How to make money online Doing online arbitrage on Amazon
A question I am getting quite often recently:
“Can I make a living from doing online arbitrage and why is it better than Private label or even wholesale?”
The short answer is : “yes” you can make a living on Online Arbitrage alone.
However it isn’t as easy or straightforward as some people may lead you to believe.
As we describe in this article for instance, you need to change the way you think about what you are going to sell.
If you think of it as nothing more as a quick cash grab and are not willing to treat it as a business or at the very least be very serious about it, then I would advise you not to read on and just go back to the office tomorrow and stick to that.
And I am not trying to be mean about this either, I truly believe that it is just better to accept certain realities and truths about your own motivations before starting this or any other business.
To really live of the proceeds of this business and assuming you have enough when you have about $2000 a month for paying the bills and living expenses, you’ll need:
a base stock value of $30.000
Sell at least a third of your stock each month
With a minimal margin of 20%, preferably 30%
You might think this base stock value is to difficult to attain, however if you focus on what you can do and not what you cannot do, but moreover look at the numbers you’ll find that it can be a possibility.
To put it into a more tangible example:
Let’s say you start with a stock value of $300, sell it with a 30% mark up and keep reinvesting the proceeds 18 times in a row, you’ll end up with approximately $ 33.736.
So it is do-able, but you need to put in the effort.
Now as to the question if Arbitrage is better than “Private label” or “Wholesale” or maybe even “Dropshipping”, the short answer is “no”.
The long answer is that it really depends on what level of risk you are comfortable with, how much time and capital you have and if you are an experienced online merchant or just starting.
Private label is very similar to the arbitrage model.
Where it differs is that you need to have about $10.000 to seriously get your brand into the market.
I say brand, because that’s what private label really is, launching your own brand, trying to get your listing ranked on the first page on Amazon so that it actually sells.
On top of that you really have to put in the hours upfront to get it moving, but once you do it is much more passive than the arbitrage model.
Wholesale is in essence just buying a lot of the same products at a low price.
The risks and also the rewards are higher, as if you have a product that doesn’t do well you lose that investment, but if you know what you are doing and pick the right product you make a lot more in one fell swoop than either Arbitrage or Private label ever will.
Dropshipping carries very little risk, but you need to know how to do marketing very very well and find a niche with very little competition.
Next to that you have to realize that there are a lot of big players out there with a lot of ( marketing) budget to spend.
So thread lightly on this one, as this market is very aggressive and you need to know how to play this game.
Now as to why I would advise anyone starting selling online to start with Arbitrage?
If you plan to eventually move to private label and sell in a category which doesn’t have a lot of competition, you need to get ungated for these categories.
And the only truly effective way of getting ungated is to build sales history (i.e. if you sell a lot Amazon will ungate you automatically based on performance).
Another reason is that it is a learning experience not only in the ways of Amazon, but also in customer service.
The foremost reason is however rapidly building capital, as it is one of the quickest ways to make a profit.
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