arbitrage business is capital. You can start with as little as $500, but it’s better to start with $1000 and more. This way, you can build a bigger inventory and use the FBA (Fulfillment by Amazon) method. With this method, Amazon will take care of logistics, returns management, and customer service for you.
Buying an online arbitrage sourcing list is a great way to source products, so you can invest in sourcing lists and additional tools and software for keyword research.
Pros And Cons of Doing Online Arbitrage
Knowing the pros and cons of online arbitrage can help you decide if it’s the right business model for you:
- Little start-up capital required: All you need for starting an online arbitrage business are products, so it requires a relatively small capital (around $500-$1000).
- Lower risk compared to other business models: In contrast to private label and wholesale, you don’t have to buy large quantities of products, so there’s a lower risk involved.
The products are also from well-known brands for which you can estimate the demand relatively well and have the opportunity to diversify. This leads to a comparatively lower financial and legal risk.
- Easy entry: Most Amazon sellers would agree that online arbitrage is the best way to get started with Amazon FBA not only for the reasons above but also because there are fewer barriers to entry (i.e., no product certifications are required, you don’t have to make your own listings, and so on).
- Solid foundation for other Amazon FBA models: Online arbitrage is sometimes seen as a transitional model, and there is nothing wrong with that. Experienced OA sellers will find it much easier to get started with all other business models such as private label or wholesale.
- Commission fees: Amazon takes a commission on each sale. This commission can go up to 15% of the selling price of the product.
- High competition: Amazon is a very competitive platform. Many sellers sell the same products as you. So, you have to stand out to be successful.
- Strict rules: Amazon is a regulated platform. There are rules to follow if you want to sell successfully on Amazon. If you do not follow these rules, you risk being banned from the platform.
Best Websites for Online Arbitrage
Whether you’re just starting your online arbitrage business or you’re a veteran, you’ll need to use some services to grow your business and move in the right direction. Here are the best websites that can help you do it:
- OABeans is a service provider that offers top-notch online arbitrage sourcing lists and Amazon ungating services. By purchasing their leads, you can free yourself of the hassle of product research and focus on more important things, like promoting your products.
- Tactical Arbitrage provides a great sourcing platform for both new and seasoned sellers. They have an Online Arbitrage scan that contains product research and reverse search for locating places to buy at profit.
- SourceMogul is another product sourcing platform that works 24/7, scanning retailer websites to find cheap and profitable products for online arbitrage on Amazon. They offer monthly and annual plans.
- Aura is the best repricing tool that combines artificial intelligence and machine learning for maximizing your time in the buy box.
Top Online Arbitrage Tips
There are some tips and tricks you can follow to be successful in your online arbitrage business on Amazon. Here are our tips:
1) Invest in Promotion and Advertising
As soon as you make your first sales and collect your first payment, we recommend that you invest part of this money in promoting your products.
2) Invest in High-Quality Products
Amazon’s customers have increasingly high demands. They want quality products at the best price. If you don’t invest enough in the quality of your products, you will struggle to sell.
4) Invest in Customer Relations
Customer relations are very important on Amazon. If customers don’t have a good experience with your products, they won’t come back and will give negative feedback. Therefore, you must invest in customer relations to succeed on Amazon.
5) Do Not Break Amazon’s Rules
Amazon is a highly regulated platform. If you do not follow the rules, you risk being banned from the platform. You must read Amazon’s terms and conditions of use before starting your business.
6) Manage Orders and Deliveries Properly
Be quick to ship orders and take care to package products well. Customers expect good service and products in good condition.
You can also add a little personalized note (or a little printed card if you have too many orders) to thank the customer for buying from you.
Online arbitrage is nothing more than the classic resale of commodities. The seller buys the goods from online retail stores to resell on marketplaces such as Amazon and makes money by leveraging the price difference. Using the tips and tricks provided in this article, you can easily start your own online arbitrage business on Amazon!