Have you ever heard of the phrase “cross-border arbitrage”? If I were a betting man, I would guess you haven’t heard of it. Never fear—this blog post is here to give you the information you need to add cross-border arbitrage to your Amazon seller toolbox.
There is no question that the World Wide Web has changed the way the world does business. People used to be confined to the stores and shops within their close geographical areas. People shopped locally because there were not a lot of options outside of their local communities.
Today, I can hop onto my computer and buy a piece of clothing from a shop in California, some cheese from Wisconsin, and even a new couch from Maryland. The internet has connected me across the nation with stores and businesses and expanded my ability to purchase items.
The same is true for the businesses. They are no longer restricted from potential customers across the world. If someone has an internet connection, they can place an order and get it shipped to their front door. And it doesn’t just stop in the United States. The World Wide Web connects us with all the countries in the world and allows us to buy and sell across borders, oceans, and time zones.
Most Amazon sellers look at this as a great way to sell their products and grow their businesses.
Smart Amazon sellers know that a global marketplace for goods presents different (and profitable) opportunities.
And that’s where cross-border arbitrage comes into play. It’s the act of finding a deal in one country and selling it in another country (across the border). With the internet and the scope of e-commerce, this type of arbitrage is an opportunity to set yourself apart from the competition.
In this article, I am going to walk you through the basics of cross-border arbitrage. I’ll explain what it is, how it works, why everyone doesn’t do it, and how you can find your first cross-border arbitrage flip.
What Is Cross-Border Arbitrage?
Cross-border arbitrage isn’t as complicated as it seems.
Here are the basics: you’ve got different countries, each with its own set of online marketplaces and stores, stocked with products and prices that vary like crazy. Cross-border arbitrage is all about capitalizing on these differences. You hunt down products in one store in one country where they might be cheaper or more available, and then you flip them for a profit on Amazon in another country where they’re in demand or priced higher. It’s like being a digital detective, sniffing out opportunities and making smart moves to cash in.
There are two main forms of cross-border arbitrage:
1. Country-to-USA Arbitrage
This is the option that provides the largest possible audience for your listings. You find a product from another country (say Mexico or Canada), you order it, ship it to yourself or a prep center, and then sell it on the Amazon US marketplace. It gives you the largest opportunity because you are hitting the largest group of customers on Amazon (which is the USA).
2. USA-to-Country Arbitrage
So take the idea above and flip it on its head. Instead of trying to find products abroad, you can try to find products domestically and ship those in-demand items across the border to make a profit.
But hey, it’s not all smooth sailing. You’ve got to deal with things like currency exchange rates, customs and duty rates, and international shipping logistics. It’s a wild ride, but for those willing to roll up their sleeves and dive in, the rewards can be sky-high.
Why Does Cross-Border Arbitrage Work?
When it comes to cross-border arbitrage, there are a few major reasons it works as a way to bring in a new stream of revenue. I’m going to provide you with those reasons and a few stories to help you understand why cross-border arbitrage might be a perfect fit for your Amazon business.
1. Non-US-Based Products
I had the chance to visit Jamaica during college and I fell in love with some of the food down there. In particular—jerk chicken. Ever since I visited, I had been in a search for a true authentic jerk chicken marinade to cook with at home. Hours of searching and hunting and I was never able to find the same wonderful flavors.
That was until someone brought an authentic jerk chicken marinade to the Amazon marketplace. Now I buy a bottle every month and enjoy a taste of the island. And some Amazon seller is making money along the way.
This should be the most obvious of the reasons why cross-border arbitrage works. Some products made in one country aren’t being sold in another country. Even though it’s not being sold in the United States, people in the United States might enjoy purchasing these items.
If you are able to bring a product to the US market and tap an audience base that has been searching for it, you are going to be raking in the profit. The same can also be true in reverse (think about taking a US-based product and getting it into another country’s Amazon marketplace).
2. Currency Exchanges
While I was in high school, I would come home at lunch every day and a financial channel (don’t remember which one) would always be on and my dad would be watching. I remember watching the stock ticker at the bottom and seeing the prices of certain stocks and currencies with their green and red arrows. The prices were always shifting and you never knew if something was going to be up or down.
Currency exchange rates are like the secret sauce of cross-border arbitrage for online sellers. When currencies fluctuate, the prices of goods in different online stores can change too. So, let’s say the US dollar gains strength against the Mexican peso. That means products from Mexico suddenly become cheaper when you convert them back into dollars. Now, here’s where the magic happens: savvy sellers seize this opportunity to buy products in pesos, take advantage of the favorable exchange rate, and then sell them for a higher price in dollars. It’s like turning pennies into pesos (or dollars, in this case).
3. Better Pricing
I remember being in Barbados on my honeymoon and walking into a local store. I walked up and down the aisles and had a good laugh when I started comparing prices. A bottle of rum cost just $5–$8 USD. A toothbrush cost a full $15 USD. It was literally cheaper to buy 2 bottles of rum than a toothbrush in Barbados.
Some countries have a lower cost of goods than others. This is usually due to an industry being rooted in a specific area, lower labor rates, or lower shipping costs. Regardless of the reason, these differences do exist. And when it comes to cross-border arbitrage, these are the exact opportunities that can provide a profit. If you can find a product that is manufactured cheaper in Mexico than it is in the United States, you can buy this in bulk and sell it to the US market. The opposite can also be true if you can find something in the United States that is produced cheaper than abroad.
4. Specials and Promotions
If you are from the United States, you know that you are going to see some crazy good deals online during certain holidays (Black Friday, President’s Day, Thanksgiving, etc). If you are like me, I wait until these holidays to make my large purchases.
Did you ever stop and think if other countries have different holidays than the United States? They actually do! Canada celebrates Boxing Day and Mexico celebrates Hot Sale at the end of May. These different holidays, and the sales that accompany them, are great opportunities to find cross-border arbitrage opportunities.
Why Doesn’t Everyone Do Cross-Border Arbitrage?
In short: Because it isn’t easy.
Before we dive into the logistics, let me tell you a quick story.
I spent the morning chatting with my dad about a new Amazon/eBay idea he was tinkering with using a new piece of equipment. He was explaining it to me and he mentioned he was doing it because it’s a lot of tedious work upfront, but well worth it in the end. Once he said that, I knew I had to write it down and use it in a blog post (thanks Dad)!
He was talking about the concept of barriers to entry. And it’s one of the main reasons cross-border arbitrage works.
If you were to enter a college-level marketing or economics course, you would catch the term barriers to entry used when talking about market share and entering new markets. This refers to the different steps that are needed for a company to enter a given market. These “barriers” are often deterrents for new businesses to enter that market. The more barriers, the fewer competitors in that market.
The general idea is: If it’s easy, everyone will do it. If there are challenges along the way, most people stop and revert back to an easier path. Those who want to make money keep pushing and get past those barriers to set themselves apart from the competition.
Most Amazon sellers start with a mix of retail arbitrage and online arbitrage. And as you know, there is a learning curve (or barrier to entry) that prevents some people from starting in the first place. Maybe they don’t know how to set up an Amazon account. Maybe they don’t know how to pack, prep, and ship items.
And if you add in an international component to it, filled with customs, different languages, and even cross-border shipping (all of these are barriers to entry), most sellers won’t even consider trying cross-border arbitrage. And that’s why you don’t see a lot of sellers crossing borders on a regular basis.
How Do You Find Cross-Border Arbitrage Opportunities?
Honestly, there isn’t a big difference between finding online arbitrage opportunities and finding cross-border arbitrage opportunities. The basics of the process can be found here, but I’ll dive into a few of the additional details you need to know to make cross-border arbitrage a reality.
First off, you can do cross-border the manual way, but Tactical Arbitrage can make your life so much easier. Tactical Arbitrage has the built-in ability to help you scan and identify different cross-border arbitrage deals depending on your home marketplace. I don’t know a list of Canada-based sites, but Tactical Arbitrage does. And that’s where you can set yourself apart from the competition.
If you are based in the United States, Tactical Arbitrage has the following sites you can source from that are just a stone’s throw away from an Amazon warehouse.
Mexico
- mercadolibre.com.mx
- bodegaaurrera.com.mx
- chedraui.com.mx
- liverpool.com.mx
- sams.com.mx
- mx.ebay.com
- homedepot.com.mx
- sears.com.mx
- petco.com.mx
Canada
- bluettipower.ca
- burton.com
- mastersha.store
- georgerichards.ca
- ca.myprotein.com
- you-buy.ca
- ca.tilley.com
- hp.com
- ca.theoodie.com
- baileynelson.com
- tiptop.ca
- nordictrack.ca
Once you find the product (manually or using a tool like Tactical Arbitrage), you need to place the order and get the items shipped to your business or to a prep center. Since you are doing things across borders, you will also need to navigate the process of duty and customs. I won’t claim to be an expert in this, but you can learn more on the official US government site here.
After that, the process is just the same as if you ordered the product in the United States. It goes to the Amazon warehouse and Amazon FBA handles the rest of the process. It’s a hands-off process that gives you the ability to scale and grow your Amazon business.
Conclusion
Cross-border arbitrage isn’t just a game changer; it’s like unleashing a whole new world of opportunities for savvy sellers. With the internet breaking down barriers faster than ever, we’re not just confined to our local stores anymore. We can hop online and snag goodies from across the globe and businesses can reach customers in every corner of the planet.
For Amazon sellers, cross-border arbitrage is like having a secret weapon in your arsenal. It’s all about spotting those sweet spots where prices, currencies, and demand align just right. From snagging products in one country to flipping them for a profit in another, it’s like being a digital detective on a mission to score big.
But hey, let’s not sugarcoat it: cross-border arbitrage isn’t all sunshine and rainbows. You’ve got to deal with currency fluctuations, customs headaches, and a whole bunch of other challenges along the way. It’s like navigating through a maze, but for those bold enough to take on the challenge, the rewards can be off the charts.
From discovering unique products that resonate with buyers to capitalizing on favorable currency exchanges, the possibilities are endless. Sure, it’s not for everyone, but for those willing to roll up their sleeves and dive in, the world of cross-border arbitrage is waiting with open arms.