What is Online Arbitrage?
The Online Arbitrage refers to product re-selling. Buy products from one online marketplace at cheap price and sell it online on another marketplace at high profit.
Suppose, I bought an item on a retail store like Walmart, Home depot or eBay for $20. The same product is getting sold on Amazon at $50. I will list the product on Amazon at $50. What i am making is profit.
Check an Amazon product picture below. It is priced $39.99 and two sellers are selling it on Amazon.
I researched this product on other retail store online. I found it for $4.32.
So, you can check a big profit margin $30+. Though it will involve shipping fees, FBA fees etc. But, it will leave at least $10-12 after deducting all expenses to you.
The thing that matter is product research and sourcing. The best sites to stock such products are clearance sites and large retailer sites like (Sears.com, Home depot, Jet etc).
You can resell it on your own store or Amazon. Online arbitrage works effectively on Amazon. You will find an existing product listing to sell on Amazon. Buy the stock and start selling on the existing Amazon listing.
Is online arbitrage legal on Amazon?
Yes, you can do online arbitrage on Amazon. Follow Amazon guidelines and run risk free arbitrage business.
What should I do Merchant fulfilled or Amazon fulfilled?
To run and drive results through online arbitrage, I will recommend you Fulfilled by Amazon model. Send your inventory to Amazon and do hassle free online business. They will pack the orders and process them to the customers.
Also, FBA sellers have high chances of winning the buy box. The buy box is “Buy Now” button on Amazon.You will find many sellers selling the same product on a single listing. As a new seller it is difficult to win buy box on the listing. With FBA and price down, you can win the buy box.
How to find products and source them for Amazon OA?
Online Arbitrage as explained is a process of re-selling a product on Amazon. So, you will start your product research from Amazon. Find best selling items on Amazon with following criteria:
- Lightweight (0-5 pounds)
- small or standard box dimension
- BSR under 100000 for main product category
- Number of sellers under 5 or less
- Good profit margin up to (at least $5/unit)
- Average ratings 3.5 or more
You can use free Amazon product research tools like Amaze Owl or Helium 10 for finding such products.
Check whether you can sell the product on Amazon or not. Login to the seller central account and check it. Sort out what items are allowed to list on Amazon from your list.
The next step is product sourcing. You have mad a list of good products. Now, use product price comparison sites like Google shopping, Bizrate etc. Find best deals for the same product on Wayfair, Target, or other retail stores. This way you can grab a good deal and stock the products at best prices.
Another way of sourcing product is stock clearance or liquidation sites. Search the product on the such sites and find are they listed for sale. Here you can save even more than large retail stores as supplier wants to clear the inventory asap. You can save up to 80% on the product M.R.P.
Automatic Method
The alternative to the manual product research and sourcing are arbitrage tools. Tactical Arbitrage and Source mogul are best to add in the Arsenal. It searches the products on hundreds of retail websites online. You will get list of the same product on different sites. This way you can purchase it at lowest possible price online.
Do Amazon charge fees to FBA sellers?
Amazon gives you a platform to selling online. It charges 15% referral fees of the selling price on every order. Suppose, you are selling a product at $50. You will pay $7.5 on every order you receive on Amazon.
FBA fees
Amazon is handling order shipment for you. It will charge you FBA fees for order fulfillment. The shipping fees depends on package weight.
Professional seller Plan
Amazon allows limited inventory storage to FBA sellers as an individual seller. You will need to buy $39.99 monthly subscription on Amazon seller central to keep unlimited stock. The plan allows you unlimited storage space and listings.
Monthly storage fees
Amazon provides you space to keep the stock. It charges you for using the warehouse storage. The standard charges of monthly storage fees depends on cubic feet area your inventory covers in the warehouse.
For. e.g. Your inventory is occupying 1 cubic feet area and box dimension is standard, you will pay $3.50 as a monthly storage fee to Amazon.
How to calculate profit?
To calculate profit per sale, you need to prepare an excel sheet. Sum product purchasing price, FBA fees, and shipping fees you pay to carrier to forward the stock to the Amazon warehouse. Subtract it from the selling price. This way you can check the profit you making on every unit.
Remember you paying $39.99 as a subscription fee and monthly storage fees. So, you need to subtract it from your monthly profit revenue to get the actual profit count.