There are plenty of opportunities to make money online and plenty of people willing to have you pay for that information. That’s where this guide to online arbitrage is different.
If there is one thing I have learned in graduate school, it is to question everything. I mean everything. Things you already assume to be true and things you already consider to be false.
Since I have been an Amazon seller for over seven years, I have come to take a few things as fact and others as fiction. For instance, I know from experience that online arbitrage is a sustainable business model that can make some serious cash for those who are willing to put in the time and effort.
Sure. There are plenty of easy ways to make a buck online. Just this weekend, I found a way to sign a few family members up on an online betting site and was able to make around $500 from the referral bonuses.
Although this is great for the short term, there is no way I could continue to make money this way. In fact, it’s limited to only 10 referrals and I’m not sure I even have 5 more friends.
The main difference I think exists between online retail arbitrage and other “make money online” opportunities is that it is sustainable in the long-term. It isn’t a “get rich quick” scheme and it doesn’t hold the potential drawbacks of something such as referral bonuses.
If done correctly, online arbitrage is an opportunity to either make a little extra income or to develop a business from which you can make a living. I have seen it happen time and time again.
Let’s take a look at how you can go about growing your online arbitrage business.
Starting Small
I can’t stress this enough.
Start freaking small.
You can have an unlimited bankroll or you could have $1,000 in the bank, but you should start small when it comes to starting your online arbitrage business.
Why you might ask?
I like to think of it like this. Say I was teaching two people to golf who has never swung a golf club before in their lives. One person has a golf club set that Tiger Woods would even play with and the other person has some old clubs from Goodwill. Regardless of the clubs in their bag, I’m going to tell them both to take out a 7 iron instead of a driver to start. A 7 iron is easier to control and you can learn the technique before moving to a different club.
You need to take some time to learn the ropes of online arbitrage. By practicing your buying habits, prepping, and shipping routines, you will be able to minimize mistakes and learn the process inside and out. That’s a key part most people don’t understand. You need to know online arbitrage inside and out before you start to automate processes. This understanding is crucial to your success and allows you to see opportunities others never even notice.
Starting small also gives you a foretaste of the feast to come. When you start small, you can really see if this thing called online arbitrage is for you. If not, you can exit gracefully.
Develop Smart Habits Early
Back to my golf analogy – When I started to play, I picked up some bad habits by taking my baseball swing and turning it into a golf swing. Little did I know that some of those small habits would still haunt me to this day.
As you start on your online arbitrage journey, you need to make sure you are starting with smart habits. It might not seem like much now, but it will make a huge difference in the long run.
Think about it like this: If you put the processes and steps into place now, you build upon a strong foundation for the future. I remember when I started online arbitrage and did not have an accounting system in place. I can also remember pulling my hair out during tax time because I did not have an accounting system in place.
By putting these habits into action, you are setting yourself up for success in the long term.
Take Care of the Amazon Side of Things
I know you are excited about making money, but you need to hold your horses.
Before you even think about buying your first online arbitrage deal, you need to make sure you have everything ready to go on the Amazon side of things.
You need to have an account open and you need to set up Amazon FBA.
First, you need to register for an Amazon seller account at Amazon Seller Central.
Once you have done this, you will then need to register to be part of the FBA (Fulfilment by Amazon) program, which you can learn more about here.
Then I’m going to make a recommendation that might sound a little stupid, but I promise has a lot of value to it.
- Go buy any item from a local store. I would keep it under $10.
- List the item and send it into the Amazon warehouse using Amazon FBA.
- Sell said item (even if it’s for a loss).
- Document the entire process.
You might lose a full $20, but you now have learned something that can save you a lot of time and money in the future. Call it the cost of your Amazon tuition.
Deciding How and What You Want to Buy to Sell
When I started with online arbitrage, I literally wanted to buy anything and everything that made a profit. Although this made me some quick money, I learned that I was a jack of all trades and a master of none.
So I would advise that you do it a little bit differently.
Start out with a plan and adapt as you go instead of going and building a plan as you go.
Do you need to write out a full business plan before getting started with online arbitrage?
Probably not, but it is definitely worth having an idea of what it is you want to sell.
The approach you take is up to you.
How and Where to Buy
You could start by heading over to your favorite retail store’s website and searching the clearance section, but odds are you won’t find a ton of deals. Instead you might want to use an online arbitrage tool that will do most of the heavy lifting for you.
That’s not to say that online arbitrage is impossible without a software to help you find the deals. To this day, I am still subscribed to some email lists and Facebook groups that provide me with deals hours before a software could even detect them. I also know techniques that can find deals that most software would pass over in a heartbeat.
That being said, my favorite way to find deals to flip on Amazon is through using an online arbitrage software.
If you use an online arbitrage tool such as Tactical Arbitrage, you’ll have access to a wealth of data that will show you what sells for the highest price, what offers the highest margin, opportunities to sell in high volume, and many other data points that can be extremely valibule to your decision making.
What to Buy
It’s pretty simple. You want to buy items that have the highest profit margin possible while at the same time buying items that will sell quickly. Sounds pretty straight forward, but I have seen multiple sellers focus on just one side of that equation.
Take this as an example:
I could buy an item that returns $1,000, but only sells once every two years
Or…
I could buy an item that returns $1, but sells 10 times a week
Which is better?
I would pick the second option. Even though the profit isn’t as much, the frequency is more frequent. It makes more in the long run than the other item.
That’s the way you make money with online arbitrage. You find the perfect mix between profit margin and sales volume.
As for the type of product, that’s up to you.
The beauty of using Amazon FBA for your online arbitrage activities is that you don’t need any specific product knowledge, as Amazon takes care of the customer service side of things for you. That’s not to say that you can’t decide to buy and sell products that you are interested in or passionate about, but you don’t need to worry about having specific product knowledge.
The only knowledge you need is what you’re buying and selling for and how much profit you’re going to make!
When It’s Time to Grow
This is a hard question for most sellers. When do I need to grow? And I’ll give one of my favorite answers of all time.
It depends.
It depends on your goals with the business. If you are selling on Amazon to make a little side income to pay for a trip or to pay for Christmas, you might not need to grow much. If you are wanting to create a business to replace a full time income, you might need to grow.
And since you were smart, you already set up the foundation for growth and success when you first started.
If you decide you want to continue growing, the biggest consideration is likely to be around taking on extra help.
The beauty of online arbitrage, particularly if you use Amazon FBA, is that the task list is actually relatively simple:
- Figure out how to buy more products – This is where a tool like Tactical Arbitrage comes in handy.
- Figure out how to ship more items into Amazon – You can do this by setting up a basement or garage or you can hire a prep company to handle it all for you.
- Keep track of the money and all that stuff – Mo’ money, Mo’ problems – You need to be able to keep track of what you are spending and how much profit you are actually making.
I have always been a big believer of outsourcing everything where I’m not needed and only doing the tasks that are crucial to the success of the business. I also realize that this costs more money, but it also gives me unlimited potential on expansion.
If I was doing it all over again, I would most likely take a more hands-on approach and find a partner to help me with the sourcing and prepping. The reason I say this is due to the fact that I would only expand to a level that would allow me to do certain things. I don’t want or need a multimillion dollar business. I need a business that meets my goals.
Building Your Business and Making a Profit from Online Arbitrage
Is it possible to build a real life business and make a profit from online arbitrage? Yes, but not if you want it to just magically happen. While the principles behind online arbitrage are simple and there is money to be made from it, it still takes hard work. You have to be the driving force to get your business started down the path of success.
Remember, you never know where your online arbitrage journey could take you!