What is Online Arbitrage? A Guide for Beginners on a Budget

Deep in the corner of the e-commerce ecosystem is online arbitrage. If you’re not familiar with the concept, it basically is a way to source inventory online you intend to resale on marketplaces like eBay, Amazon, Craigslist, and dozens of other online sales channels. Or even in a retail store if you have one. Part of this challenge is finding low-cost items on one website, and selling them for a profit on one of these marketplace platforms. If you’re starting with a low sourcing budget, finding as many good products as possible is key, but there are a few things to keep in mind before getting started.

here are 7 quick tips for any beginner looking to get started with online arbitrage:

1. Have Items in Hand

In order to have success with online arbitrage, I would recommend having products ordered and shipped to your location. Many out there will recommend listing items on eBay and fulfilling them on Amazon (dropshipping) whenever you find profitable products. I would not recommend doing this, as eBay and Amazon have policies where they can suspend your account. At the end of the day, having to explain to buyers that you do not have an item in stock they have already ordered is a good way to eventually get kicked off any platform

2. Use Coupon Codes

One thing I like to do before purchasing items online to resell is to look for coupon codes prior to checking out. Sites like RetailMeNot.com are a great resource for find coupons for 10% off, 20% off, and sometimes higher.

3. Use Product Research Tools

Someone once told me “you don’t make money when you sell, you make money when you buy”. In e-commerce this is definitely true. It doesn’t matter how many sales you make on eBay, Craigslist, Amazon, or any other marketplace if you aren’t making a profit after fees and all other expenses. Arbitrage is notorious for slim margins, but if done right, can be a good sourcing method.

eBay, Amazon, and other online marketplaces

Researching what items are selling for (comps) on these marketplaces is the most important step in making a purchase decision. On eBay, you can research comps for sold items (I use the app). On Amazon, there are several programs like CamelCamelCamel which can help you track prices. Profit Bandit is probably the most popular mobile app I’ve heard of for looking at competition and sales rank.  On Amazon, a sales rank under 1,000 is excellent since Amazon does not allow sellers to view how frequently items are selling.

4. Find Items you Can Sell Frequently

This goes along with the last tip, but simply going through clearance and finding any items you can make money on is probably not a great strategy for beginners. Any items that is in an obscure size, brand, or shape will probably take a long time to sell. After all, there is a reason these items have foudn their way into clearance sections.

5. Decide Where you are Going to Buy Inventory

Sourcing I’ve found can be the hardest part when doing retail arbitrage. It’s not that there aren’t any products out there to find (there are many), it’s just that it can take alot of time to research and find products to purchase. For ideas on where to source, check out these 488 Websites for sourcing inventory. A few of my personal favorites I’ve had decent luck with have been:

  • Groupon Goods
  • Kohls.com
  • eBay
  • Walmart
  • Sierra Trading Post

6. Dedicate Time (but not too much)

Honestly, online arbitrage can be a huge time suck. The key is to master your process using tools, coupon codes, browser extensions, and other programs to help save time. If you’re a beginner, it doesn’t really matter at first, but if you are going to depend on sourcing online, you might want to take into account how much inventory you can source per hour.

If you’re a store like Marshalls, TJ Maxx, or Ross, find out how long it takes to find a handful of items and check out. Over time you will have an idea of how may items per hour you can source. Do the same thing when shopping online, and compare results. I honestly prefer to dedicate time each week where the goal is to find as many items as I can in about 2 hours. There are some programs out there I’ve seen like Tactical Arbitrage, that claim to make it easier to source quickly, but I haven’t personally used anything like this. Time is money, so keep that in mind when deciding on where to spend it.

7. Start Small

If you’re a beginner and don’t have a lot of money to work with, start small. Find a few $4-5 items you can sell for $20+ and make a $10 profit. From there, reinvest it. For beginners, it’s not a bad strategy to find  items that sell for $25 and under, but as you begin to bring in money, you’ll want to purchase larger quantities.

The benefit being that many sites will give you free shipping on orders above a certain amount (for example), and usually that amount is $50 or more. Some may also give you 20 percent off orders over $100. To maximize your savings, buying in large quantities will be essential, but not until you build up capital.

I hope you’ve found this blog helpful. Online arbitrage is pretty fun to do, it just takes some time. If you need help on how to organize inventory once it gets shipped to you, check out How to Organize Inventory for a Small Business on a Budget.

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