Online arbitrage can be a great way to make a little (or a lot!) extra money on the side. When done right and with the proper preparations, online arbitrage can be very lucrative.
You’ll make more money with online arbitrage the longer you do it. Generally, and with a decent amount of time and effort, you can make $1,000 or more each month. The money you make through this process is exponentially driven, meaning the more you reinvest your profits, the more your business will grow and earn.
The key to making a lot of money through online arbitrage is continuously learning throughout the process and knowing the best items to invest in. If you’re considering online arbitrage, there are a few things to know before you begin.
Also see: Can you Make Money Online Without a Bank Account?
What is Online Arbitrage?
Before we discuss what exactly online arbitrage is, we need to define “arbitrage!” Arbitrage is the process of buying a product or products for a low price, and then reselling them for a higher price in order to make a profit.
Those who use online arbitrage purchase their inventory online and then resell it on different websites (typically Amazon). Online arbitrage has become very popular over recent years, and if done right, can be a very profitable venture! It’s very simple to start – all you need to know is the best ways to shop online.
How Much Can You Expect to Make with Online Arbitrage?
Like most entrepreneurial pursuits, the amount of money you can expect to make depends on:
- The amount of effort you put into the process
- How quick you learn what works best for you
- What risks you’re willing to take
- How much capital you have to invest
- The supplemental tools you use
As you get more and more comfortable with online arbitrage, you’ll be able to develop your own proven system that keeps your profit margins on track.
Online arbitrage is not the way to make a quick buck. It may take a while to see a true payoff, and if you put too much pressure on the financial aspect, you might be discouraged rather quickly! Generally, you’ll need to put consistent time and effort into your arbitrage operation for 3-9 months before it pays off.
Also see: Is Selling on eBay Worth It? The Pros and Cons
Pros of Online Arbitrage
For some people, the positive side of online arbitrage makes the whole process worth it. Some of the pros of starting your own online arbitrage operation include:
Risk Associated Is Low
With online arbitrage, you can start with as little as $100 or even less as long as the profit margin is good.
And the risk associated is relatively zero; if you do your product research right, you will find all the information needed to minimize your risk.
Easy to Find Inventory
People who practice retail arbitrage find their inventory in stores, and therefore, spend far more time actually stocking up! Because you can shop many stores quickly online, those who utilize online arbitrage have an advantage.
Products Shipped to Your Door
This is a double-pro – it’s convenient, and it provides you with some free, reusable shipping materials if you’d like to ship out your inventory yourself!
You can find products online to resell on Amazon FBA or eBay without even leaving your house.
No Training Required
While many entrepreneurial pursuits require some kind of knowledge of business practices, certifications, or licensing, online arbitrage is very easy for people with no background in business to do!
All you need is to watch a few YouTube videos to get you started. Watch the video below, and learn how to discover products online to resell from the comfort of your home.
Order Large Quantities
When you shop online, you can typically order a higher number of products than you would be able to find in-store. Some websites like Walmart may even offer a discount on items purchased in bulk, further reducing your costs and increasing your profit margins.
Freedom to Travel
Since your entire business is run online, you have the freedom to travel as you please, take time off on your own watch, and even live anywhere you’d like without any risk to your job security!
Little Initial Investment Required
Many people are discouraged from starting traditional businesses due to the very high initial investment often required. With online arbitrage, however, the amount of start-up capital you need is very flexible. You invest what you feel is appropriate and use your profits to invest further!
Live Where You Love
Many people who live in areas without a lot of businesses nearby find it difficult to make as much money as they’d like. However, those who can get their inventory shipped, package products, and ship them out directly from their home have the opportunity to increase their standard of living without sacrificing a life in the place they love.
Also see: Here’s How You Can Make Money Online With Math Skills
Cons of Online Arbitrage
While online arbitrage does offer quite a few areas of strength, it’s not a sure thing. Just like any other small business operation, it does come with some downsides to keep in mind. Some of the cons of the process include:
Lots of Trial and Error
The early stages of online arbitrage will involve a pretty high learning curve, and you might lose money before you make money! There are tons of different stores and products to choose between when you’re sourcing products, some of which you’ll find work better than others.
Keeping Up with Price Changes
A cornerstone of online arbitrage is making sure to buy items when prices are low and sell them back when they’re high. This might mean paying to use some different price tracking tools to learn when exactly to buy for the best chance at a decent profit margin. Some paid tools that track changes in price on Amazon include:
There are also a couple of free options available, including:
Product Matching Can be Difficult
Sometimes, companies will put out a lot of products that look and seem similar, but still have some differences. These differences can end up costing you, as one model of a product could be selling on sites like Amazon for much more than other models!
To prevent any accidental purchases of the wrong products, make sure you have a thorough understanding of the Amazon listing your targeting and can match up the items you’re considering purchasing.
Tips and Other Things to Keep in Mind
There are a few different ways to maximize your profits and minimize your investment when dealing with online arbitrage. When choosing the products you’ll resell, consider the following questions:
- Will I be able to make a profit reselling this product online?
- Will I be able to sell it within my desired time period?
- Does this product come with any restrictions that may affect my ability to sell it?
You’ll also need to keep a few different costs and numbers in mind. These include:
- The purchase price, including any taxes, fees, and shipping costs
- The fees for selling on Amazon, or wherever else you’ll be listing your products
- The cost of shipping to your customers
- The average price you can resell the product for
The Selling Family gives us this piece of advice: Take the average selling price of your product, then subtract all the costs and fees you’ll incur. If there’s a reasonable amount of profit leftover, it’s a good indication that this is the product you want to sell!
Here are a few more tips to make the most out of online arbitrage:
- Sign up for cash-back and coupon sites to get the best deals you can. Rakuten (formerly Ebates) is one of the most popular cash-back sites, and Honey is a great place to start for couponing!
- If you’re selling on Amazon, take advantage of their fulfillment centers to make the shipping process easier! You won’t have to worry about properly packaging your products or dealing with customer service issues. Amazon will take care of all of this for you!
- Shop online at wholesale stores like Costco or BJ’s. These stores often offer a discounted price on items in bulk, which can give you a much better profit margin.
- After you’ve sold your entire inventory of one product, check your numbers to determine if you made enough profit doing so to deem the product “successful.” If you made a reasonable amount of profit, it’s safe to say this is a product you should try to sell again in the future.
Bottom Line
When done correctly, online arbitrage is a surprisingly easy way to make a good amount of money from the comfort of your home. As long as you take your time and keep good track of your costs and profits, you should find this to be a very fruitful endeavor!