Online Arbitrage is a great way to earn money online and using Amazon in my opinion (and many others I might add) is one of the best places to do this.
Online Arbitrage using Amazon is how many people get started selling online, with it being a typically low risk/investment and having a quick turnaround it’s ideal for those just starting off.
Even beyond just starting off I know of many people making full-time incomes and beyond solely using online arbitrage so it’s not just some “hobby” for a quick buck here and there.
Arbitrage is all about turning a good profit at a quick pace and scaling from there. So if this sounds like something that is for you, let’s get into how you can practice Online Arbitrage using Amazon.
The better question would be why not practice online arbitrage (an online based selling business) in one of the biggest online stores on earth?
They’re an e-commerce super giant with one of the biggest customer bases this world has ever seen.
Prime members alone are over 54 million, and that’s only a small percentage of the other 300 million active customer accounts they have already.
So yea, the customer base is clearly there, so you know you won’t have any shortage of active customers searching for products.
On top of this Amazon offers a great selling program called Fulfillment By Amazon or commonly referred to as FBA.
This program allows you (the seller) to store your inventory in Amazon fulfillment centers where Amazon will take care of the fulfilling, packaging, shipping and returns of your products. (for a fee of course)
With selling on Amazon with whatever program (Merchant is another option) Amazon will take its customary 15% commission for using their platform.
Your other option, selling as Merchant
Although I don’t recommend this it is still a possible choice for practicing this business model, but it can still be done.
All selling, as a merchant does, allows you to use Amazon’s storefront to sell your products.
So the only fee you can be expecting is Amazon’s 15% commission fee. Which is a big plus but there are some sacrifices that come with doing this…
Since Amazon won’t be doing any of the fulfillment processes that will leave you to handle the fulfillment of orders, shipping and packaging of products, and all customer service.
On top of this, you have to have somewhere to store your inventory so your garage might get converted into a warehouse.
The main reason I don’t recommend this is the time consumption, with Arbitrage being so fast paced and scaling for a bigger profit, you’re going to be left with less time to work on growing your business.
Here’s an Amazon FBA vs. Merchant article if you’re looking for a little more details between the two.
Online Arbitrage Using Amazon 101
Online Arbitrage (if you’re not familiar) is the selling of other company’s products online.
The business model in itself isn’t hard to understand:
Source products ->Gauge Opportunity -> Purchase inventory -> Sell online for a profit
Of course there are some missing details to fill in the lines, but in a nutshell, that’s a good way to sum it up. Now that you got a basic understanding lets start showing you the ropes of using Amazon for Online Arbitrate.
When looking for product opportunities online you’re going to want to start thinking bargain. Sales and clearance sections are now your best friend.
You can sign up to a company’s e-mail list, subscribe to magazines, whatever you can to know when something is marked down.
Typically 50 – 70% off is what you’re wanting to be looking for, but isn’t the case in some situations.
You can find these products on big name sites like Kohl’s, Disney, Walmart, Target, Best Buy, the list goes on, but essentially any big online store.
Once you find a product that looks promising you’re going to want to see if it’s selling on Amazon. So simply search the product and see what comes up.
Note: (Sometimes you can just copy and paste the title of the product from the site into the search bar and it’ll pop right up)
From here you’ll go onto gauging the opportunity, this is the process of you seeing if a product is a good opportunity or a bust.
So you found a product listed for a good discount online, went and searched Amazon and it’s showing up, now what?
First off, you want to ensure the product that showed up is the exact same product as the one you found, size, dimensions, everything.
If it is, what is it selling for? It should be listed for at least double on Amazon then what it is from the site you’re sourcing it from. If it isn’t, move on, the profit here is to slim.
Note: I try going for items usually $10+ to make it worth my time, but that’s entirely up to you.
If the price is showing to be at least doubled we’re going to want to check what are FBA fees are going to be at if we were to sell this product. (Being one of the primary reasons I stress being double the price)
To do this all we’re have to do is use Amazon’s FBA Revenue Calculator, and what this does is it calculates what fee costs are going to be associated with selling this product, such as handling, pick and pack, storage, and shipping.
You’ll just go to the product’s listing and copy it’s ASIN (10 digit code starting with BO) and past it into the search bar, then press search.
From here you’ll just implement the price the product is selling for into the item price bar under the Amazon Fulfillment column, the press calculate.
Scroll to the bottom and you’ll see the total cost of fees associated with this product (highlighted in blue) labeled as the Cost Subtotal.
Note: From this point or when you do this from here on out it’s best to open up google sheets or excel and create a spreadsheet listing off your fees, purchase price, numbers of units you’ll order (we’ll get into that below), and add on an extra 50c per unit for shipping to FBA.
If the profit margin still looks good a 50%+ return on investment then we’ll continue looking into the product. If not it’s just rinse and repeat, and don’t worry if you don’t find a diamond in the rough your first time, so don’t beat yourself up.
From here we’ll want to check if the price hasn’t just recently been raised if it has this wouldn’t be a good opportunity since the price isn’t consistent.
To do this I recommend downloading the chrome extension Keepa. This is a great Amazon Price tracker tool that will show just below the Amazon listing.
For an example I used a popular plush Disney toy that was listed for $7.79 on Amazon, here’s what the chart shows:
As you can see the price has been fairly consistent and hasn’t shown a drastic price jump in the recent dates of it’s listing.
Note: If you see Yellow lines in the listing that show Amazon is also selling this product meaning this is a definite no go. Going head to head with Amazon will be a waste of time and you will be better off just sourcing another product.
This would be something I would want to research further leading me to see if this product is selling.
There is a difference between something being listed a certain price and actually selling so this is going to be something you’re not going to want to skip.
To do this I use a site called Camelcamelcamel.com, they’re a simple tool you can use to get a good estimate as to how much a particular product is selling.
All you need to do is go into the product listing on Amazon go to the product URL in the address bar and copy the product’s ASIN (a 10 digit code starting with BO).
From here you’ll just go to Camel and past the ASIN in the search bar and click search.
You’ll just scroll down the page and you will see a chart like the one below, just click “Sales Rank” in the available tabs and (if the product is selling) you will see a chart with green spikes.
Each spike representing roughly 1 – 3 sales. Then go to the date range (on the right) and select 1 month.
Here’s the example using the same plush toy from the previous example:
This is also a good way to give you a rough estimate of how many you should buy, I usually stick to the lower end of gauging each spike as 1 sale.
So with this, I would need to buy roughly around 15 – 20 units to keep up with this products demand. (This will be something you would want to put into your spreadsheet like I mentioned earlier)
The reason for sticking to the lower end is to ensure you turn a profit and get your return on your investment ASAP, inventory just laying around waiting to be sold isn’t ideal for this business.
If a product sells well you can always buy more so no worries.
Purchasing and Selling
Now you got your product sourced, gauged, and you’re ready to pull the trigger.
From here all you’ll need to do is go through with the purchasing of the products from your sourcing site taking the quantity selling per month on Amazon into account and have them shipped to you.
You’ll just go into your Amazon Seller Central account, create your product listing and shipping labels, print them off, slap them on the boxes (on the sides, not the seems, Amazon’s picky) and ship them off to FBA.
Then you’ll be notified once your inventory has arrived, and you’ll be live and selling on Amazon!
>>If you still need some blanks filled in, here’s a couple great online and retail arbitrage courses I recommend you check out.
Just scroll down to the Arbitrage section and I elaborate further.
Although I covered a lot there are still a ton of little in-between details that some of you may need covered, and truthfully I just can’t cover them all.
I’d be here for days writing out every detail and scenario, and I don’t think my fingers can handle that.
So if you’re looking for a great program that covers a detailed A to Z process and every letter in between then I highly recommend you check out the courses above. They are taught by some of the best experts in the arbitrage game.
They’ll show you everything from setting up your seller central account, to finding profitable sites, sourcing inventory, setting up your product listings, showing on the first page, and all the necessities to make this work.
They know this isn’t just some “hobby” this is a full-time business for them, and their courses reflect that.
Wrapping Things Up…
If this has got you excited and opened your eyes a bit then that’s awesome, but just thinking about it won’t get us anywhere, action is essential.
But if you think Online Arbitrage just isn’t your thing no worries, there are still tons of entrepreneurial opportunities out there!
If you still got the entrepreneurial itch then you should go check out my friends at Amazing.com, they are an amazing community of entrepreneurs offering over 100 courses spanning from all different forms of entrepreneurship.
You can even try out Online Arbitrage’s similar yet different sister Retail Arbitrage to see if it’s more your speed. P.S.- If you like shopping you might find this pretty fun.
Things from selling on Amazon, app creation, website development, real estate investment, content creation, and that’s only a few.
You can read more about them in the link provided above or the banner below. If not then I hope you found this article helpful and best of luck with your future businesses!
Until next time,
P.S. We have a serious Taco Bell addiction and the affiliate links on our site lets us order off the dollar menu. Thanks for your support!