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Online arbitrage: we look beyond the hype!

Last updated July 12, 2023 5 min to read
Online arbitrage
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Bank of America recently estimated that Amazon accounts for 44% of eCommerce purchases in the US. Third-party sellers are behind over half of Amazon’s transactions so, when you work it out, that means they’re responsible for almost a quarter of all online sales!

With eCommerce and Amazon predicted to grow significantly for years to come. There are still plenty of opportunities for third-party sellers to make a name for themselves. That’s where online arbitrage comes in! It offers sellers a quick way to get started without huge amounts of risk or investment.

What is online arbitrage?

Online arbitrage is when you purchase a product online for a low price and you sell it on at a higher rate.

So, for example, you might find some popular products on AliExpress and list them on Amazon with a significant markup.

Although you’ll have to pay for shipping and other costs on each sale, you’ll be left with a small sum of money to take home. Repeat this dozens of times and you can build up a customer base that can be the foundation for an eCommerce business.

Sometimes established eCommerce businesses might use online arbitrage if they’re low on stock or looking to bolster a new product range. 

At its core, online arbitrage is about spotting profitable pricing disparities across different online stores and marketplaces. The whole process takes place online and some sellers even do it without ever touching a product.

Many of those who take advantage of online arbitrage, sell on Amazon because of its large and loyal customer base. However, it works across other online marketplaces as well.

What do you need for online arbitrage?

Online arbitrage is a simple concept so you’ll have lots of competitors. A whopping 500,000 new sellers joined Amazon in the first half of 2020! To increase your chances of success, you’ll need to invest some time and resources into your business.

1. Invest in eCommerce software

Specialist eCommerce software helps you to save time, increase productivity and guide your purchasing decisions. In short, they improve your chances of success.

Here are some must-have eCommerce software for online arbitrage:

Product sourcing

Tactical Arbitrage, Jungle Scout, FBA Wizard and other tools help you to source products from all over the internet and automatically compare prices so you can find the best deals. You can narrow your results by category, product type, availability and marketplace. When choosing a tool, check how many stores and marketplaces it can scan.

It’s also worth checking Google Trends to find what people are searching for. This is particularly useful if you’re going to be re-selling products that are new on the market. Consumers often aren’t sure how expensive new products should be and this gives you the opportunity to sell at a bigger margin.

Related article: How to Find a Profitable eCommerce Niche: With Examples!

Price tracking software

Once you’ve spotted a product, the likes of Keepa or camelcamelcamel allow you to verify if it’s something worth stocking.

These tools display a product’s track record in just a couple of seconds. You can see past pricing, sales history and the number of sellers you have to compete with. It can help you assess how many units to buy and how much you stand to earn. You can also set up alerts. When a price drops, you can snap up stock. When availability is low, publish your listings and make a killing!

Repricing software

Repricing software enables you to maximize your profit and sales by helping your products win the Amazon Buy Box at the optimal price. The Buy Box is where over 82% of Amazon sales take place, so winning it on a regular basis will have a huge impact on your sales figures. Automated repricing software is essential if you’re selling on Amazon!

Related article: 10 Secrets to Winning the Amazon Buy Box in 2020

Having a great set of tools to hand can really supercharge your online arbitrage efforts. They also allow you to scale your business faster. However, product sourcing tools come with a steep learning curve so start slow and try out different free trials before choosing one.

2. Be aware of all your costs

One of the most frequent downfalls of online arbitrage is the tendency to focus on revenue rather than profits.

It may seem like you have tons of money coming in if you close a lot of sales. But when you deduct all of your costs, this may no longer be the case. To avoid this, you need to constantly be aware of what you’re spending and only stock items you can make a significant profit on.

Costs to factor into your online arbitrage planning include:

  • Purchasing: Obviously, you need to factor in the cost of buying your inventory.
  • Marketplace fees: Amazon charges sellers a monthly subscription of $39.99 per month, as well as referral fees. These usually cost between 8 and 17% of your final sale price. On top of that, items like CDs and books incur a flat closing fee of $1.80. Familiarize yourself with all the Amazon seller fees to avoid any nasty shocks later on.
  • Fulfillment costs: Many use Fulfilled by Amazon (FBA) to ship products to customers. It takes a lot of work off a seller’s plate because Amazon takes care of picking, packing and shipping – as well as customer service. Using FBA also offers huge advantages like Amazon Prime access and increased Buy Box placement. However, it also comes with fulfillment fees, monthly storage fees and long-term storage fees. You’ll also have to pay to ship items to one of Amazon’s fulfillment centers. For those who don’t opt for FBA, you’ll have to tally all your packaging, shipping, warehousing and customer support costs separately.
  • Other outgoings: These may include software subscriptions, wages and product lead lists.

Return on Investment is the key metric to keep at the forefront of your mind. Starting off, aim for a minimum ROI of around 40-60%. This way you’ll quickly see your profits snowball no matter the size of your initial investment.

3. Invest your time in profit-driving activities

With software helping you to streamline your processes, you can focus on other aspects of online retail, like eCommerce marketing. Here are some of the most productive ways to spend your time:

  • Research, research, research: Spend lots of time reading up on new brands and browsing your product research tool. When sourcing products, always follow the data rather than your personal preferences. You should also vet every supplier to minimize negative feedback, which will hurt your sales on Amazon.
  • Create a process: Set out step-by-step procedures to follow which allow you to consistently find products that will sell fast and earn money. Set certain criteria and stick to them. This will minimize bad decisions and can be shared with others when you decide to grow your business.
  • Distinguish yourself: Lots of people are trying online arbitrage, so set yourself apart. Find an eCommerce niche, sell complementary items together in unique bundles or focus on refillable products that customers will order again and again.
  • Focus on marketing: To boost sales you should try every eCommerce marketing tactic you can. Think about which marketplaces you’re selling on and find specific tips for them. Check out these tactics to help increase your sales on eBay, for example.
  • Provide excellent customer service: Once you start building sales, you’ll learn how important excellent customer service is in eCommerce. Great customer service helps you to get more reviews on Amazon, eBay and everywhere you sell. Lots of five star reviews are really important for winning the Buy Box and will have a direct effect on your sales. Try using eCommerce help desk software to simplify your customer service on whatever channel you’re selling on.
  • Ask for reviews: If you’ve sold a product to a happy customer, or resolved an issue and delivered a positive outcome, why not ask them for a review? It might seem obvious, but simply by asking nicely you can increase the volume of your positive feedback. Make sure that you don’t ask specifically for a positive rating however, as this is against most marketplaces’ terms and conditions.
  • Accounting: You need to keep track of outgoings and profits to make sure you’re paying the correct tax and staying compliant!

Can you make a successful business with online arbitrage?

Lots of articles out there makes online arbitrage sound easy. But it’s not a get rich quick scheme. There’s a lot of work required and, no matter how good you are, it will be months before you build up enough income to sustain a business.

Online arbitrage is something that you should consider as a project within a wider business plan. If you find a niche, online arbitrage can help you to get started, but at some point you should find a more profitable way to scale.

Did you know that over 60% of US online retail purchases were made through Amazon last year? Amazon’s hold over eCommerce is well established, with 9.1 million active Amazon sellers worldwide and an average of 66 thousand orders per day. Newer sellers may be wondering how they can get more sales on Amazon in such a competitive environment.

The truth is, they absolutely can because with Amazon’s booming market share come many opportunities. We’ve assembled this digestible list of 14 quick wins and strategic moves, to help you up your game and sell more on Amazon.

1. Do keyword research

Having the right keywords can be one of the most important tactics in reaching your target audiences. Using the keywords that are common to searches for your products is the objective, but search engine optimisation (SEO) is a constantly evolving game. That means that keywords used successfully in the past may not be as effective with updated search engine algorithms today.

The terms used by customers to find products change daily and are affected by seasonal, cultural, and economic factors. Hence, it’s important to stay on top of the latest SEO trends and make sure you cast a wide net when implementing keywords for each product listing.

Each product should be optimized with as many relevant keywords as possible – into the hundreds! This gives you the best possible chance of getting your products found by customers, helping you sell more on Amazon.

Amazon keyword research tools like Helium 10, SellerApp, Jungle Scout, and AMZ One can help by generating a list of related keywords with search volume, competition level, and other useful metrics, making it easier for you to choose the best keywords for your product listing

2. Use a repricing tool to get more sales on Amazon

When it comes to sealing the deal and making a sale, price is a main deciding factor for many customers. As an Amazon seller, you always want to make sure you’re pricing your products competitively, but equally, you don’t want to lose your margin! 

This is something that using repricing software can help with. Repricing software automates the pricing process in real-time, ensuring your prices stay in line with those of competitors, and with market fluctuations, while you get more sales on Amazon.

Repricing software also has many customisable features that allow you to set prices at optimal levels to help drive sales, without compromising profit. It’s worth taking a trial to see how it can help lift your sales. 

3. Get more Amazon reviews

Online reviews are important to spread confidence through word of month and for building credibility for your brand. It’s also a fact that 72% of shoppers won’t buy until they’ve read reviews of a product from people like themselves – people they trust. 

Even a strong product with great marketing behind it still has to overcome the fear of the unknown if there’s no social proof. Plus, positive reviews are a significant factor in deciding which products win the Amazon Buy Box.

Get more Amazon reviews by encouraging feedback from your customers. The best way to do this is by utilizing feedback software to automate the process.

4. Provide great customer service

Customer service is absolutely essential in eCommerce. Offering top-quality customer service not only adds value, but helps retain customers. A big part of making a sale is assuring the customer that they can trust you to deliver, and that trust is hard earned but easily lost. Providing good eCommerce customer service is critical, and committing to providing great customer service is all the more so!

As an Amazon seller, you need to be on top of your customer service. Responsiveness, a friendly manner and quick and easy resolution processes are all ingredients that make for a winning approach to great customer service. 

But it can be confusing trying to streamline it all. Thankfully, there are all sorts of tools available to make this job easier, like helpdesk software to keep all your customer interactions in one place. This helps you to respond quickly and accurately to customer inquiries when they come in, so that your customers always know you’ve got their back.

5. Leverage Amazon seller tools

The best part about being an Amazon seller is that you don’t have to go it alone. There are numerous tools available to help you maximize your business and get the most out of selling on Amazon, whether third-party or FBA. 

From repricing tools, to help desk software, to review software and even shipping assistance, many tools exist on the market today that specifically help Amazon sellers optimize their listings, prices, feedback, shipping, customer service and even their taxes. 

There are many different seller tools available, so it’s worth reading about options and making an informed decision about the right ones to choose for your business. With the right tools, you can grow your business more than you ever thought possible. 

6. Get more sales on Amazon with ads

Running ads is almost guaranteed to help you get more sales on Amazon, but it’s easy to just throw money at them and hope for the best. You can do better! Pay attention to your advertising cost of sales (ACOS) metric, the figure for how much ad spend you need in order to make a sale.

By advertising more efficiently, you lower your ACOS and ensure you get more bang for your buck. Over time, you’ll learn what works and you can employ a strategy with regards to how you run your ads. Taking an insight-driven approach to Amazon ads results in a more profitable Amazon business!

7. Optimise your product pages

The old saying goes that 80% of readers never make it past the headline of any piece of content. That means once you’ve written your product title, you’ve effectively spent 80 cents of your dollar.

When writing product titles, stick to the formula of:

  • Brand name
  • Product name
  • Features (size, colour, gender etc). 

This lets you include the right keywords in the right order to immediately tell shoppers that this is the product for them.

Moreover, making sure to visually design your product pages so that they’re clean, simple and easy to read will also help win over shoppers. No one wants to read through a cluttered page. The more straightforward (yet informative) and the cleaner you make your design, the more likely you’ll be to win over those elusive eyeballs!

8. Win the Amazon Buy Box

The quickest way to get more sales on Amazon is by ensuring that your products show up consistently in the Amazon Buy Box (the area in the top right of a product page, where shoppers can ‘Add to Cart’ or ‘Buy Now’). This is because over 82% of sales happen through this highly sought after space.

Although the exact formula to win the Buy Box is unknown, there are a few things that we know are essential. These are mainly metrics that prove the seller is providing a good customer experience. Customer reviews play a big role here. The more positive reviews a seller can amass, the likelihood of winning the Buy Box increases. 

In addition to reviews, something else that’s obviously very important to Amazon shoppers is price! By using repricing software, you can automatically set your prices at the optimal level to win the Buy Box and maximize profit, even if you’ve got an enormous inventory.

9. Amazon account health rating

The Amazon account health rating (AHR) is a new feature that helps you monitor your account health based on its adherence to Amazon seller policies. 

It considers both negative factors (such as the number of unresolved policy violations on your account) as well as positive factors (how your account positively impacts the customer experience through its selling activities). 

Each account will be given a rating, which is regularly reviewed as Amazon monitors the performance of its sellers. If your account is off-target, you will be notified so that you can improve your performance. Conversely, a good AHR rating will work in your favor, helping assure customers that they’re doing business with a compliant seller. 

10. Maintain your Amazon SLA

A big part of being a seller is cultivating trust with your customers. That means showing them that you operate in an above-board manner and that you’ll make good on your promise of fulfillment to them. One way of doing that is by making sure your Amazon store has a Service Level Agreement (SLA). This is a promise to your customers that they’ll receive their orders on time. When it comes to fulfillment, the SLA is based on the capacity to fulfill open orders and on-time shipping and delivery. 

SLAs help manage customer expectations by defining standards and outlining circumstances under which you as the seller won’t be liable for unfulfilled promises (e.g., natural disasters preventing shipping, etc). 

eDesk’s customer service solution is designed to alert you when your SLA is expiring, so your business is never caught without one. Having a current SLA helps you maintain transparency with customers, thereby building trust which helps ensure customer loyalty.  

11. Focus on products that already sell

Most ambitious business owners want to try new streams of revenue, but it’s important not to lose sight of the things that are making you money now. 

By doubling down on the products that already provide your Amazon store with a reliable revenue stream, you not only deliver to market demand but ensure that you have the financial runway required to take risks on innovative new products, if need be. 

Review your financial statements every quarter and look at the items that are performing best in your store. Think about how you can continue to market these with ads, SEO keywords and upgraded images to maximize their selling potential in your online store. 

12. Sync your inventory

Inventory can be a delicate balancing act. Hold too much inventory for too long and you need to pay over the odds to store it. But hold too little inventory and you lose out on vital sales, or even customers, due to an inability to fulfill. Amazon can also penalize you if your inventory performance isn’t up to standard.

Stock control is something every seller needs to understand and have the capability to manage for optimal results. Smart inventory management is an under-appreciated way to increase your Amazon sales and profit margin. Fortunately, there are tools that can help. Investing in the right tools and software can help sellers take the stress out of balancing supply and demand.

13. Expand into new Amazon marketplaces 

Amazon currently has 20 marketplaces around the world, which include the US, Canada, Mexico, UK, France, Germany, Italy, Spain, Japan, Singapore, Brazil, Australia and more. 

You can scale your brand by moving into some of these marketplaces. This can involve doing market research to find out which products are popular in each market and then uplevelling your shipping operations in order to be able to ship globally.  

But expanding into new markets also means you’ll need to take language into consideration and localize your listings so that they feature each marketplace’s local language and SEO keywords in the appropriate language. Multilingual customer service is also needed in order to be able to service customers across various marketplaces in their local language. 

Sounds complicated? It doesn’t have to be. eDesk’s help desk solution is designed to support customer service and workflow in multiple languages, so you can expand your business without investing in the overhead of hiring a global team. 

14. Spy on your competitors

Ok, maybe “spy” is a bit of an exaggeration, but profitable sellers are always on the lookout for what their competitors are doing. You want to make sure you’re offering the right inventory for your market at the right prices. Repricing software will monitor this for you, taking the guesswork out of pricing at the right levels. 

Using data gleaned from helpdesk reporting can also help you gather valuable insights and feedback from your customers, which will help you to better understand what customers want and need. Acting on analytics-driven insights from easy-to-read reports means you’re always one step ahead of the competition. 

Final thoughts

The quest to increase your store’s Amazon sales doesn’t need to be an uphill struggle. There are many resources available to Amazon sellers today to help them optimize their store and develop a healthy sales pipeline. 

By staying in touch with how the Amazon platform grows and using the right tech tools to drive your business, you can continue to do what you do best: building a great brand, winning customers, retaining existing customers and improving your bottom line. 

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