You might have heard that selling on Amazon is a lucrative business model. Selling online is a great side hustle because you can often do it from the comfort of your own home and on your own terms, becoming your own boss. Amazon, meanwhile, is the perfect marketplace to get started, allowing you to take advantage of the over 2 billion visits per month.
The amount online arbitrage sellers make varies depending on a lot of factors, but with a little know-how, you can undoubtedly make money on the platform. This guide to Amazon online arbitrage will tell you everything you need to know to get started, ensuring you can build a successful online arbitrage business.
What Is Amazon Arbitrage?
Online arbitrage refers to the practice of buying goods at a lower price and selling them for a higher price. Retail arbitrage has existed for decades, which involves purchasing goods at flea markets, garage sales, and other retail locations before reselling them. The difference with online arbitrage is that you procure and sell products online.
Amazon online arbitrage is a particularly profitable venture because of the sheer traffic volume generated by Amazon. It's the largest online marketplace and the third-largest public company in the world, pulling in over $513 billion in annual revenue.
As a result, online arbitrage sellers can benefit from the vast customer base that already sees Amazon as a trustworthy site.
Is Amazon Online Arbitrage Legal?
If you're wondering, "is online arbitrage legal on Amazon?" you're in luck. The answer is a resounding yes. Amazon allows arbitrage as a valid business model, meaning you can set up an online store and resell to your heart's content.
However, it's worth noting that Amazon has strict rules and regulations about what you can sell on the site. There are plenty of banned or restricted products, so familiarize yourself with the rules before choosing what products to sell.
Now that you know online arbitrage is legal on Amazon, here's a step-by-step guide on how to set up your business model.
Step 1: Set Up Your Amazon Seller Account
The first step is to establish an Amazon seller account. You need to go to sell.amazon.com to begin the process.
Source: amazon.com
Here are the steps you need to follow:
- Choose a pricing plan: Amazon has various fees you need to pay to sell through their online marketplace. You will need to choose between an individual seller account or a professional seller account. Do some research to see which is best for you; as a tip, 'professional' is the best choice if you plan to sell over 40 products per month.
- Enter your details: Enter your email and password, then verify your account. You must also provide a valid government-issued ID or passport, recent bank account or credit card statement, chargeable credit card, and mobile phone number.
- Fill in your business details: Select the location where your online arbitrage business is located. Amazon will verify this, so make sure it's accurate. You also need to select your business type and full name.
- Enter your personal information: Prove your identity through the verification process, then use the PIN provided to verify your phone number.
- Provide billing information: Fill out your bank account and credit card details.
Once these steps are complete, you can start your online arbitrage journey! You can change these details at any time through your Amazon Seller Central account.
Next, it's time to start setting up your store.
Tip: Consider Building an Amazon Storefront
Before you start selling online, you can use Amazon's features to build a storefront. Successful online stores often add a storefront to showcase their products in an aesthetically pleasing way.
Plus, having a storefront means that you can use banner advertisements and other features to draw customers to your store. Some of the top online retailers, including brands like Apple, Adidas, and more, have Amazon storefronts.
Even if you don't make a storefront, you will need to fill out info about your store. Make sure you add a name, logo, and UPC codes for your products.
Step 2: Choose Your Niche
Next, it's time to choose a niche. This refers to the category of products you are selling. Amazon has a list of product categories that you can find in the sidebar of the desktop site. Choosing one of these categories ensures that customers know exactly what they can get from your store.
Choosing a niche is a key part of your online arbitrage business model. It will dictate your sourcing process, shipping process, and more. Since Amazon's warehouse fees vary depending on the size, weight, and type of stock, it can also impact your profitability.
Source: amazon.com
Some niches on Amazon are more popular than others. Here are some common product categories for online arbitrage sellers:
- Home and Kitchen
- Books
- Electronics
- Toys and Games
Do some research to choose a niche that works for you. Bear in mind that some categories have much higher competition, so it might be a wise business decision to choose a less competitive niche that still obtains decent traffic.
Step 3: Decide on a Strategy
There is more than one way to sell on Amazon. You will need to choose an online arbitrage business model that suits you, remembering that each method has pros and cons.
The most popular is using Amazon FBA (fulfilled by Amazon), which uses Amazon's warehouse system to pack and ship your products. With this method, Amazon handles everything for you, from inventory to shipping and even customer service.
When you use this method, there are Amazon fees you must pay to benefit from the service. These depend on the type of product you are selling. That said, when selling on Amazon with online arbitrage, it's often worth using FBA.
Another option is dropshipping. With this method, you don't need to purchase inventory upfront, which means the barriers to entry are very low. This cheap cost makes it appealing to new online arbitrage sellers. Instead, you list the products for sale, and when somebody makes a purchase, the manufacturer handles dispatch. In case of errors or returns, you are still liable.
Other selling methods include creating handmade items, selling private-label products, or selling wholesale. However, dropshipping and FBA are the two most common methods for online arbitrage work.
Step 4: Find Your Products
Then, it's time to find your products. Again, there are numerous methods you can use. Online arbitrage sourcing takes time and effort, so ensure you're prepared to invest these resources before setting up your business. Here are some of the most common methods for sourcing profitable inventory.
Online Arbitrage Tools
Thanks to the popularity of OA, plenty of software tools are available. These include Tactical Arbitrage, CheddarSoft, and more. Depending on the tool, there will be a variety of features, including:
- Product lists from numerous online marketplaces
- Information on the product's sales history
- The current selling price
- Current sales rank
Some software suites also help you to manage and control your inventory, which is beneficial later down the line.
Software can be expensive, and free tools are often limited. As a result, they're a bit of an investment for new sellers. However, they can save you time and effort by automating a lot of the process.
Leads Lists
Leads lists are similar to using software, except you don't need to invest in the software yourself. Instead, reselling experts use software to track down products and source leads on your behalf. This method has several major benefits, including:
- A personalized, human touch
- Access to expert advice
- Handpicked, curated lists
- Less competition due to limited spots on each list
Leads lists, like those from OA Cheddar, can help you easily source high-quality, profitable products.
Physical Retail Stores
Some OA sellers take things back to the root of retail arbitrage by sourcing products from brick-and-mortar stores. While this is possible, it's time-consuming, expensive, and does not ensure a constant supply of products. As a result, you risk disappointing your customers. Plus, sourcing profitable deals can be challenging. You may also have to handle shipping yourself when sourcing from brick-and-mortar stores, which adds extra costs and responsibility.
Online Marketplace Hunting
You can also shop online to find profitable items. Online retailers like eBay, Etsy, and Facebook marketplace are fantastic arenas to find products alongside smaller online retail stores. Although you might not find your dream products through online shopping, it can help with researching and spotting current trends, hot sellers, and selling price points.
Wholesalers and Suppliers
Online arbitrage pros often work with wholesalers and suppliers to ensure a steady supply of goods. This will keep your inventory stocked and help your store to flourish.
You can track down manufacturers by checking out wholesale lists, contacting suppliers, online sellers, and attending conferences. As you grow your online store, you'll need to practice your negotiation skills to conduct business with other online retailers and secure the best deals.
Step 5: Start Listing
Next, it's time to take the most important step in your online arbitrage journey: listing your products. You can start listing through your Amazon Seller Central account.
There's a trick to listing products effectively. Amazon sellers must make their items stand out in otherwise crowded marketplaces, including in the search bar and in front of the customers.
The first step is listing your items with titles and product descriptions with keywords. Plenty of keyword research tools you can use if you want to do this properly will give you terms you might not have even thought of.
Source: Amazon.com
In total, you’ll need all seven things listed in the image:
- Title
- Images
- Variations
- Bullet points
- Featured offer ("Buy Box")
- Other offers
- Description
Make sure you use keywords in both the title and description. Alongside optimizing for Amazon's search engine, you also need to ensure the product is clear for the customer. The title and description should effectively explain what the product is, what sets it apart, and how it benefits the customer. When you master the art of writing product descriptions, you can become a top arbitrage seller.
Finally, make sure you set a price that will benefit your profit margins. The price should be competitive to attract customers away from competitors but also high enough to turn a high enough profit margin. It's a fine balance and one that online arbitrage tools can help you with. Make sure you factor FBA fees, shipping costs, inventory costs, and estimated sales into the price.
Step 6: Monitor Your Progres
The moment you start online arbitrage, you embark on an exciting journey. However, if you want your online arbitrage business to succeed, you need to put the work in. Plenty of businesses will try to sell you tools to make online arbitrage easy, but the truth is that it's a business like any other. Even with Amazon FBA, there is a lot you need to keep a handle on.
As an arbitrage seller, you need to monitor your success carefully. Analytics in your seller account are a good place to start; these will tell you how much stock you have sold, the amount you have made, and the sales rank for some of your products. However, if you want to dive into the stats, you can look at software tools that monitor factors like inventory, slow-moving stock, and more.
Depending on the products you sell and their seasonality, you may see peaks and troughs with your income as an arbitrage seller. However, you should be able to create a steady upward trend overall. Keep an eye on the analytics if you want to adjust your course and create a business that can truly flourish.
Can Anyone Sell on Amazon?
In theory, anyone can sell on Amazon. After all, Amazon FBA makes it easy to get started!
However, the real answer is a little more complicated. It depends on your niche, as some products require a Professional seller account, some are restricted, and some include products that third-parties cannot sell. There are other restrictions, too. With drop shipping, for example, Amazon sellers cannot list products to dropship from competitor marketplaces like Walmart.
Online arbitrage is not for everyone. It's hard work that requires a high level of adaptability. However, if you're someone with an entrepreneurial spirit who is willing to work hard and learn, then online arbitrage could be right for you.
Get Started Selling on Amazon with OA Cheddar
If you want to get started with online arbitrage, you need to think about how to run your business. Here at OA Cheddar, we believe leads lists are the best way to help your business flourish. With access to webinars from 7-figure resellers and curated leads lists that source high-quality products, OA Cheddar's leads lists are a fantastic way to boost your sales and improve your profit margins.
Are you in? Sign up here today!