Amazon Arbitrage allows you to utilise Amazon’s world-wide presence to sell products you don’t own, for profit! As Amazon is the go-to site for approximately 40% first purchases online, the potential reach of this is astronomical.
The Amazon Arbitrage concept is similar to dropshipping and eBay arbitrage although it does have some areas of uniqueness that we will examine. The basic premise is that you sell something on Amazon for a higher price than the price you paid your supplier. You do not have to stock or warehouse anything. You are simply the middleman.
Different Methods of Selling on Amazon
There are several different methods for selling products on Amazon. You can buy products and ship them to your own location, sell them on Amazon and then mail them out, however, this is expensive, risky and time intensive so we do not recommend it.
FBA stands for “fulfilled by Amazon”.
Essentially, you buy products in bulk and have them delivered to Amazon’s warehouse. Then, when an item is sold Amazon take care of everything – picking up, packaging and delivering to your customer – you sit back and take a margin for doing relatively little.
Amazon FBA does cost more because they are holding your stock, however, the cost for the first six months is very cheap, especially compared to the cost you would otherwise pay for warehousing. After six months, there may be penalties. Please see their full guide here.
Your second option is to secure deals with suppliers who can ‘dropship’ in your country (‘dropshipping’ simply means moving goods from the manufacturer directly to the retailer without going through the usual distribution channels). It is not necessary for the drop shipping company to sell your product as they usually would. Rather, you can pay for the item and add the shipping address of the customer from Amazon. Listing products on Amazon costs nothing, so you can continually expand your range. Once a customer purchases your product through Amazon you pay your supplier and provide shipping details. You can then communicate tracking numbers etc to your customer.
What Products to Pick?
There are many strategies used by successful dropshippers but there are some definitive commonalities amongst everyone:
- Search for a niche or two you already have some knowledge of, dig deeper into that niche and research gaps in the market or opportunities for sourcing a better product at a better price. Description, pictures and customer service are just some of the ways to stand above the competition and be successful.
- Aim to sell most items for double what you are purchasing them for, this will mean after all the fees and your time there will be a healthy profit
- Mostly sell products that retail between $80 – $250. This allows room for a good margin and the ability to undercut competitors.
- Search for some high priced items. You will make a smaller percentage on each sale but will make a larger profit overall by virtue of their price point. Usually stick to markets you know or products you are familiar with. You will also need reliable suppliers
Choosing a Niche
When starting out, you may find it hard to find a niche. The best thing to do is begin. Take out some note paper or an online document and begin taking notes on your research.
- Think of different areas of your life, including hobbies and sports or even products you use, like or want and start looking on Amazon to see what is selling.
- Look on Amazon and without typing anything in the search bar start looking at the categories and subcategories supplied by the website. Dive deep down into niches. The Amazon store, like most online stores, is organised into departments and sub-departments. Use this structure to research niches and products.
- Use the random store selector; keep pressing the button to reveal completely random products. Find them on Amazon, see what niche they are in and look at related products – www.randomamazonproduct.com
- Go to Alibaba.com and search their products and departments. Many people buy products in bulk from overseas using Alibaba. Have them ship direct to Amazon’s warehouse and let Amazon take care of everything while you sit back and enjoy the profit.
How to Accelerate Success
Amazon search criteria are heavily focussed on its review system. It is in your interest to accelerate the review process. When deciding to sell a product on Amazon you need to choose wisely. You do not want to go for a popular item that has lots of sellers and thousands of reviews. Rather, find a niche that has 2 – 4 good sellers with not many reviews. The top seller may have quite a few reviews, however, it is ok to be second or even third; you will still make sales, especially if you can undercut the price or innovate on the product.
q but offer 20% more product. Twelve marshmallows instead of 10 for the same price as the number one seller. This will accelerate your success.
Reviews take time to build up. You may have to wait months for the volume of reviews to start accelerating your rankings and sales. Luckily there are services like www.amzrc.com that allow you to get products into reviewers hands quickly. You will either have to give away some products or sell at a large discount. This is a loss leading exercise to climb the ranks and sell more products consistently in the long term.
We recommend educating yourself further before starting an Amazon business. There are some great articles, podcasts and courses from people who are making a success of Amazon dropshipping.