Market arbitrage is the buying and selling of the same item in different marketplaces to profit from the price difference between the two markets. An arbitrageur buys a lower priced item and short-sells the higher priced one, making a profit on the spread between the two.
It's a popular way to make money online, especially with open marketplaces such as eBay.
How to Apply Market Arbitrage to eBay
To make money, you have to buy things for which there is a demand at prices you can make a profit on. One way to discover which items are in demand is to use research software that incorporates sales data from eBay's' Market Data Program. Software such as Hammertap, Terapeak and MarkSight illustrate which items generated the most bids, which items actually sold and the price at which they sold. This data provides crucial information, including:
– The average selling price of products you intend to re-sell
– The buying behavior of demographic groups
– Items for which there is more demand than supply
– Items that sell quickly
– The best time of the day and week to sell
– The effect of shipping costs on the final sales price
– General information about the target market for specific items
To apply arbitrage to your eBay business, simply research the item to determine the average selling price, buy it at a price that will maximize your profit when it sells and list it on eBay. Researching items before you buy can prevent you from buying things for which there is no demand. In other words, products that will be hard to move or that won't have a high profit margin.
Related: How to make a living selling stuff on Amazon (and let Amazon handle the shipping!)
Where to Find Products to Sell Using Arbitrage
The secret to success is buying products for resale at the lowest possible price. Once you know where to find products, you can look them up on your research software, compare the cost of the item to the potential sales price and determine if it's a potential money-maker.
Here are some options for finding low-cost items that are often in demand on eBay:
#1 – Garage Sales
People often have garage sales when they are cleaning or moving and need to get rid of things. Since their goal is to get rid of stuff, items are usually priced to move.
#2 – Estate Sales
Estate liquidators sell the contents of homes when people pass away, move to nursing homes or simply need to downsize. Sometimes they need to empty a house quickly, so liquidators sell groups of items by the box or lot. You can then sell the items individually at a profit.
#3 – Municipal Public Auctions
Many police departments have periodic auctions where they sell unclaimed items and confiscated property very cheaply. Cities and counties also sell used and surplus equipment. Contact your local sheriff's office or municipal office for their public auction schedule.
#4 – Storage Unit Auctions
Storage companies auction the contents of unpaid units. You can find everything from working appliances and electronics to household goods, jewelry and collectibles.
#5 – Liquidation Stock
When a company is liquidated, the inventory and fixtures may be sold either by the pallet or individually. Retail store liquidations usually involve brand new merchandise.
#6 – Overstock
Business owners often sell goods that didn't sell as planned to clear shelf space or even to improve cash flow. It is usually new stock. Overstock may also include items returned to stores and can't be sold such as merchandise that is out of season.
These sources do not involve any shipping costs, making them the cheapest arbitrage options. However, you always need to be on the lookout for these buying opportunities.
Here are some online sources for low-cost items:
#7 – Wholesale Clearance Companies
Wholesale clearance companies buy stock in large quantities from catalog companies and retailers and resell it. Since they buy in bulk, they sell at far below retail prices. These types of companies are popular in the UK, so shipping costs are frequently less prohibitive.
#8 – Buying on Amazon and Selling on eBay (drop shipping)
Drop shipping is when you list an Amazon product on eBay for a higher price, usually a 15-20 percent markup. When the item sells on eBay, you buy it from Amazon and ship it to your eBay customer
#9 – Buying from Walmart and Selling on eBay
This can work well if you are in the US, where you can find deeply discounted merchandise at Walmart. High demand products include: jerseys, sports team merchandise, electronics, Disney licensed products, seasonal items, children's toys and action figures, and discontinued items, especially cosmetics and skin care products.
#10 – Buying and Selling Internationally on eBay
You can buy items from an eBay account in one country and sell them in another, for instance, buying on eBay.ca (Canada) and selling on eBay.com (US). However, you may need to have two eBay accounts so that your buyers don't see you buying in one country and selling for twice the price in another. You also have to make the sure you don't lose money on international shipping, duty and taxes.
#11 – Buying by the Pallet
Buying by the pallet involves buying goods at wholesale and re-selling them at retail prices. Pallets are sold by companies that buy salvaged merchandise in bulk. This can be profitable but is also risky because you can't see what's inside the pallet and you might end up with damaged goods.
Bottom line, arbitrage is a great way to make money from home. However, to be successful you need to keep your costs low. Always be on the lookout for local sales and online buying opportunities, and remember to add shipping and taxes to the product costs.
Finally, use market research software to determine what will be profitable and what won't – limiting your purchases to items that are in demand and that you can sell at a profit will make your eBay business successful.
Interested in another way to earn a living selling stuff online?
Amazon FBA (Fulfillment by Amazon) is something many people are doing now to earn a living selling stuff online. The great thing about Amazon FBA is that THEY ship to your customers — not you! You just source the items, ship them in bulk to Amazon, and they do the rest!
If this is intriguing to you, you can sign up for this FREE 7-day email course from Jessica and Jeff Larrew (6-figure Amazon sellers) to learn more about how it all works.