Well it depends.
The amount that you can make through online arbitrage depends on the amount of effort you are willing to put into the process. It depends on the amount of capital you have and the amount of risk you are willing to take. It depends on the tools you use to automate the process and sort through the winners and the losers.
It just depends.
I have seen firsthand the amount of money that can be made from online arbitrage. With each success story, there is a system in place that helps keep the seller on the right track.
That being said, I think a look into the feasible levels of profit and money you can make from online arbitrage can help set some expectations as you get started selling and look to grow.
So let’s look into the answers to the real questions people are asking about online arbitrage. This article will break down online arbitrage and look at how much money you can really make from it.
What is Arbitrage?
Arbitrage is an economics term that is used to describe when someone buys a product low and sells it high. Normally this is done by finding it at a lower price in a marketplace, buying it, and then selling it on another marketplace. When it comes to arbitrage in the Amazon sense, we can identify where the arbitrage is taking place by the word in front of arbitrage.
For example: Online arbitrage occurs when you buy an item from one online store and then sell it for a profit on Amazon. Retail arbitrage is the same, but done in a retail setting. Coupon arbitrage is the same concept, but includes extreme couponing.
It’s pretty straightforward.
For example, you can buy a toy action figure from Wal-Mart and then sell it on Amazon for a higher price. But wait a minute… why would a customer buy a product off Amazon for a higher price instead of going to Wal-Mart or any other store that may sell it for a lower price?
You have stumbled upon what I like to call the arbitrage conundrum.
We assume most people act in a logical fashion. And when arbitrage happens, it seems very illogical.
What we forget is that most decisions are made based upon the information at hand, not with perfect information.
It is this imperfect information that creates the arbitrage opportunities.
In reality, there are many reasons as to why a customer would do this. Perhaps the toy is sold out in Wal-Mart, or perhaps they have Amazon Prime and want to get free one-day delivery. Maybe they would rather buy from Amazon because of the reputation the company holds. Maybe they just don’t like to go to a store and are willing to pay more for the convenience.
When you want to buy something, where’s the first place that pops into your mind? For most people it’s Amazon. Amazon is convenient, Amazon is trusted. That is why online arbitrage can be so effective and profitable!
Why Online Arbitrage?
So now that we have a general idea as to how online arbitrage works, let’s look at the reasons as to why you might consider getting involved in it.
Online arbitrage allows you to make money from literally anywhere with an internet connection – providing you the freedom to travel and live wherever your heart desires without the geographical restrictions of a job. Although it is useful to bear in mind that you may need to have a space for packing and shipping the products – alternatively, you can also send the product to Amazon’s FBA warehouses (sometimes referred to as a prep center).
Online arbitrage also gives people in remote areas an opportunity to make a lot of money even if they don’t live near any major retailers – giving anyone an opportunity to become financially independent.
A low entry threshold is also another major advantage of trying out online arbitrage due to the fact that your main expense will consist of purchasing goods. Therefore, you don’t need a huge amount of capital to invest in order to get started – significantly reducing risk for newbies. Risk is further decreased if you diversify what you sell. This is because if you sell a variety of products from a variety of different niches and markets, any mistakes you make will only affect a small portion of your business. Thus, as long as you are learning from your mistakes, your business will continue to grow and expand.
How Much Money Can You Make?
Now let’s look into the big question! How much money can you really make from online arbitrage?
I like give people the following timeline and amounts:
0-3 months: $100-$200 – You are just getting started and you are going to make mistakes. Mistakes cost money, but they provide a great education for you. During the first three months, sellers often have a few big wins and a few big losses. If everything pans out, you should have a profit and have a warehouse with a good amount of inventory.
3-9 months: $200-$1,000/month – You have your feet on the ground and you are starting to get systems into place. As you become more comfortable analysing deals and finding products, you are more willing to invest into more inventory. As your inventory level grows, your potential for profit increases.
9 months+ – $1000/month – ??? – After the first nine months, you have become a pro and you are now in control of your own destiny. The amount you can make is only limited to your supply chain, the amount of time you want to invest, and the amount of capital at your fingertips.
It’s important to note that, the nature of making money through online arbitrage is very exponentially driven. Thus, no matter how small your budget is, you can expect to see your money pile grow and grow as you reinvest your profits back into the business.
How long does it take?
So how long does it take to see some exciting results from online arbitrage? Well, it all depends on how much time you invest, how fast you learn and how much money you are willing to put in.
The most significant reason as to why so many people have failed in the past at online arbitrage is due to the fact that they failed to learn from their mistakes. You need to have the discipline to detach yourself purely from the potential cash returns and focus on using your skills to find the best products to sell. If you’re only driven by the money aspect and don’t enjoy the process, online arbitrage will become a lot harder for you.
Overall, through hard work and determination, you can expect to see real results between 3 and 9 months.
How Does It Work?
If you’re still reading this, then you are probably quite interested in online arbitrage and may want to try it out yourself. I don’t blame you, as the whole process behind online arbitrage can be fascinating! Let’s have a brief look into the process of establishing a successful online arbitrage business and what you need to get started.
I would recommend reading this article that helps you understand the steps behind arbitrage in more detail – Taking Advantage of Online Arbitrage.
Below, I will give a short crash course into the process. I encourage you to look at our other articles for more detailed information.
Step 1 – Find a Product
Before we can do anything, you have to find a product you want to sell for a profit.
Manually searching through countless websites is a free way to find good products. However, this strategy is ridiculously time consuming, and most likely, not worth your time. In addition, if you are a beginner, using this technique will most likely completely drive you away from online arbitrage altogether.
The most effective and efficient method to find lucrative products for your online arbitrage business is to use Tactical Arbitrage. A subscription to Tactical Arbitrage will provide you with the ability to scan through over a thousand stores. Our advanced algorithms will instantly calculate any Amazon fees, cashbacks, source discounts, and shipping fees in order to accurately present you with a clear picture of how much profit you will make – BEFORE any investment is actually made. This ensures that your investments are as low risk as possible, giving you a greater peace of mind that your buying decisions will give be profitable. The filter option allows you to narrow down your product search by site, product type, price and so much more. Tactical Arbitrage is sure to save you an enormous amount of time that you can invest into other aspects of your business. Remember, time is money! Therefore, the more time and energy you save the better. Take advantage of our 7-day free trial to test out the platform for yourself and discover the benefits of Tactical Arbitrage!
Since Amazon is the most popular marketplace to sell products on, it’s worth noting that under their FBA (fulfilled by Amazon) program, Amazon takes a 15% cut of every sale that is made on their marketplace. Amazon also charges roughly an additional 15% for the dimensions and weight of the products that you sell – with the charge varying slightly depending on the product and size.
Overall, the fees are worth it. Amazon saves you a lot of time and hassle from having to process and fulfil every individual order yourself – and trust me; you do not want to do that! Ever! It’s a headache.
Step 2: Order the item and Sell the item
The ordering and selling process is, of course, the most important aspect of online arbitrage – so it is vital that you consistently work on perfecting this part of your business.
When ordering items, you want to send them to yourself (or a ‘pick & pack’ center if you are not based in the United States of America). I highly recommend signing up to Ebates, a site which allows you to find coupons that will help cut expenses when ordering products. Honey, the browser extension, is also another amazing tool to help you get access to coupons and discounts. In general, the more money you save the better – this is because you can simply reinvest the money saved back into the business and speed up growth.
While you’re waiting for your products to arrive, take the opportunity to create a great quality and unique listing. Spend time researching how to write excellent descriptions and how to best price your items as these are integral to the success of every single listing you’ll ever make.
Once your products have arrived, ship them off to amazon where their FBA (Fulfilled by Amazon) program will do the rest of the work for you.
Even though it’s extremely tempting to start buying new products, take this time to wait and evaluate whether your product choices were effective. You don’t want to start buying tonnes of new products only to realise that your buying strategy is all wrong. Patience is a vital skill that every single person working around online arbitrage needs to master in order to prevent expensive and painful mistakes.
I totally get it! The world of online arbitrage can seem very overwhelming and scary. But if you’re the kind of person with patience and determination, then online arbitrage will allow you to be able to make enough money to work full-time – anywhere! It doesn’t matter how much experience you have, online arbitrage levels the playing field for everyone and gives everybody a chance to succeed.