Lesson 2 of 6
Online Arbitrage
Buying from online retailers instead of physical shops, so sourcing can be done at a desk and scaled with software.
Online arbitrage is the same idea as retail arbitrage with the shop replaced by a website. You buy from online retailers and resell on Amazon. This lesson covers what changes when the sourcing moves online, and what that costs you.
What changes, and what does not
The economics are identical: buy below what the item sells for on Amazon, by enough to cover fees and leave a margin. What changes is reach and effort.
Instead of the shops within driving distance, you have every online retailer that ships to you, which in most markets is hundreds of them. Instead of walking an aisle, you are reading a clearance page. And because it is all screen work, it can be done at any hour, from anywhere, and by somebody other than you.
The three real advantages
Volume of opportunities
Hundreds of retailers running promotions continuously produce far more candidate deals than any set of local shops. The constraint stops being how many products exist and becomes how many you can evaluate.
It can be automated
Because every input is a web page, software can do the searching. A tool can compare a retailer's catalogue against Amazon prices, work out fees and margin, and hand you a filtered list. That is what Arbitrage Hero does, and it is why this method is the one the software was built around. The alternative is checking products by hand, which works and is slow.
It can be handed to someone else
Online arbitrage is entirely instructions and screens, so it can be delegated to a virtual assistant working from a written process. Retail arbitrage cannot: it requires a person in a building. The Scaling Up module deals with this directly.
The same property allows prep centres. Rather than having stock delivered to your home, unpacked, labelled and reshipped by you, you have the retailer deliver to a prep centre that does all of it and forwards the stock to Amazon. At that point you never touch the goods, and the business runs from a laptop anywhere.
The costs of moving online
Everyone can see the same pages
This is the fundamental trade. A clearance page is public. Every seller in the country can open it, and many have software watching it. Good deals are found quickly and by several people at once, and the price on Amazon then falls as they all list.
The practical consequence is that margins in online arbitrage are usually lower than in retail arbitrage, and that speed matters more. A deal found four hours late is often no longer a deal.
Sale stock still cannot be replenished
Same as retail: discounted stock is finite. When it is gone, that product is finished. The exception is the same too, and it is the more valuable find: products with a permanent price gap between the retailer and Amazon, which you can buy again whenever you sell out.
Tooling costs money
Doing this at any volume means paying for software. Expect a monthly subscription in the region of tens to a hundred in your currency, depending on what you use. That is a real cost to build into your margins, and it is a reason not to start here on the smallest possible budget.
Two costs the lesson does not mention
- Delivery. The retailer's shipping charge is part of your cost of goods. A deal that works at the listed price can stop working once postage is added, which is why order size matters online in a way it does not in a shop.
- Returns and cancellations. Online orders get cancelled, arrive short, or arrive damaged. In a shop you leave with the goods. Online there is a gap between buying and receiving, during which the Amazon price can also move.
How it fits with retail arbitrage
They are complementary rather than competing. Retail gives better margins on stock nobody else can see. Online gives volume and can be automated and delegated. Most sellers who do both use retail for the higher-margin finds and online for consistent flow.
The rest of this course treats online arbitrage as the main method. The Online Arbitrage module covers manual sourcing first, so you understand what the software is doing, and then the software itself.