Online arbitrage is a fantastic opportunity.
I have personally seen many entrepreneurs who have created a business from buying and reselling items through online arbitrage. I could spend hours telling you how some people have paid off debt, taken trips, or even bought a house because of the extra money they made with online arbitrage.
Even though I have seen a ton of success stories, I have also seen a lot of different failures. People think that online arbitrage is going to be a get rich scheme and they get burnt when they fail to learn and use the tools that are available to make educated purchasing decisions.
I want to spend this post talking about the six main reasons people fail at online arbitrage to give you a guide to help you succeed with it. I have always said that I would rather learn from the mistake of someone else than to learn it on my own, so I hope these can serve as a lesson for you to help you with your OA journey.
1. Online Arbitrage Isn’t Easy
Online arbitrage seems pretty easy doesn’t it. You just find a deal online, buy it at a lower price, send it to Amazon, and sell it at a higher price. I’m not saying anyone can do it, but the idea is very straightforward.
Nothing is as easy as it seems. Ever.
If you really think it is that easy (or are hoping to do little to no work), you will be disappointed. Online arbitrage takes time, practice, and patience.
It will take time to learn the ins and outs of different stores. Amazon has quirks that will make you want to pull out your hair. You will make mistakes. And you will find out that online arbitrage isn’t as easy as it seems.
2. Online Arbitrage Isn’t a Get Rich Quick Scheme
Can I get an amen?
You will not make hundreds of thousands of dollars in the first month. Or even in the first year. You will not be able to find items that flip for over 1000% on a daily basis.
It just won’t happen.
Online arbitrage is a business and businesses take time to grow and turn profitable. It does not happen overnight.
When you start with online arbitrage, you need to set realistic expectations and goals. You will be able to make money, but it is going to take some time and a lot of hard work to get to that point.
3. People Let Emotions Get in the Way
A business person with emotions will not be a business person for very long.
I remember when I first started online arbitrage and I would get so excited, mad, and every emotion in between. OA gives you a thrill and it’s hard to take the emotion out of it.
You need to be a cold and calculated buyer and seller when it comes to online arbitrage. Take emotions out of the equation and focus on the numbers.
One of the benefits of using an online arbitrage tool such as Tactical Arbitrage is that you can work with numbers and charts. You can see what’s available, how much you can sell it for, what your profit margin will be, and much more. You can eliminate the emotions and look at everything through the eyes of a business person.
Walmart wouldn’t open a store in the middle of nowhere on a gut feeling. They would use data and analysis to determine what location would bring in the most revenue.
You should do the same with your online arbitrage purchases.
4. Revenue is Vanity, Profit is Sanity
Sales numbers are useless without profit numbers to back it up.
Any “online guru” can post a screenshot of their revenue numbers (sales numbers for those of you who don’t use business speak), but that’s only half of the equation.
I could sell $1,000,000 worth of products, but only make a 1% margin. That would be would be a whopping $10,000 in profit. See – It’s the profit margin that really matters.
Most people who are just starting with online arbitrage want to compare themselves to other sellers. This is just a recipe for disaster. You should only focus on your business and your business alone. Comparing yourself to others will drive you crazy and lead to emotional decisions that will wreck your online arbitrage business.
5. People Want to Grow, Until They Don’t
You most likely want to start online arbitrage because you want a little side income to help with an expense or some debt. You saw a few videos or blog posts about it and you decided to give it a try (I heard a podcast about it and decided to give it a whirl). You start making a little money here and there and then you decide you want to make a little more. And a little more. And a little more.
All of a sudden, you have a business that is growing way faster than it should and you start running into the different issues that come with operating a larger business. It could be cash flow issues, managing time and resources, outsourcing labor, etc.
What was once a hobby, is now a full time job. And it seems like you will never be able to catch up.
People are happy to grow, until they don’t. What we mean is that many people allow their arbitrage activities to get on top of them because they don’t take on any extra help. Things can then get challenging and you might decide to give it up due to burn out. You’re thinking online arbitrage isn’t sustainable in the long-term, but in reality it’s just that you need to be smarter and treat what you’re doing like a business.
If you start to grow, you need to grow with a plan. Take small steps and put the work in up front to make sure your business can grow and scale without major issues.
6. I Like To Buy, But Hate To Keep My Books
You need to know where your money is going, when it is being spent, and where you are bringing money in.
Without this knowledge, you are just buying products and hoping for the best. You might think you are making money, but you honestly have no idea how much and what items are profitable.
This might not seem like a major need when you’re new to online arbitrage. After all, if you make an initial investment of $1,000 into products and make $1,200 from selling them, pocket the $200 profit and then re-invest the $1,000, you know where you are with your mone
Running a business requires you to also handle the finances in order to keep your records straight. This includes keeping track of expenses and revenue and keeping back all your receipts for tax time.
However, if you’re starting out today and you don’t know where your online arbitrage journey will take you, set up an accounting system right now. That way, you’ll always know where you’re at, and if you do grow, you’ll have a system in place already rather than suddenly having to set something up when you want to be buying, selling, and growing your online arbitrage business.