Did you know that you can make money on Amazon FBA by shopping online from your couch?
With Online Arbitrage, you can shop for inventory on your computer and then send it off to Amazon FBA warehouses to sell for a profit.
And thanks to improved automated sourcing tools, you can even find profitable deals while you sleep!
I know, I know – it starts to sound a little too good to be true.
But Online Arbitrage is a popular, profitable, and totally legitimate business model. And it works especially well when used alongside Amazon's Fulfillment by Amazon program.
Online Arbitrage has many of the same great benefits as Retail Arbitrage…but without driving all over town and standing in lines at Walmart!
A lot of people who know I'm a Retail Arbitrage expert want to know what I think about Online Arbitrage.
Well, I personally love it! And by the end of “Online Arbitrage 101,” you'll know if online sourcing is right for your Amazon business.
In this Ultimate Guide to Online Arbitrage, I'll cover what you need to get started, sourcing information, profitability, and a list of my favorite online sourcing tools.
If you're looking for a proven business model that's easy to scale, keep reading to learn more about Online Arbitrage.
What is Online Arbitrage
If you're already familiar with Retail Arbitrage, then you probably have a good understanding of Online Arbitrage (OA).
With Retail Arbitrage, you buy items at brick & mortar retails stores like Walmart or Walgreens and resell those items for a higher price. And here at The Selling Family, we're specifically reselling our inventory on Amazon.
Well with Online Arbitrage, instead of sourcing inventory from the physical locations of retail stores, you order from those stores' websites instead.
This doesn't require a special Wholesale license or any kind of insider deals. You're just doing online shopping but with the intent to resell your items for a profit on Amazon.
Here's a simplified version of how Online Arbitrage works when paired with Amazon FBA:
1. Head to a retail website like Walmart.com
2. Look for items that you can buy from Walmart.com for a low price to resell on Amazon.com for a higher price
3. Place an order for those items and have them sent to your door
4. When your inventory arrives from Walmart.com, unpack the items, list them on Amazon, and then ship them off to an Amazon FBA Fulfillment Center
There's a little more to it than that (like learning how to find profitable items!), but we'll be getting to that shortly.
Online Arbitrage isn't for everyone, so I want to start by sharing a few pros and cons.
Pros of Online Arbitrage:
- No driving around town looking for inventory (which can be difficult for people with full-time jobs or young kids)
- Product arrives at your door (free packing materials!)
- You can order higher quantities of items than typically found on retail shelves (this is great for replenishables)
- Relatively easy to scale (because you could easily spend thousands of dollars on inventory in a single online sourcing session)
Cons of Online Arbitrage:
- Higher learning curve due to an overwhelming number of stores to source at
- If you're not handy with Keepa, prices may tank on Amazon before your inventory even arrives
- Harder to tell if the item you're buying actually matches the Amazon listing (especially if the retailer website doesn't list the UPC)
- Profit margins are generally lower than Retail Arbitrage
Every Amazon business model comes with a set of pros and a set of cons. What's great is that you can pick one (or several!) that works for you.
If you'd like to learn more about different types of Amazon businesses, check out this post: The 5 Most Popular Business Models For Selling On Amazon.
Just want to know more about selling on Amazon by sourcing online? Great! Keep reading 🙂
What Do I Need to Get Started?
If you don't already have an Amazon selling account, you'll need to go ahead and set one up right here.
Amazon will walk you through the process, but you will have to decide if you want an Individual or Professional selling account. I have a blog post that explains the difference if you need help deciding.
Once you have your account up and running, there's really not a lot left to do!
You will, of course, need a computer, internet access, and some money to spend on your initial inventory purchase.
If you're brand new to Amazon FBA, you'll also need some basic supplies. Here is a list of tools that Cliff and I use the most in our Amazon business.
There are a lot of other tools out there that will help streamline your online sourcing process, but they're not essential to get started. I'll be sharing some of my favorites later on.
Making Money with Online Arbitrage
I'm guessing that you don't want to learn Online Arbitrage “just for fun”. If I wanted to shop online for fun, I'd keep all of the items for myself!
To make a business out of shopping online, you need to actually make money on your sourcing. That means you need to buy items at a low price that you can sell for a higher price.
For many new sellers, this seems impossible. “Why would someone pay more money on Amazon for something they could order for less on Walgreens.com?!”
Well, there are a lot of reasons why. And all you need to know is that people do choose to shop on Amazon (even if there are better prices somewhere else online).
Maybe you found an item on sale that other shoppers didn't know about. You may also make money by buying items with special coupons, cashback deals, or with rewards points/cash.
At the end of the day, the Amazon buyer doesn't know what you paid for your inventory. They're probably just happy to get exactly what they want shipped to their door straight from Amazon (and usually with free 2-day or same-day Prime shipping!).
There is no shortage of profitable inventory available for purchase online. You just have to know where to look (which is exactly why you're here!).
Your Amazon Profit Variables
Here are the numbers you need to keep in mind when you're looking for profitable inventory:
- Your purchase price (plus any shipping costs and sales tax)
- Amazon Fees
- Inbound shipping costs (these are more affordable than you'd think!)
- The selling price on Amazon.com
Basically, take the Amazon selling price and subtract your total costs and total fees. If there's money left over, then you can make a profit on that item!
Don't worry, thanks to helpful tools and calculators, you don't have to do too much math to figure this out. Even the free Amazon FBA Revenue Calculator can calculate your profit!
How to Find Items to Sell
When you source online, there is basically unlimited inventory. Plus, you can shop for it 24 hours a day!
One common complaint that I hear from my Retail Arbitrage students is lack of stores and inventory.
I'm lucky enough to live in an area with multiple Targets, Walmarts, liquidation stores, and a drugstore on every corner.
But many people in smaller towns may have one Walmart, a local grocery store…a not a lot else.
That's the beauty of Online Arbitrage. No Target? No problem! Just head on over to Target.com and grab those deals.
Looking for Inventory on a Retail Website
Let me show you a quick walkthrough of what I call manual online arbitrage. That's doing OA without the help of any tools or software to speed things up.
When you do online arbitrage this way, you just pick a website, look for an item, and then try to find the matching ASIN on Amazon.com
Today, I decided to head over to Barnes & Noble's website to see if they had any sales going on. I noticed that they were having a sale on the Party Popteenies brand of toys.
That led me to this product on bn.com:
Now I need to see if this item is also on Amazon. I can copy the product name from Barnes & Noble and paste it right into the Amazon search bar:
This search brings up 3 different products, but I can tell from the photo that the first one is probably it.
Sometimes it's a bit trickier to tell if you've found the right product or not. That's when searching by UPC code helps. This makes it a lot more like scanning an item in-store with the Amazon Seller App barcode scanner.
Not all retail websites will list a product's UPC code. But when they do, it's the best way to find a true match on Amazon.
On the Barnes & Noble website, the UPC is listed near the bottom on the page in the “Product Details” section. It may be in a different place on other store websites.
So now I can simply copy the UPC and paste that into the Amazon search bar:
Perfect! That brought up just one result so I would feel pretty confident that this one is a match.
You'll need to repeat this process for every product you find on a retail website.
The Best Stores for Online Arbitrage
Now that you know how to search for matching products, you probably want to know the best online arbitrage websites.
Here are 10 of my favorite stores for online sourcing:
- Disney Store
- Academy Sports/Outdoors
- Home Depot
- Christmas Tree Shops
I keep a list of my 30 favorite stores for online sourcing (plus links) here: Top 30 Recommended Retail Stores For Online Sourcing
Check out that list, visit a few sites, and see if you can find some matching products on Amazon.
Tools to Save You Time and Money
Once you've got the hang of finding matching products, it's time to move on with more product analysis.
It's great to find matching products, but before you buy them, you need to know if those items are even worth selling on Amazon FBA.
But before we get to that, I want to share some tools that are available to improve the efficiency of online sourcing.
You probably already realized that searching for items manually is kind of time-consuming. Plus, those methods don't help you determine profit or sales frequency.
With my Party Popteenies example, you may have already noticed that the selling price on Amazon isn't high enough to cover the price I'd pay at Barnes & Noble…even with the special sale going on.
So it's important to have other tools in place that will help you make smart buying decisions.
Here are my must-have tools for online sourcing. Remember, you don't have to start with these right away, but they will help you run a more profitable business by saving you time and helping you understand your numbers more clearly.
I have to start with a big one. Source Mogul is automated online sourcing software. You can use it to automatically search hundreds of retail websites and compare those items to matches on Amazon.com.
This means that you can start a search, walk away, and come back to view and analyze all of the matches. Source Mogul is a MAJOR time saver and changed the way I view Online Arbitrage.
If you want to see it in action (which is kind of necessary to understand how it works), read my full review and watch a demo video here.
RevSeller is probably my most-used tool. It's a Chrome extension that works as an on-page profit calculator.
This means that when you're analyzing a product on Amazon.com, Rev Seller will automatically show you that item's fees and profit.
What a huge time saver when compared to keeping the FBA Revenue Calculator open in a separate window and copy/pasting. I can't imagine life without RevSeller!
The regular cost is $99 per year for the RevSeller extension and you can get a free 30-day trial when you sign up for RevSeller. I have a coupon code that will save you $20 on the cost of your first year. Enter code THESELLINGFAM at checkout to get one year of RevSeller for just $79!
Inventory Lab is my favorite listing software. It's also how I make sure that each item I sell is profitable. And, of course, it also includes access to Scoutify 2, my favorite scanning app.
But a lot of people don't know that InventoryLab also has a research tool that's perfect for online sourcing: Scout.
Scout is a lot like Scoutify but for your computer. When I search for the UPC of the toy I found on barnesandnoble.com, here's what Scout shows me:
This can be a great way to analyze a product if you're not already using software like Source Mogul to crunch the numbers for you.
Other Essential Online Sourcing Tools
To make my business more efficient, I use quite a few more tools for online sourcing. I'd encourage you to read the full list of my Top 14 Tools for Sourcing Amazon Inventory Online.
That's the best way to learn which tools are out there so that you can see which ones could help your business the most. Some of them are free, some are cheap, and others are pretty pricy. So only you will know when it's the right time to invest in paid tools for your FBA business.
Once your business is consistently profitable, it's smart to add paid tools that will help you source inventory faster. You'll be surprised how much your sales increase once you start buying and sending in more inventory.
How to Tell Which Items are Worth Selling on Amazon
Ok, let's say that you've found some matching products on online sourcing sites and Amazon. It doesn't matter if you found them with paid sourcing software or with copy/paste manual OA.
Once you've confirmed that you've found matching inventory, you need to decide if this product is a good candidate to sell on Amazon.
You'll need to evaluate a few things:
- Will this product make a profit if sold on Amazon?
- Is this product likely to sell (within a reasonable time period) on Amazon?
- Are you allowed (approved) to sell this product on Amazon?
For me, if it doesn't make a profit, I don't need to do any further research. So let's start right there.
How to Calculate Profit with Online Arbitrage
As I mentioned earlier, you need your Cost, Amazon Fees, Inbound Shipping (estimated), and Amazon Selling price to calculate your profit.
Amazon has a free tool available that makes this pretty easy: Amazon FBA Revenue Calculator. You can even use this tool before you have a selling account.
After you search for a product by UPC, ASIN, or name, you'll need to fill in the blank fields:
Be sure to use the “Amazon Fulfillment” column if you're planning on using FBA!
Once you fill out the fields, click the “Calculate” button to see your profit.
You should already know your Cost (be sure to include any tax or shipping costs). And the “Item Price” is typically the current Amazon Buy Box price.
Not sure what to put in the “Ship to Amazon” box? I recommend using a rate of $0.50/pound. Since Amazon tells me that this item weighs 2.5lbs, I can enter $1.25 for my estimated inbound shipping costs.
Amazon calculates the fees for me based on the actual ASIN, so I don't have to enter anything there.
So with all of that information entered, I can see that this product has a profit potential of $5.62. That's great for an item that only cost me $5.
You'll need to repeat this process for every item that you find with online arbitrage.
Using the FBA Calculator for each item can be a little slow. This is when I would recommend using Source Mogul (which would do all the calculations for you behind the scenes) or RevSeller (which speeds up the profit calculations).
Maximize your ROI with Cash Back and Coupons
Now an item like that shampoo with a 100% ROI is a no brainer. But sometimes you'll find a product that doesn't quite meet your personal ROI criteria.
Say you've found a product that looks good but the ROI is only 20%. You're not sure if it's worth sending in.
Before you bail, see if there's any way to boost your ROI.
My favorite way to increase my ROI with Online Arbitrage is by using cashback sites.
When you use a cashback site, like Rakuten, to source inventory, you can quickly earn lots of “free” cash on your purchases.
Now some people might just want to pocket that cash for fun money. But you could also consider it a discount on your purchase price (which would increase your ROI).
If you're new to cash back, read my full review of Rakuten and see how I've used it to earn nearly $12,000 in cash back!
In addition to cash back, keep an eye out for sales and coupons! A storewide 20% off coupon code could turn a meh product into a winner!
Go ahead and join the email lists of stores you frequently source for OA. That way the special sales emails will land in your inbox. You can always use labels and filters in Gmail to keep them from cluttering up your main inbox.
If that doesn't work for you, consider using a service like RevROI which scans each website for the best cashback deals and coupon codes.
You can grab the RevROI extension here and then you can download the extension immediately after payment.
Heads up – the price for The Selling Family readers is $5 less than you can get anywhere else 🙂
By stacking cashback deals with coupon codes, you can start to increase your savings (and your profits!) rapidly. You can stack even more by purchasing discounted gift cards online.
Get creative! The options are endless when you need to make more money with online sourcing.
Analyzing Sales History
It won't be long before you come across some inventory that looks like it makes tons of money. But there's a catch….
It hardly ever sells on Amazon!
Even if the profit is great, you don't want to tie up your money on inventory that's never going to sell. It's better to find inventory that sells relatively quickly so that you can reinvest in more products.
To determine this, you need to understand a product's sales rank. I teach my own sales rank guidelines in my Amazon Boot Camp course.
When it comes to Amazon sales ranks, lower numbers are better. You can see this information on any product page (and at a glance with a tool like RevSeller).
For online arbitrage, a product's sales history and sales velocity matter a lot more than just the current sales rank. Tools like Keepa and Helium 10 can really help you do better research.
Here are a couple of blog posts that you can read to brush up on your sales history skills:
Checking Amazon Restrictions Online
There's one last important thing to check before hitting “Buy Now” on a retail website: product restrictions!
I find that it's a lot easier to forget about Amazon restrictions when doing Online Arbitrage than Retail Arbitrage.
When I'm out in stores, I know to rely on my Amazon Seller App to instantly show that red Restricted warning. But at home, I sometimes forget this step!
You can check each product individually in Seller Central using the “Add a Product” tool. But you have to remember to do it for each item you're considering buying.
If you want to make restrictions a no-brainer, use a Chrome extension like CheckPermission to show you at-a-glance product restrictions on every Amazon page.
Restrictions vary from seller to seller on Amazon, so it's important to know your restrictions before you buy inventory. There's nothing worse than having a bunch of OA goodies delivered….only to find out that you can't sell them on Amazon!
Ask me how I know…
If you're unsure of your approval status, check out this guide that I wrote:
Getting Your Inventory to Amazon FBA
The last piece of the online sourcing puzzle is getting your inventory to Amazon FBA Fulfillment Centers.
If you've never used Amazon FBA before, you might want to go back and read my Beginner's Guide to FBA.
But for today, I want to cover a common question I hear about online arbitrage:
“Can't I just have my OA inventory shipped directly to Amazon?!”
I'm afraid not.
Remember, you're ordering this inventory from regular retail suppliers. You can't really expect Walmart to log in to your Seller Central account, pack your items into multiple shipments, and print off your shipping labels.
I think it's really important that all new Online Arbitrage sellers have inventory shipped directly to their home (or office).
This gives you a chance to personally inspect the items for damage and any other discrepancies (like a change in packaging that doesn't match the Amazon listing).
It's not much trouble to unpack your OA shipments and repackage them into FBA shipments. Plus, you get free boxes and air bubbles to use!
Third-Party Prep Centers
Once you have a few shipments under your belt, you might want to outsource your OA prep. While you can't ship direct to Amazon, you can have your items shipped to a third-party prep center.
This is great for international sellers (outside the US) or anyone who is really looking to scale their business (without buying their own warehouse!).
Each Prep company should have their own rules, but most will charge you a per-item fee to prep and ship your items to Amazon.
They may even be able to package up bundles and multi-packs for you (for an extra fee).
Note that using a prep center will reduce your profits, but it might be worth it if it allows you to buy and ship more inventory.
I personally still do my own OA prep (with help from Cliff and Aiden of course!), but I know a lot of people love using prep centers for a more “hands-off” Amazon FBA business.
Ready to Start Your Amazon Online Arbitrage Business?
Now that you know the basics, what do you think?
Are you ready to get started?
If you can read this blog post, then you can give online arbitrage a shot! Try it using the free methods just to see if you like it.
But if it's getting too tedious, remember that using the right tools will make things a lot easier and more profitable.
Don't hesitate to ask questions in the comments below. And if you're already an OA pro, please share your favorite tips and tricks with newer sellers!