My life took a turn I never expected it to, and online arbitrage was behind the whole thing.
I watched my best friend become financially free in a way would have never guessed.
Then it happened to me as I learned a little more about how he did it.
I was a week away from moving to a different city and going through another few years of college because I thought it was the only way I could provide for my family.
Im going to share with you what changed everything for me, and how you can do it too
You have to have years of experience in business before you can be successful
The only way to make money from home is to invest every second of your free time
To be your own boss, you need to have large sums of money to get started
You need to quit your full-time job before you can have your own rewarding business
If you agree to any of those statements above, in the next few minutes Im going to blow your mind.
I became financially independent after a few months of selling on Amazon with online arbitrage. After two years and six figures, this is everything I wish I knew when I first started.
Just so you know, Im not an exception, Im not a unicorn, and Im not making this up.
I was working 40+ hours a week, earning only a little more than minimum wage as an EMT in Texas. I was 22, newly married, and badly needed some extra income to cover our expenses.
In my mind, I knew that whatever side hustle I chose, I wouldnt have a lot of time to dedicate to it, so I needed to make it as efficient and effective as possible.
Selling on Amazon fit the bill perfectly, and here are five reasons why:
Amazon fulfills all of your orders, so you dont have to ship anything directly to customers
They take care of customer service, so you dont have to talk to any customers
The behemoth owns50% of the e-commerce space(and their share is only growing larger)
Its incredibly easy to jump into a market where the blueprint is already laid out for you
The barrier to entry and risk of loss if things go haywire is incredibly low
Online arbitrage is 100%, totally, completely do-able by someone with no experience. All you need is time and the right mindset.
While I cant do much to give you more time, but in the next few parts Im going to help give you the right mindset.
3rd party sellers like me contribute to overhalf of the sales on Amazon. That means that 3rd party sellers make up 25% of all the sales made on the internet.
Now you know why I chosefulfillment by Amazon(FBA) as my side hustle (and why its likely a good fit for you as well), so Id like to talk about 49 things youre going to need to know to make this passive income cash cow that is selling on Amazon work.
The Most Common Pitfalls Online Arbitrage Sellers Make
How To Source Profitable Products With No Experience
Arbitrage is simply taking advantage of a price discrepancy in two different marketplaces. Its capitalism in its purest form. The opportunity were exploiting here is in physical products.
For example, you, with your sharp eye for a deal and a burning desire to make a little extra cash, notice that board game A is selling for $5 at Walmart. Most people think to themselves Granny Gene would love this! But you know that its selling for $23 on Amazon and think to yourself Ill take 20. You flip the board game on Amazon, pocket the difference, and do the same thing with hundreds of other products, hundreds of times.
You bet! Theres nothing wrong with providing a service to someone who prefers to pay more for it. The reason online arbitrage on Amazon works so well because (if you didnt know) you, me, and everyone else in the world are impatient.
A lot of people are willing to pay a premium to have their product delivered to them within two days without them ever having to leave the house or talk to anyone else (gross). Arbitrage has been around for a long, long time and it will be around as long as there are goods being sold.
The basics are covered above its nothing crazy. There is one difference, though, that makes online arbitrage (OA for short) extremely appealing to people like me who had a limited amount of free time.
Well, that little thing makes a big difference. Hypothetically, you could perform every step of the process without ever leaving your home, without ever touching a product, and without ever talking to a customer.
I made this graph to make the process as easy to understand as possible.
This is online arbitrage at a 30,000 ft level. There are some intricacies about the process, and sometimes it can feel more like an art than a science. Very broadly, you buy a product at say, , ship it to you or a prep center that specializes in shipments for Amazon sellers, ship it from there to Amazons warehouse, sell the product, pocket the difference, and reinvest to go a little bit bigger next cycle.
Youre not going to like the answer it depends. The question you should really be asking yourself is How much monthly profit do I want to make? Reverse engineer the capital requirements and ROI youll need to meet that.
For example, if you set a goal of $1,500 in net profit per month, youre going to need to invest $3,000 per month and buy products with an average 50% return on investment (ROI). In this realistic example, the next month youll have $4,500 to invest. At an average of 50% ROI, you can snowball your success into $2,250 in net profit.
Ah, I see youre playing the long-game. Smart.
I know a lot of sellers who revolve their Amazon business model 100% around online arbitrage. Theyve committed themselves to flipping products 24/7/365. They make a full-time income and are living the lifestyle theyve always wanted. A lot of sellers leverage the capital and experience they earn with OA into other ways to make money on Amazon.
Time for some more vagueness, in case you just really enjoy cryptic answers.
How fast you progress is really up to you. The information in this article should help you get a jump start, but the bottlenecks to your success are how much time you dedicate, how quickly you learn from any mistakes, and whether or not youre going to invest the capital required to meet your goals.
I know this whole process can seem intimidating at first, and its totally normal to want to dip your toes in before you cannonball into the deep end.
Thats okay but realize that you cant expect to meet your goals the same way if you were committed all in.
From my experience helping other sellers become financially independent, it takes an average of 3 7 months before theyre earning passive income comparable to their full time job.
If you have a computer, youre 90% of the way there.
There are lots of ways to find products to flip. You can manually go through websites and find opportunities.
This can be time consuming, but a good way to learn what attributes make a good product when youre first starting.
Another way to source online arbitrage products is with software. There are tools, both free and paid, that allow you save time (and in the long run, money) when it comes to finding your next flip.
The learning curve with using this kind of software can be a little bit steep at first for new sellers, so another way to find profitable products is with a leads list.
In the end, though, youre just going to need to try a little bit of everything and see what delivers the best results for your particular needs.
Let me start by saying this the FBA fees are absolutely worth it for the amount of time it saves you.
I cant even imagine having to process and fulfill every single order weve made, let alone handle customer service as well.
We likely would have spent more money if we had tried to do it ourselves.
Amazon charges about 15% of the sale of the product just for selling the product on their marketplace
Amazon charges an additional variable fee depending on the dimensions and weight of the product. Of course, this varies for different products, but a good rough estimate is another 15%
So at the end of the day, youll be charged about 30% of the revenue from the sale.
That wraps up the questions I get on a daily basis. If youre hyped up, keep reading so I can tell you more about how to be successful at making a passive income machine.
This next section is all about not making the same mistakes every other new seller makes.
If youre doing the same thing as everyone else, dont be surprised when you get similar results.
The real money (in anything, not just online arbitrage) is found in doing what everyone else isnt.
Whether its going the extra mile because youre willing to do extra product research other sellers arent, or keeping your ear to the ground on a profitable brand you know will be releasing soon, youll find riches in the niches.
Keep an open mind and look for opportunities nobody else is looking at.
Its not uncommon for new sellers to get blinded by the revenue theyre making.
Its not hard at all to hit 10k/month in revenue, but if youre only making a 5-10% profit margin, you should re-examine what youre doing. Theres likely more room for profit.
Dont be obsessed with how much youve sold, focus on how much youve made.
Thats all that matters at the end of the day, anyway. The amount of profit youre making is going to be the determining factor for when youre financially independent.
The return on investment youre making on your flips is a key metric that determines how fast you can grow.
ROI is really personal preference. Some people, like myself, are perfectly fine with a 30% ROI, and some people wouldnt even consider anything less than 100%.
There will be some products where youll get a 200%+ return and others where you might get 10%.
Let me give you some perspective, though: The average return on the US stock market is 8%.
If youre getting a 30% ROI consistently, youre doing great.
The best way to minimize risk and maximize profit is to go wide, not deep.
For example, its better to diversify with 10 products with a 30% ROI than with one product that has a 300% ROI.
Another benefit of spreading your portfolio evenly is that youll typically be able to keep your cash flow more open as some products will sell faster than others.
This allows you to take advantage of any more potential opportunities that come your way instead of tying all your capital up with one product.
If youre not sure if a product is going to sell well, dont feel pressured to buy more than youre comfortable with, silly goose.
There will be more opportunities to take advantage of in the future, I promise.
I hate bookkeeping, I loathe accounting, and I know how important they are.
Too many sellers, no matter how much experience they have, dont keep good records of their purchases and expenses.
If you dont have the data staring you in the face, youd be surprised how much you can under or overestimate things when they really count.
Dont fail because you didnt know how much money you had left. A simple spreadsheet should do you just fine, andGoogle Sheetsis free, so I dont want to hear excuses.
Youre going to be a sad little seller if you base your purchasing decisions on emotion.
If at any point, you catch yourself thinking I feel like people would buy this because I would buy this, youre doing something wrong.
If theres one thing Ive learned after selling tens of thousands of units, its that people are just plain weird. Theyll buy things youd never expect in quantities that would make your head spin.
Let the data speak for itself, do your best to interpret why it is the way it is, and follow what its telling you.
Dont take this advice and lose obscene amounts of money. I know thats what it took for me to learn this lesson.
Patience is a virtue. Dont get nervous or frustrated if the products you sent in on Monday arent sold by Friday.
Those products arent hurting anything for a few months (Amazon charges long-term storage fees), so take your time.
If a few new sellers are engaged in a price war, stay out of it for a while and wait for them to sell out. Youll be there when the prices shoot back up to take advantage of larger margins.
In the next section, were going to be talking about how find the products that make you money.
If you need to be hyped up, go grab a double shot of espresso and do, I dunno, 50 jumping jacks. And by the way, whats wrong with you? This stuff is exciting!
I want to start off by saying that making well informed sourcing decisions is going to take time and experience.
That experience is going to come from good and bad situations, and the faster you learn from both, the faster youre going to be successful.
If you test-buy a small quantity of a product and it goes well, analyze why you think so and buy some more.
Likewise, if a product goes sour, study why it did and what you can avoid in the future so that it doesnt happen again.
The golden rule of Amazon sourcing (that I just made up) is Dont make the same mistake twice.
Heres your first sourcing mission in three easy steps:
Im not kidding. Thats exactly how I and a ton of other sellers got started. The capital investment is zero (youve already bought the stuff), and theres nothing to do but learn patterns of what sells and why.
My very first sale on Amazon was a philosophy book, and my first sale over $100 was a used textbook I didnt need anymore. I sold both of those books in my first two days on Amazon. Its not hard stuff.
Youre likely going to make a little bit of profit, but even if you dont, you cleaned out your closet a little bit and learned valuable (free) lessons.
Its very common sense, but youd be surprised how many new sellers try to cut corners.
Trust me, its just not worth it. Your seller account integrity will thank me.
Do not buy used things and try to sell them as new. Do not source from stores like eBay, and do not sell products that you know are close to, but not exactly the same thing.
Some angry customer WILL report you to Amazon, and your selling journey will be over as soon as it started.
Remember when I was talking about using data to your advantage? This is where that comes in.
There are two major tools (in the form of Chrome extensions) you can use to track a products history:
CamelCamelCamel is a great tool that performs the same function as Keepa. To be honest, though, I prefer Keepa.
It embeds on the Amazon page directly so you can source faster and more efficiently.
Keepa used to be a free tool (RIP), but now its a monthly subscription to use. However, its pretty inexpensive and will be the best $17 you could spend on your business each month.
The point of these tools is to give you the historical price, sales history, and number of sellers for each and every product youll ever buy.
Does product X sell at $15 at least 100 times a month? Keepa will tell you in about 3 seconds.
Sourcing without leveraging the power of history trackers is essentially playing roulette.
There are a few free Chrome extensions I wouldnt source without.
TheFBA calculatortells you the estimated Amazon fees, sales per month, profit, and ROI at the click of a button
TheJungle Scout Chrome extensionis paid, but has agreat free alternative. This nifty little tool gives you a second data point for estimated sales per month.
Theextension helps you track your competitors stock more easily. If theyre about to sell out, you could potentially play things more aggressively.
Just because a product is set a price point, it doesnt mean it sells at that price. Youre going to need to make sure that has historically sold at a certain price before you commit to flipping it.
Dont let your imagination go crazy when you see something priced at $50 when its only ever sold at $12.
Stay realistic, and youll eliminate a lot of heartache. The good online arbitrage products are out there, you just have to be patient.
If Amazon has historically been selling a product for the last three months (you can see this using Keepa) and just recently ran out of stock, theres a good chance the price just shot up as well.
If theres no history of Amazon running out of stock, it would be very risky to try to capitalize on these kinds of opportunities. By the time you get it in stock in the FBA warehouse, Amazon could likely be back in stock and not run out again for a while.
There are a lot of categories on Amazon, and theyre perpetually growing as new products are added.
If, for example, you want to know how well a bar of chocolate compares to every other product in the Grocery & Gourmet Food, youll need to look at the sales rank.
Think of sales rank like a race being 1 is the best, and everything else is relative to that place.
A sales rank of 1 means its the best selling product in its category. Sales rank fluctuates every minute, and is updated every hour.
Using tools like the free sales rank chart I made, you canestimatehow the product youre interested in fares in its category. The top 1-3% is probably a safe bet to flip.
One of the best tools for product research yourself isTactical Arbitrage. It basically does all the heavy lifting for you by scanning entire websites and comparing the data of a product to the offer on Amazon.
You can set filters to match exactly the criteria you want, start the scan, and come back a few hours later to products saying buy me, buy me!
TA has a free trial, but since the learning curve can be a bit steep, I recommend learning all you can before you take advantage of it.
If you know what youre doing before you jump in, you could very likely find profitable products with no risk to you.
After you realize how effective it can be, you cant go back. Its like having a whole team bringing leads to you, all you have to do is sort through it.
If you want an even lower risk way to find things to sell, anonline arbitrage listis a good way to go.
The basic concept is experienced, battle-hardened product sourcers send out OA leads to a small group of people.
These online arbitrage leads have been vetted according to strict standards, and are ripe for purchasing. Theyre delivered directly to you all you have to do is order the recommended products and youre done with your sourcing for the day.
Its pretty easy to replicate the success of other OA sellers how the kids say theres an app for that.
Of course, you can do it manually (ew), or you can use Chrome extensions like Storefront Stalker to grab the information from another sellers entire storefront (sometimes hundreds of products).
Plug that information into a tool like Tactical Arbitrage and now youve reverse engineered an already profitable recipe.
Another strategy to completely cut out your competition is to bundle products together.
If you sell similar or complementary products together, you can create a listing and be the only seller for it. More for you!
Steven Smotherman over at FullTimeFBA has a great article aboutbundling online arbitrage products.
Sometimes you need to look no further than Amazon itself to make a little extra cash.
Its a little more manual than some of the other methods, but thats not a bad thing if fewer people are willing to do it, it means less competition.
If you notice that theres a huge price difference for a product after Amazon runs out of stock, purchase directly from them, ship it to yourself, prep it, and send it back into Amazon to sell.
You can set alerts in Keepa to notify you if a product youre interested dips to a price that would be profitable to flip.
PS Be careful Amazon is totally fine with you flipping products from them as long as you dont abuse their 2-day Prime shipping when you do it.
Im not going to lie, I just made that name up. Its a real thing, though.
The idea is to balance your product portfolio. Some products might have a smaller margin and ROI, while others may only sell once a week with a fatter margin and ROI.
Its nice to have consistent sales rolling in, but also to make a burst of profit every once in a while. It will also bring your average selling price (ASP) and average ROI up. Win-win.
I remember my first Valentines Day as a seller. It was glorious.
I bought chocolate from Sams Club for $5 a bag and flipped it on Amazon for $28. I bought a couple dozen and sold out in a few hours.
However, Ive also heard horror stories from other sellers who had gross amounts of returns on their Halloween costumes or Christmas trees after the season passed.
Unfortunately, customers will take advantage of the situation.
Therefore, my general rule of thumb is to only capitalize on the craze of seasonal items if its consumable (and therefore unreturnable).
Me too! Thats why I use sites likeTopcashbackandEbatesto save a percentage on every purchase I make for online arbitrage.
2% might not sound like a lot, but I promise it becomes substantial over time.
It only takes a few seconds to see if theres a cashback deal on one of these sites, and the benefits are well worth it.
Dont get caught up in the ego of being the only one running your successful business. It can be fun to watch the sales roll in, but its even more fun to outsource strategically and watch even more sales roll in.
Im dead serious prepping is not fun. If you get enjoyment out of prepping your products and shipping them into Amazon, you might be a psycho (not really).
Luckily, there are entire businesses that want to prep your products for a small fee.
Let the psychos do the time-consuming, boring, and tedious part of being an FBA seller so you can free up more time for the things that make you money.
Its really simple to never have to touch a physical product: account for the prep cost in your margins.
The fees range depending on what prepper you go with and how many units you have, but a reasonable cost is around $1 per unit.
Utilizing a prepper is one of the best decisions you can make for your business when you decide you want to scale.
I know youre not going to listen to the valuable advice I just gave you, so for those of you who are stubborn and want to prep products yourself: perform quality control religiously.
It only takes a few seconds. When you get the item from wherever you bought it from, look it over to make sure it matches on Amazon, that there arent any defects with the product, and that there arent any signs that its been used before.
Its just good practice with any product, but this rule applies especially to shoes. People can get really weird about their shoes.
If it doesnt meet your criteria, return it from whence it came and get your refund. No harm done.
Dont be afraid to enlist the help of your family, friends, and neighbors down the street for product prep.
When I first started, I worked out a deal with my sister where Id cook her dinner if she helped me prep everything. It worked out well for both of us.
If your helpers want monetary compensation, pay them per unit they prep. 25 50 cents per unit should be enough to get you started.
Teach them everything you would do to prep, then source while they package everything up for you.
A lot of people dont realize how inexpensive shipping to Amazons warehouses is. Amazon partnered with UPS and FedEx to get their 3rd party sellers incredible rates.
For example, we just shipped a few hundred units into Amazon the other day and we paid 8 CENTS PER UNIT. Thats just incredible.
Take advantage of these discounts to fatten your margins a bit.
Account for 25 75 cents per unit to ship it to Amazon, depending on the size and weight.
Amazon tracks basically everything you do as a seller through statistics.
Good metrics means that you have a lot more possibilities in the future to make more money. Of course, the inverse is true as well.
A few key metrics to keep a sharp eye on is your seller feedback (provided by customers), any intellectual property complaints that may come against your account, and your response time to the rare customer message.
These metrics really play a role down the line.
As a new seller, youre going to be unable to sell in some categories and brands. This temporary restriction is called gating.
Its a precaution Amazon put in place a few years ago when some less-than-reputable sellers were hawking counterfeit goods on the marketplace.
Customers got angry, Amazon got protective, and good sellers suffer.
No worries, though, because its possible to become ungated in everything.
One of the best ways to get ungated is through auto-approval.
Amazon takes a look at your metrics (remember when I talked about that) and uses an automatic process to determine if youre eligible to be ungated.
If you are, you can sell the product immediately. Its great to sell in categories that are gated to the vast majority of other sellers because itssubstantiallyless competitive.
If youre not ungated in anything yet, we offer an online arbitrage product list calledAtlas Leadsthat has totally ungated products.
New sellers can jump right in with a brand new selling account and no experience sourcing themselves.Why yes, I do recommend it (Im a little biased, but I believe its the best on the market).
If you dont have the patience to build up the metrics required for auto-ungating, its going to cost you.
You can submit invoices (not receipts, invoices) to get ungated in brands and categories.
Youre going to need to get a wholesale account and purchase the right products to get ungated in Amazons eyes.
The catch is that opening a wholesale account usually entails having an LLC.
The fees to have a legal business vary depending on the state youre in, but look into what it would cost for your state and figure out if being ungated quickly is worth it to you.
Listen up: match the buy box price. Theres only a handful of reasons why you should ever ignore that rule.
Too many newbies get on a listing and immediately tank the price of a product.
The other newbie on the listing starts freaking out and tries to undercut the first one. A few back-and-forths later, and nobody is making any profit.
Piggybacking off the last one, if youre spectating a raging price war, let the newbies sell out.
Lie in wait for your time to strike at an actually profitable price after theyve run out of stock.
Youre going to be in a much better situation if all your hard work didnt just go to waste because you were impatient and wanted to sell out in a day.
If youve been waiting for a few months and the long-term storage fees are about to hit, you can reconsider if you want to get down and dirty in the mud. However, if the end is in sight, wait it out.
When a product listing has the buy box, which is this little thing:
Theres a good chance that the vast majority of sales are going to whoever owns it.
If you want to stay in the buy box, there are a few factors that go into it. The most important is your price.
Amazon is customer-centric, and want to offer the best price to its audience.
Like I mentioned above, matching the buy box price is the way to go. You should be good if you follow this rule.
If theres not a buy box on the listing, it means that Amazon doesnt think any of the offers deserve it. Interpret this as Amazon thinks the price is too high.
Dont worry the product could still sell. Youll need to double-check on Keepa, but if it has a history of selling without a buy box, fire away.
In this particular case, youll need to make your price so competitive that youll be the first Prime offer customers see.
As long as people see the Prime badge, which youll have, they dont care who it comes from.
The only thing they care about is the best price, so give it to them.
I hope youre not thinking that you have to sit there all day and watch all of your products like a hawk.
No, no, no. Theres a better way, and best of all, its free.
Amazon has a built-in repricer to the Seller dashboard you can utilize to your advantage. Its a little on the simple side, but its the best way to get started.
Simply set the repricer to match the buy box, input a few other details, and youre off to the races.
Now you can sit back and source more while it handles your pricing.
A replenishable product, or replen, is any product that people consume and re-order on a regular basis.
This could be food, makeup, toiletries, or something like trash bags.
Consumers are largely brand-loyal, and if theyve ordered their snacks from Amazon once, they likely will again.
Heres your opportunity just stay in stock with what people want and re-order, and you have a consistent and easy cash flow.
Returns happen, its just unavoidable. Most of the time, Amazon will deem the product unfulfillable.
Now youll need to choose to either have them destroy it at the warehouse or recall it back to you.
I recommend the latter to get as much money as you can back.
If you recall it, inspect it, and verify that its been damaged by a customer, you can atte