Lesson 2 of 8
Getting Ready For Online Arbitrage
The accounts to open before you start buying, including the cashback sites that return a percentage of every order.
Before you buy anything online, there are three things to set up. Each one reduces what every future purchase costs you, which means they raise the margin on deals you have not found yet. They take an hour to arrange and they apply for as long as you keep sourcing.
Why this matters more than it sounds
Arbitrage margins are thin, and they are thin on every unit. A few percent shaved off your cost of goods across every order is not a detail, because it compounds over hundreds of purchases and it applies whether or not any individual deal works out.
It also changes which deals qualify. A product that misses your minimum return by two percent is a product you walk past. With cashback and card rewards behind you, some of those become buyable, and they are deals your competitors are declining.
1. A rewards credit card
Use a card that gives something back on every purchase, and use it for all sourcing. The common types:
- Cashback. Typically 1 to 2 percent on everything. The simplest to value, because it is money.
- Retailer vouchers. Some cards return coupons for particular supermarkets or retailers. Worth more than their face value if they are for shops you already source from.
- Air miles. Worth considering if you already fly with one airline regularly. Worth little if you do not, because the value is locked in a currency you may never spend.
Two cautions the lesson does not give. First, pay the balance in full every month. Interest on a revolving balance will exceed any reward rate several times over, and arbitrage involves buying stock before it has sold, which is exactly the situation where a balance builds. Second, some cards treat this kind of spending differently or have caps on rewards, so read the terms.
2. Cashback sites
Cashback sites pay you a percentage for clicking through to a retailer from their link. The retailer pays them a commission and they share it with you. Rates vary by retailer and change often, sometimes reaching several percent.
The sites named in the lesson are TopCashback and Quidco, both of which operate in the UK and the US, and Rakuten in the US, previously called Ebates.
Register on more than one, because rates differ between them for the same retailer. The habit to build is simple: before buying, check what each site is offering for that retailer today, and go through the better one.
Two things to know. Cashback is paid after a holding period, often weeks or months, so it does not help your immediate cash flow. And it can be refused if the order is returned or if you have a browser extension interfering with the tracking. Treat it as a bonus rather than as part of the margin you rely on.
3. Search for a discount code every time
Before every order, search for the retailer name plus "coupons", "voucher" or "discount". It takes twenty seconds and it works often enough to be worth doing every time.
Also check whether the retailer runs a newsletter signup discount, which is frequently 10 percent on a first order, and whether they have a loyalty scheme.
Putting the discount into the analysis
This is the part that changes how you source rather than just how you pay. If you know a retailer's current code before you start searching, you can enter that discount into Arbitrage Hero, and the profit and return figures are calculated against the discounted price rather than the shelf price.
That matters because it changes what appears in your results. Products that fail a profit filter at the list price can pass it at the discounted price, and they are the deals other people are filtering out.
So the order of work is: find today's code first, apply it in the search, then look at the results.
Your task
- Check whether your existing card returns anything. If not, look at what is available.
- Register with two cashback sites and install their notification extension if you trust it.
- Build the habit of checking for a code before every order.
All three work for personal shopping as well as sourcing.