If you type in the phrase “Online arbitrage on Amazon” in the search bar, you will get dozens of articles on how to “make money” without investment and effort using a “proven scheme”. Doesn’t sound too credible, does it?
Let’s take a look at what the online arbitrage sales model really means, how much money you can make on it, and when exactly Amazon will ban you.
What is online arbitration on Amazon?
In the classic version, this model means a banal resale.
For example: you’ve found a portable speaker that sells well on Amazon and costs $39.99. Your next task is to use price aggregators (or other methods) to find this product cheaper.
Let’s say a store has a sale, and you manage to buy 30-50 units of this equipment for $19.99. You place your speakers in a ready-made listing (you join the advert you found initially), so you don’t even spend money on advertising. Profit!
This is how Amazon arbitrage is described in various articles on the Internet. The profit will be 50 x ($39.99 – $19.99) = $1,000 in 5-7 days! Of course, you should take into account the various overheads and commissions of the system… but no one forbids you to sell several other products at the same time with a markup of up to 200%.
And this is where we run into the first obstacle: Amazon officially prohibits reselling goods from other marketplaces.
How will the system know about this? Sooner or later, as a seller, you will be asked for product documents – invoices (which you, of course, will not be able to provide). It may happen in a day, or it may happen in a year. But it will happen for sure. And your account will be banned (usually without the possibility of restoring it and returning the funds).
An important clarification. This scheme assumes that you buy and sell goods in the US. If you make purchases from suppliers from China, send them to the warehouses of the trading platform and have all the documentation in hand, then this is no longer online arbitration, but absolutely legal business under the Fulfilment by Amazon model.
Is it worth using the “online arbitrage” sales model on Amazon
In our opinion, this is more of a way to make quick money with huge risks than running a business. Like everything called a “money-making scheme”, this method has short-term prospects and not the most pleasant consequences.
For example, you can get into trouble with the bank, which will pay attention to dozens of suspicious transactions.
Nevertheless, there are a lot of advantages of making money on online marketplaces on the Internet:
- quick and easy start (you can launch in a few weeks);
- minimal investment (from $500 for one product);
- flexible product search options (you are not creating a brand, so you are not limited by the concept and can sell pans/rattles/hair bands at the same time).
Sometimes, fans of online arbitration warn that you will have to have a lot of accounts to stay afloat when the first ones start to be blocked. They also “honestly admit” to other disadvantages:
- Due to high competition, it is quite difficult to sell TOP products;
- this is not a predictable scheme, as prices in markets and marketplaces are constantly in flux;
- it is necessary to constantly increase the speed and look for new product positions.
What are the alternatives?
We have already written a lot about popular business models on Amazon, and our opinion remains the same: the best option for building a successful and stable project is to work with Private Label.
However, we understand that this is also the most expensive model. Therefore, newcomers might be advised to start with wholesale (i.e. purchases from product manufacturers). In this case, your activity will not violate the rules of the marketplace.
We also recommend reading why dropshipping to Amazon is not the best solution.