How To Do Online Arbitrage [Epic Sourcing Guide]

Technology today has provided us with plenty of money-making opportunities. If you do a quick search online, you are going to find hundreds of ways to “boost your side hustle” or “start a business to help you leave a job you hate”.

Over the years, I have tried a handful of the different arbitrage methods out there, but only one has landed a place at the top of my list.

Online Arbitrage

Why might you ask? Well, I have found that it is fun, easy (if you have the right tools), can be done from anywhere, and has no cap on the amount of money you can earn. Plus it is incredible being able to sell on Amazon and reach thousands of customers.

The business of online arbitrage on Amazon allows you to shop for inventory via your computer and resell the products off to Amazon FBA warehouse at a profit. It is similar to Amazon retail arbitrage, but only online.

I also might be partial to it because I’m a tech nerd and I love money making methods that are fueled by economics. Online arbitrage is a perfect blend of both and I have been doing it for over seven years.

Along the way, I have paid off cars, taken trips with my wife, and been able to switch jobs without being concerned about a pay cut.

This guide is meant to get you started in the world of online arbitrage. Perhaps, you got your start with retail arbitrage or just being introduced to the Amazon arbitrage game.

I have been teaching people who to get started for years and this guide pulls together all of my teachings and gives you an epic guide to getting started. Many of these Amazon sellers have built a profitable arbitrage business that have changed their lives.

I will cover all you need to know on how to do online arbitrage and how to get you started selling on Amazon in this blog post.

What Is Online Arbitrage?

When it comes to making money online, the word arbitrage is thrown around a lot. It’s actually a term from the study of economics and it describes the process of a middle man (or arbitrager) who helps fill a market need when markets are inefficient.

If you know only one thing about economics, let it be this: Market inefficiencies are money making opportunities!

Online arbitrage is the practice of finding items at a low selling price in one marketplace online and selling them for a higher price on other online marketplaces. It’s almost identical to the process of retail arbitrage, but it is not limited to a geographical location or clearance section at your local Walmart retail stores.

In the context of this post, an online arbitrage business model is done by finding deals online and selling those items on Amazon. Amazon is the one of the world’s biggest online marketplaces and people are willing to pay more for items that can be delivered to their door with Prime shipping.

Personally, I love online arbitrage because I can do it from anywhere and at any time. It is a little less time consuming than going into retail stores.

With a little kid crawling around the house, I can’t just run and spend 2 hours scanning items at a store. I might not even be able to do any sourcing until I get a few free moments (usually at 5AM or 10PM).

If you are anything like most of the students I have taught, you are most likely still a bit confused on how online arbitrage business works. Let me break it down into a few steps that will make it a little easier to understand:

You head to an online retail website and look for items that are lower in price on that site than they are on Amazon.
You compare the price difference to a set of criteria you have created (more on that later) and you see if the product actually sells on Amazon (more on how to do that too).
If they fit your criteria, place your order, and have the items delivered to your doorstep.
Once your order arrives on your doorstep, unpack the products and list & set your price for your products on Amazon.
Ship them off to the Amazon FBA fulfillment center
Make yourself a nice cocktail and wait for the item to sell on Amazon.
Receive your profit and repeat the process.

If it sounds easy, that’s because it actually is. The hardest part about the whole operation is finding the deals to flip, but the rest of the process is as easy as sitting, waiting, unpacking, packing, and waiting some more.

How Can I Make Money With Online Arbitrage On Amazon?

I can read your mind. The question you have right now is:

How in the world can I actually make a profit from this? Can’t everyone else just go to the other site and buy the item I am going to buy? This seems too good to be true.

I 100% understand this question. It’s the exact same question I had when I got started with arbitrage on Amazon.

The answer? Well, it all comes down to consumer loyalty and lack of information and time.

Think about a typical consumer. When they are ready to buy something online, where is the first place they head? For most, the answer would be Amazon. Some head to Amazon because they know they can find what they are looking for and don’t need to look elsewhere.

Others head there because they can get their items quickly with Prime shipping. Others head there because it’s the app they have handy on their mobile device. People are willing to pay a premium for convenience and customer service.

Do you think they want to spend hours searching online store by online store just to save a few bucks? My guess would be no. They want what they want and they want it now. Plus some of the consumers would never even think to look on another website for the same item.

As someone who finds products at the right price for online arbitrage, you are trained to look everywhere. You are trained to know how to stack promo codes or use discounted gift cards. You are trained to find the deals.

Most normal people are not. This is why online arbitrage works and this is why you can bank money by doing it.

Before you get all excited, I want to make certain to stress that online arbitrage is not a “get rich quick scheme”. It might sound easy, but there is actually a lot of work that goes into the searching for flips and managing of your Amazon account.

If you are willing to put in the work, you will find that you can make some dough. In addition, there are some risks involved when you have to purchase inventory (items not selling, returns, and damaged products).

You can minimize your risk by making educated purchasing choices and by taking additional steps to protect your investment.

How Can I Start Online Arbitrage?

In order to get started with online arbitrage, you are going to need a few things:

A computer
An Amazon seller account
Access to the internet
Some capital to invest into inventory (I suggest starting with $100)

I’ll leave the computer, internet, and capital to you, but if you have never opened an Amazon seller account, here is how to do that:

Go to https://sellercentral.amazon.com/ and click “Sign Up” (quick note: an Amazon seller account is going to cost your $39.99/month – make certain to sign up only when you are ready to start selling.
If you already have an Amazon account, sign into it. If not, create an Amazon account.
Amazon is going to ask you a bunch of questions as you set up your account. You will need to have the following ready to go before you register for an account: Business name and address (can be your individual name as well), telephone number, credit card and bank account information, and tax information (social security number or EIN for a business).
Once you get all of the questions answered, you should have access to the Seller Central Dashboard and access to Amazon’s customer base.

Now you should be ready to go. All we have to do now is find something to sell. Before we get to the searching process, we need to set some criteria up to make certain we are buying items that will actually sell and will actually make a profit.

I like to call these my “buying criteria” and your criteria might look a little different than another seller’s criteria. Your buying criteria will include:

What categories you are willing (and able to sell in)
Sales rank (Amazon’s way of telling you how fast an item sells) maximum
Profit margin
Minimum price point

Let’s break each of these down a bit more so you can understand why they are important factors when you are searching for online arbitrage amazon deals:

Category

In the Amazon world, every product that is listed on the marketplace falls under a product category. Amazon allows all sellers to sell in some categories and restricts other categories. Amazon fees also vary from category to category.

I have (and also will be) an equal opportunity arbitrage for Amazon seller, so I love to look at all categories, but you need to make sure you can sell it in the first place.

The easiest way to check is by trying to list a product on Amazon through Seller Central. If you can list it, you can sell it. If it restricts you, then you need to remove that category from your list.

I have found that most sellers get started in Toys or Home & Kitchen, but never limit yourself to just one category.

Sales Rank

Buying a product to sell that sits on a shelf forever doesn’t bring in any revenue. With arbitrage online, some sellers are concerned they might buy an item that will never sell. Although this happens from time to time, there is actually a way to use the data provided by Amazon to help mitigate this risk.

It’s called the sales rank (or some people call it the BSR – Best Sellers Rank). This is a number that is shown on an Amazon listing that ranks the best sellers in a given category. The lower the number, the more often the item is purchased.

You will need to set a maximum rank (per category) that you are willing to buy. I tend to push my students towards a maximum rank of 150,000 in a given category. These items sell with relative consistency and they usually sell within 1-3 months if you are matching the lowest price on the listing.

Profit Margin

We are doing online arbitrage to make money, so we need to make sure each of our purchases set us up for success. On average, you should be able to make 30% – 100% return on your purchases when selling via online arbitrage (compare that to the stock market and you can see why people get excited).

I like to set my profit margin at 50% to make sure that I can find a lot of possible deals and I still get enough in return to make it worth my while.

Minimum Price

If you find an item that sells for $5 with a 1000% return, you might get a bit excited, until you realize that you have to pay fees to Amazon and ship the item to the customer (or to Amazon). Fees and shipping add up and you need to have a product to sell that at least covers those costs and can hit your profit margin.

I recommend a minimum price of $10 or more on any item you sell to make sure you have room to make some money.

Each of these factors can help you determine if you should buy a deal or if you should pass. It’s important to establish these upfront and adjust them over time instead of just diving in and starting to buy items.

I personally did the “head first” dive and lost some money on items that never sold or items that I couldn’t sell in the first place.

A Quick Word On Amazon FBA

It has been mentioned a few times in this guide, but I want to take a moment to explain Amazon FBA (Fulfillment By Amazon). When you sell an item on Amazon, you have two options to get that product to the customer.

The first is fulfillment by merchant (FBM) where you actually pack up the item and ship it directly to the customer.

The second is fulfillment by Amazon (FBA) where you actually ship your products to Amazon before they are sold and Amazon handles the rest (prepping, packing, shipping, and even customer service).

Amazon provides this service at an additional cost (which can be accounted for when you search for products), but it also comes with some great perks like Amazon handling your customer issues and even making your products eligible for Prime shipping.

When it comes to online arbitrage, I am going to push you towards FBA all day long. It might cost a bit more, but it makes life a lot easier. Online arbitrage by nature is mobile and flexible and you don’t want to have to sit around your house all day waiting for orders and shipping them out.

That’s why I highly recommend FBA for all sellers who decide to source using online arbitrage.

Finding Your First Flip Using Online Arbitrage

Finding profitable items to flip on Amazon can be done in two different ways.

The manual process – This way takes a lot more time, but is perfect to find your first flip or for someone who does not want to purchase sourcing software due to the price point of that software.
The automated process – This is my preferred method. It has some additional startup costs, but in the long run, you are able to find more deals and spend less time searching sites that end up yielding nothing in return.

When you get started, I recommend finding a few deals the manual way and then upgrading to the automatic method.

I find that it is nice to have an understanding of the process before purchasing a tool so you can understand how to use that tool to the fullest. I’ll explain both methods in detail so you can decide for yourself.

Manual Way to Find Products To Sell On Amazon

This is pretty straightforward, but I want to walk you step by step through finding your first deal using online arbitrage.

Head to your favorite online retailer that isn’t Amazon.
Pull up Amazon in another tab in your browser.
Start looking at different items on the site. Try to look for items that look like they might be lower priced.
Search for the lower priced item on Amazon. See if there is a higher price on Amazon (usually 2-3x the price of the other site).
– If so, move onto step #5. If not, repeat steps #3 and #4.
Run the ASIN or title of the product through an Amazon FBA calculator. This will help you determine your profit margin as it will calculate Amazon fees for you.
Look at your criteria (that we created earlier) and see if your find checks all the boxes.
– If so, move to step #7. If not, move back to step #3.
Purchase the product and have it shipped to your doorstep.
Once you receive the product, list it on Amazon.
– If using FBA, you will need to prep and send the items to Amazon.
– If using FBM, you will need to wait for a sale.
Wait for a sale.
Repeat the process.

I’ll be 100% honest with you. I used to do this method back in the day and it is mind numblily boring. You can spend hours and hours to find one or two items. Sometimes you don’t even find one.

The more you practice, the better you will get at knowing which deals or promotions might be beneficial to finding a good deal.

Automatic Way to Find Products To Sell On Amazon

My parents always taught me that there is a hard way and an easy way to do everything. That holds true for online arbitrage as well. If you have spent any time searching for flips manually, you know that there has to be an easier way.

That’s where online arbitrage tools come into play.

You can cobble free tools together or you can just get the best tool on the market that gives you everything you need to find deals while you sleep.

I’ll provide both options for you below, but first we need to take at the benefits of using online arbitrage sourcing tools.

Why Use Online Arbitrage Sourcing Tools?

Imagine you are trying to build a house. If all you had around you were hand tools, it is going to take a lot longer than if you had access to power tools. The same idea holds true when we talk about online arbitrage.

You can do things by hand, but you can do things a lot quicker if you have the right set of tools.

And let’s face it. There is a lot of information that you need to process when you are getting ready to make a purchase. Having some extra help can save you some time and can also make sure you are making the best decision you can for this business model.

So why do I suggest people use online arbitrage sourcing tools? Here are just a few reason:

They Help People Find Product Deals Faster

Duh. Searching through millions of millions of products on Amazon and online stores can overwhelm and frustrate people. It is a known fact that there are only so many hours in a given day (24 for those home gamers out there). Time is money and anything that can help you do the same task at a faster rate should be considered.

They Help To Analyze Products More Efficiently

When doing anything by hand, there is always the chance for an error to take place. If technology is used, the chance for mistakes drops and you can make better purchasing decisions.

Online arbitrage tools help you obtain and interpret data that is actually useful in the sourcing process. You can quickly look at the key info such as:

Sales Ranks
Selling Price
Profit Margin
Number of Amazon Sellers

Having this knowledge at your fingertips helps you make purchases on the fly.

They Make Buying Decisions Faster and Easier

Knowledge is power and that translates to money in the business world. When you have the right information, you can quickly decide if a product is worth purchasing or not.

Instead of spending hours just searching for a product, you can spend hours simply checking to see if the products your software found meet your buying criteria.

This allows you to scale and grow your arbitrage business over time and provides you with more opportunities to secure some profits in the long term.

Help You Understand Expenses

To run a successful online arbitrage on Amazon business, you must understand all your expenses. Shipping fees, purchase price, Amazon FBA fees, and your time are all costs associated with online arbitrage.

Online arbitrage tools help take care of the costs so that you make profits on every item you sell. They help you keep track of many important metrics for Amazon sellers.

Free Online Sourcing Tools For Online Arbitrage

To make your life selling on Amazon easier, you need to grab a few free tools that can help speed up the online arbitrage process. All of these tools are optional, but I have found that they are all helpful for finding products at the right sales price.

In addition, there are a lot of other free Amazon arbitrage tools on the market for sellers. The arbitrage tools mentioned below are just a sample of ones that are useful for selling on Amazon. You don’t need all of them, but a select few with help with your online arbitrage business.

Some of these tools can also help you with making money via “hybrid” retail arbitrage if you ship your products to the store for pickup.

1. Priceblink

Priceblink is a Chrome extension that helps you know when the item you are reviewing can be bought somewhere else at a lower cost.

In simple terms, this tool points to money-saving coupons and lower prices on other sites. It analyzes prices, including shipping charges, and gives a precise amount of what you should expect from the product you choose.

You can see where this would be beneficial when trying to find products for online arbitrage flips. You might be on one site looking at an item and that same exact item might be 50% off on another site (that you haven’t even looked at yet).

Priceblink is like having another set of eyes that can be looking for deals while you are looking for deals.

2. Honey

Another excellent extension to add on your list is a tool like Honey, which helps you find and apply the best coupon codes at the checkout before you complete making an online order.

So, instead of opening a separate tab and finding coupons and sales from various coupon sites, you just need to shop as usual and allow Honey to do the rest.

Honey users can also earn cashback on their eligible purchases through Honey Gold. You simply click the checkout button and complete the transaction, and you can receive cash back to help you reduce your cost of your purchase (and increase your profit margin).

3. Invisible Hand

I love me a good economics pun.

Invisible Hand enables you to make informed purchases on shopping by providing the lowest prices available. It shows a notification when there are lower prices on the product you are viewing.

It also provides a link to the site where the price is lower so you can buy it. It’s similar to Priceblink, but it has a few different sites it checks.

4. Cashback Monitor

Cash back is something that exists and should be used by all online arbitrage shoppers. There is nothing better than lowering your cost of goods and increasing your ROI. The Cashback Monitor finds information on cash back offers for you so you can decide which offer is the best.

This tool explores, collects, and organizes data from the cash back sites to help you find profitable deals.

5. Hummingbird Hover Graph Extension

The Hummingbird Hover-Graph is a free extension built by Tactical Arbitrage (TA). The extension allows you to interact with graphical data that you can hover over and check key information to help you make a decision when shopping for online arbitrage flips.

This powerful extension is free, but has a limit for the first five uses per day. Subscribers to TA have an unlimited amount of searches, while online arbitrage users get unique benefits such as further analysis of a product.

Best Paid Online Arbitrage Tool

Here’s the deal: If you are going to pay for any tools to search for online arbitrage flips, you should just start by getting the best.

And by best, I mean Tactical Arbitrage.

Without a doubt, this software is one of the most potent online arbitrage tools that is on the market today for sellers. This online software allows sellers to search a ton of sites with just a few clicks of a mouse (or trackpad).

I have been using it for years and I am always impressed with the quality of the software. And for a beginner, it’s pretty easy to use. You can set up your sales rank, ROI parameters, and other metrics in just a few minutes.

Since Tactical Arbitrage focuses on finding online arbitrage opportunities, it comes with the following advantages:

Filter products on numerous criteria such as Amazon sales ranking and ROI
Search unique store categories, provide URLs, and conduct a general keyword search.
Scans over 1,000 product sourcing websites as more are added every week.
Results analysis for the deep dive into the listings and products
Can carry out reverse lookups for arbitrage on Amazon products
Provides recommended deals to help find items that will generate the most profit.

There is a monthly cost (or annually if you want to save some money), but the number of possible deals you can find covers the cost tenfold. There are different packages you can choose, so I recommend starting with one and expanding once you master how to use it.

If you want to learn more, take a look here. I promise you, you won’t be disappointed.

Final Thoughts

And that’s my guide on how to do online arbitrage, but there are a few other tidbits I want to share as my final words of wisdom.

I know that this article has focused on selling items via Amazon, but there are a ton of opportunities on other marketplaces (such as eBay or Walmart).
Don’t rush your business growth. It will come naturally and only scale up if you are ready. I would rather your business to grow slowly than for it to crash and burn.
You will have items that you buy that just will not sell. It happens. When it does, make it a learning experience instead of a failure. Figure out why it happened and don’t let it happen again.
Find a support system and make sure to use it. Online arbitrage & selling on Amazon is a lonely business and you need to have interaction with other sellers. The idea sharing that takes place will take your business to new heights. Embrace and share the deals you find and you will get deals in return.
Don’t give up on retail arbitrage just because you focus on online arbitrage. A lot of the times, deals you find in a store could be also found online. And vice versa. Dabble in all things and keep the ideas flowing.
Make sure you put in a little extra effort. I have always been amazed what amount of money that can be made by going the extra mile. If something takes a little more effort, most people just quit. Don’t do that. Put in that effort.

If you have been looking for a way to make some money while you are wearing your pajamas, online arbitrage might be perfect for you. It takes some work to get started, but you can end up building a business that can make money while you sleep.

I hope you have enjoyed this guide and I wish you the best on your online arbitrage journey. You have a great foundation to get started and now it is on you to make the most of it.