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Amazon Online Arbitrage: What You Need To Know

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The great thing about starting an Amazon online arbitrage business is that it does not require a lot of money upfront. According to Jungle Scout, 10% of people started with less than $500, and 26% with less than $1,000. This business model uses price discrepancies between Amazon and other websites where you buy low and sell high, so buying from a retailer like Walmart then listing it for a profit and ROI that meets your specific desired parameters. Successful sellers research well to establish profitable products.
These success stories have much more depth to them though, you must really get good at finding efficient and unique ways to source and sell products, under stand the historic data of each product to predict future sales, set your products sell price correctly and competitively (for example, never be a penny under the lowest price!), and ensuring customer satisfaction by selling the exact product displayed on the listing and in perfect expected quality so that you dont damage the reputation of your storefront. These are just a small handful of the elements of selling on Amazon you have to get right in order to find success. This blog aims to cover a little more ground and offer unique strategies that will aid you towards becoming profitable on Amazon.  We will go into more depth with each of these strategies and more in future blog but like anything you have to start with the basics first.


Understanding Amazon Online Arbitrage

With an Amazon online arbitrage business you purchase products from one online retailer (like Target and Lowes) at a lower price and sell them on Amazon for a profit. Essentially, you’re capitalising on the price difference to make a profit. By understanding the market and identifying products with potential for arbitrage using all the tool available, you can maximise your profits and build a sustainable business model. But like with anything worthwhile, it can take a little patience and elbow grease to truly start creating meaningful profit each month from this model. Below we have listed the key elements of what is involved in running an Amazon business followed by some useful strategies to consider if you wish to find success selling on Amazon with this model.

 

 

How Amazon Online Arbitrage Works

 

Product Research 

Thorough product research is needed as the first step in Amazon online arbitrage (this is a skill that takes a while to get right and is also quite time consuming unless you have enough money to hire someone else to do it for you). When comparing online retailers and Amazon, search for products with a large enough price difference to ensure enough room for the listings price point to go down and you still remain in profit. We advise you use price tracking software and sales data analysis tools such as Keepa to help you find profitable opportunities. Consider factors such as product demand, competition, and seasonality, among others, to make well-informed sourcing choices. You will also want to learn how to detect any issues such as potential Intellectual Property risk so that your account health is protected from deactivation.  We will cover this in another blog very soon so make sure to stay tuned!

Listing on Amazon

Once you have found products that tick all the boxes and that fit within your personal monthly budget you will want to get them into Amazon as quickly as possible (if pursuing the FBA model). This will involve listing the products in your Amazon seller central account one by one and preparing a shipment ready to go out to Amazon.  You can purchase your items and get them sent to you or have them sent to a prep centre who will prep all the items for you at a small cost per item, this is particularly useful if you want to save time and scale quicker.

 

Amazon Online Arbitrage


Pricing Strategy

Decide on the selling price on Amazon, considering aspects like competition, demand & profitability and general trends that the historic sales data has provided to inform your pricepoint. Don’t forget that competitive pricing can help increase sales while maintaining sufficient profit margins. Carry out regular price analysis and adapt pricing strategy accordingly to remain competitive. Dynamic pricing tools and repricing software are used to automate pricing adjustments based on market movements and competitor activity but we recommend that when starting off it is better to keep an eye on things without automation software. This day to day monitoring of your prices stock will over time give you an feel for how to price things so that you are remaining profitable.  Novice sellers will often adopt the penny under strategy which basically means pricing your item a penny under the current lowest sales price.  This will ensure that the price will tank in no time and nobody selling will win.  A general rule of thumb instead would be to price in the top 5 FBA offers and be patient for your chance to win the buybox.

Fulfilment

You will have to at some point decide whether to fulfil your inventory yourself, as mentioned above, or use a prep centre to send your items into Amazon. It all depends on your budget and the confidence you might have at the start of your Amazon journey. Our recommendation would be to have the items sent to your own address as initially it will cut some costs and you will be able to manage the small amount of inventory you will be purchasing. Once sent in to Amazon they manage storage, and sales fulfilment to ensure customer service for the buyer is sufficient.

Monitoring and Adjusting

Once you have items up for sale it is essential to keep track of your listings, pricing, and inventory levels. Being on top of these elements is a part of succeeding with Amazon there is no getting around it!  You will have responsibilities to take care of such as dealing with customer feedback and any returns of your items that need sending back to you. By being agile and taking the initiative you can optimise your Amazon Online Arbitrage business for long-term success.

 


Strategies for Success in Amazon Online Arbitrage

 

Getting Familiar With The Right Tools 

Levering tools will help ease day to day running of an Amazon online arbitrage business, such as product research, price monitoring, or inventory management. These tools will save time and allow you to scale your business efficiently.  When you improve speed into your process you can remain competitive with other sellers and maintain a lean operation that doesn’t get too overwhelming. We will go deeper into the right tools for the job in future post but generally we like Seller Amp for quick calculation of potential profit per product, Keepa allows us to quickly see many crucial data points but mainly helps us to make predictions as to how well something is going to sell in the future and inventory labs. is a classic tool for inventory management, especially useful as you scale up.

Strategic Bundling 

Doing what most others cant be bothered to do is crucial in our eyes so we urge sellers to explore the possibility of bundling products by merging similar items into one package they are offered together with it all. Packaging can increase the perceived value of your product, distinguishing your listings from others by competitors, hence raising profit margins and general sales volume simultaneously. It is possible to bundle complementary goods strategically so that customers are presented with increased convenience, enabling higher conversion rates leading to customer satisfaction and ultimately more money in your pocket.

Seasonal Trends 

Observing seasonal trends in consumer behaviour year-round is an approach that many Amazon sellers find success with. Use these seasonal opportunities to offer relevant wares, and adjust stock levels according to changes in demand patterns within each season. The main objective behind having seasonal product offerings is simply to maximise sales revenues at peak periods while optimising inventory control procedures.  For example you might find a great source for textbook’s which have two key seasons in the year that align with when people are going back to school.
One strategy could be to stock up heavily out of season on textbook while the prices are decent enough to make a profit with in season.  You can study the historic Keepa data to see what truly sells and generally for how much.  This is where these tools can really be useful and also where relationships can be leveraged.  For example, you might know a local library that gives up old textbooks or that might, after a conversation might want to sell them to you at a cheap rate.  Do be aware though that with libraries they tend to stamp on the first page of their books which some customers may not be pleased with and could result in a negative feedback score. It is just one small example of how vast the opportunity could be even in that small niche.

Strategic Partnerships

As mentioned above relationships could be crucial to your success on Amazon. This could be with retailers that have brick and mortor storefronts or retail websites online, or even with other sellers like yourself.  If approached in the right way these can all be leveraged to combine forces in someway to create a unique route to more income.  The more creative you are the more it takes you off the path where most sellers move.  This is essential as with 3900 new Amazon sellers coming online each day, those people tend to do the same thing and often it is whatever is considered the most easiest path to success on Amazon.
This will mean that the places you are buying from, everyone else is and so you will find that your listings might get over saturated quicker than if you were to strike a deal with a retailer store to help them sell their goods online and take a split of the profits.  Or you might meet someone at an Amazon sellers conference such as the recent conference in Miami (link) and partner up with them on a warehouse to ship items out efficiently rather than waiting for your items to turn up to Amazon for sale.  There are many ways to approach a collaboration so think creatively and put yourself out there as much as possible, you never know which relationship could change your life!

 

Conclusion

An Amazon online arbitrage business has great potential for success and can be a very low risk and easy to scale opportunity if you put in the time and dedication it needs. The Leads Feed offers personalised support and guidance to optimise your Amazon journey with daily leads and coaching. If you are interested in starting an Amazon business do not hesitate to book a free call with one of our team to explore your options further, or you might want to jump straight into a free trial to see what our leads are like and if they meet your specific purchasing parameters. If a free trial is what you would like to pursue, please message ‘FREE TRIAL’ with your name and email in the contact box at the bottom of the home page.

 

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