MasterPlans is an 11-year-old business plan writing company located in Portland, Oregon. To contact us, call 1-877-453-2011 or email info@masterplans.com.
button preload
button preload

MasterPlans: The business plan experts. Custom business plans by professional business plan writers. Business plan consulting by professional business plan consultants.

How to Engage in Retail Arbitrage for Fun and Profit

I love my wife. She’s a great woman who gives me all the support I need to run a business in a tough economy. She also takes care of the house, cares for our six month old, pays the bills, keeps us socially active with our friends, and… doesn’t have an entrepreneurial bone in her body. (Unless marrying a guy like me counts.) I call her a “rules sheriff.” She’s never been one day late on a bill. She chides me for shortcuts and despises when I say things like, “due on the 1st, late on the 15th means due on the 14th to me” or “I think that sign is more a guide than a rule” when I cut across lanes. So last night when I was writing about how to make money online, she kept making me go back and forth between these links in search of proof I was somehow breaking a rule again. I assured her I wasn’t; these opportunities just exist now.

What opportunities, you ask? If you are unemployed, a stay at home husband or wife, or simply have time to burn, there is no reason you can’t start a small business with nothing but a credit card with a $500 limit.

I call it retail arbitrage. Back in college, before the Internet was anything close to the force it is today, a friend of mine and I made $50,000 in a single summer using retail arbitrage. We did it by buying and selling some ugly shoes you couldn’t get everywhere, especially if you had extra large or extra small feet. This was the heyday before suppliers caught on and shrunk margins to try to eliminate or drastically reduce market inequalities. (For the most part they’ve accomplished this now, but not entirely.)

In ’99 when my friend said, “Dude, those shoes are like $150 on eBay” pointing at the ugly foam-sided basketball kicks selling in the local outlet store for $29.99, I said “Well let’s buy a pair and check it out.” Two days later, we had $175 plus shipping in our PayPal account, and the scheme was born. Almost without fail, we were picking up a pair of shoes at an outlet store for $29.99, posting them on eBay, and getting back $110 a pair—mostly from buyers overseas where there was no outlet mall to speak of. When we discovered the “market inconsistency,” we fueled up my Toyota pickup and hit the road to every outlet store in Oregon, maxing out our credit cards by buying every pair we could find. We developed what we called “The Magic Margin”—the shoes had to be marked down either 70%, or be a really odd size (super small or pretty large) and marked down 50%. We found you generally get 70% of full retail value at auction on popular brands. Minus eBay fees and processing fees, we would net about a 90% markup per item—and if it we had several pairs to auction at once, which we often did, we could post them all really fast and our hourly rate soared. It was literally a $50k summer.

I haven’t sold anything on eBay in probably a decade, but even today when I wind up at an outlet store, I find myself mentally scanning for the “magic margin” we came up with and I assure you, it still exists.

What I noticed last night is that now you can find retail arbitrage available online too. (Never mind needing a Toyota truck—you don’t even need to leave your house!) Look here

http://bit.ly/a144QM. This trench coat just sold on eBay for $69.99, plus a $2 markup in shipping. However, you can buy this exact jacket here for $49.50, plus shipping of $7 (and if you wait, the price sometimes drops to $39.50 with free shipping) http://bit.ly/clgP7L. Once you back out the fees, you can still net a quick $10-$15 for what might take 15 minutes. That’s $40 an hour for nothing other than filling a market need by connecting buyers and sellers. I found this example in less than 3 minutes, which would lead me to believe it exists 1000 times over online.

So set up your own retail arbitrage business! Write off your home office, your Internet connection, and gather travel reward points on your credit card. It’s fun and easy! If you are unemployed, bored, or just curious about whether you can actually make money online… why not give it a try?

Tell us about your cool retail arbitrage finds. Once you have taken advantage, of course.

6 Responses to “How to Engage in Retail Arbitrage for Fun and Profit”

  1. ben afroilan says:

    Thanks, my friend. I have just started an independent business ownership with VOLLARA helping people who have breathing problems. I hate to say it but I have discovered that our nice-looking homes have become the residence of unwanted odors and harmful asthma-triggering particles. Again, thanks!
    Ben

  2. Steve S. says:

    Thanks for the great idea. Has me thinking about the possibilities already!

  3. elexis moore says:

    please keep me posted

  4. Ryan says:

    I really liked this post, so I thought I would expand on your comment about online retail arbitrage. Using online resources is the way to go. When you use the internet to discover your arbitrage opportunities you have the advantage of being able to sell before you buy, making it truly risk free. You can effectively implement dropshipping by waiting until your item sells before making the purchase from another online retailer. You may then specify the purchasers address for shipping and avoid the hassle of shipping products yourself. If you list your products for sale on Amazon, you can adjust your prices as often as you’d like, adjusting them for changes in retail prices and undercutting your competitors on Amazon until your arbitrage profit has disappeared.

    To really have an advantage over others, you would want to set up an RSS feeder that updates you immediately on price cuts at many different online retail stores. For my example, I have used an RSS feed to show me price changes in products at Newegg.com. The RSS can be found at camelegg.com, and will even update you on the biggest price drops among all products at Newegg.

    This example uses only Newegg and Amazon, but you’ll notice the huge amount of arbitrage available. First, look at the price offered at Newegg: [ bit.ly/bvWOh4 ]. I discovered a recent 50% drop in price to $1000+30 using my RSS feed from Camelegg which tracks price changes at Newegg. Now look at the Amazon price for the same product: [ amzn.to/b4DESt ]. At $1350+0 that’s a $320 difference. If you were quick, you may be fortunate enough to capture a large portion of this opportunity. However, the reality is there are likely going to be other arbitragers out there undercutting you before you are able to sell the product. If you look carefully you will see that there is another seller now selling this product for $1100+42. Assuming you undercut that seller by a penny so that the buyer would purchase from you, deducting Amazon fees you will receive $1049 when the product sells. This comes to an arbitrage profit of $19. This is true arbitrage because you won’t need to put up any money, store any products, etc.

    The benefit is that the process is highly automated. You aren’t searching for cheap products anymore as signficant deals are going to be fed to you through your RSS reader. Your only task is to make sure there is still an arbitrage profit when undercutting the cheapest price on Amazon. Listing products on Amazon is extremely fast because you do not have to post the product information yourself. I would argue listing a brand new product this way would take less than 2 minutes once you got the hang of it. You can then monitor your “inventory” to make sure you remain the cheapest until you sell the product or your arbitrage has vanished.

    I will add another example, because it is most likely best to use products that are cheaper than $200 to get your arbitrage. We are much more likely to sell a $100 product while the arbitrage exists because buyers will spend much less time making purchasing decisions. This product on Newegg sells for $170 with free shipping[ bit.ly/aCNfwO ]. The price drop occured 11 hours before this writing. The same product on Amazon is currently selling for $200. [ amzn.to/9MYI8e ]. Including Amazon fees and assuming our price is set at $187.41 to account for the additional $12.49 shipping cost, we would receive $182.67 upon selling this product, a risk free arbitrage profit of $12.67.

  5. ben says:

    Amazon has different prices in different countries I have heard of people arbitraging Amazon with amazon using this site! http://www.huge-river.com just by posting items around Europe interesting idea!

  6. Win Quibids says:

    I generally do not write comments on posts, but your article urged me to commend your writings. Thanks for writing this, I’ll absolutely favorite your web site and come back once in awhile. Happy blogging.

Leave a Reply

Follow us on Twitter

You can find us at @ThePlanExperts.

Like us on Facebook for free tools and articles. We have over 10,000 "likes"!
BitCoinBitCoinBusinessWeekBusinessWeekEO PortlandEO PortlandPortland Business JournalPortland Business JournalInc. 500Inc. 500EntrepreneurEntrepreneurWall Street JournalWall Street JournalBetter Business BureauBetter Business BureauTop Ten ReviewsTop Ten ReviewsAuthorize.netMasterPlans Facebook pageMasterPlans Facebook page
© 2000–2014
0