Traditionally, arbitrage is an old way of reselling in economics and finance. Sellers buy products at different prices from the various marketplaces and resell them in other marketplaces with markup. This price difference generates profits for them.
Retail Arbitrage and Online Arbitrage are two methods of selling third-party sellers use to source and sell their products on Amazon. Knowing the ins and outs of each way will help you select the most effective one for your business goals.
What is Online Arbitrage?
The process of purchasing products from online retailers at a low price and reselling them in another marketplace such as Facebook, Amazon, Walmart, or eBay at a higher price for a profit is known as Online Arbitrage, or in short “OA.”
As the entire process is online, it is straightforward, and sellers don’t even need to touch the products. Actually, this business model is based on the price disparities across different online stores and capitalizing on them. Arbitrageurs mostly choose to sell on Amazon because of the large number of Amazon’s customers. On the other hand, each platform has its unique audience. Selling on Vinted, eBay, Mercari, and other platforms can provide significant benefits for specific customers. For instance, while Vinted specializes in second-hand fashion, eBay offers a wide range of product categories and has a larger global audience.
What is Retail Arbitrage?
Another simple concept is Retail Arbitrage is the act of going to local brick and mortar stores to find and buy discounted products and selling them at a higher price in an online marketplace like Amazon.
Before the Pandemic, Retail Arbitrage was a popular business model for those who wanted just to start their business and earn some money from a side hustle.
It is very quick and has minimal risk. It is possible to venture into other business models like wholesale, private label, brands, or even a mixture.
Differences & Similarities of Online and Retail Arbitrage
While running your business, you don’t have to stick to one selling method. But it is necessary to know both business models and understand the differences and similarities, which help you manage your business better.
Online arbitrage has essentially become the modern way to start an Amazon FBA business. It’s slowly overtaking retail arbitrage as many Amazon FBA sellers are deciding to function and operate purely as an online business model, enabling people to run an Online Arbitrage business from anywhere in the world.
But which is better? Online Arbitrage or Retail Arbitrage? It’s a never-ending debate and is very much a personal preference for which one profits you more. But, according to the sellers involved in this industry, online arbitrage appears to be leading the way as more people are showing a keen interest in it. Let us give you an insight into the pros and cons of Amazon FBA Online Arbitrage Vs. Retail Arbitrage. To know more detail, please read the following post on online arbitrage or retail arbitrage
Pros and Cons of Online Arbitrage
Below are the thoughts on the Pros and Cons of Online Arbitrage:
- It is not required to go to physical stores in person and scan the barcodes. So it is energy efficient.
- The most significant benefit of the Online Arbitrage method is that it has a low-entry threshold.
- You can run your business anywhere in the world as it is an independent location method.
- It is very comfortable as it doesn’t require physical work, and you find the profitable products online from your desk at your home.
- You may lose some sales on local store promotions or offers.
- It is undeniable that this business model’s competition in selling the same product is high.
- You have to put a lot of time and money into learning how to use product research tools unless you use a deal sourcing service.
- Expanding your business is somehow far away without reaching good Online Arbitrage Leads.
Pros and Cons of Retail Arbitrage
Here, the pros and cons of Retail Arbitrage are listed:
- You will see the products in person, and there is no chance for different looking or mismatching as what is commonly happening in online shopping.
- You can buy the products without waiting on the manufacturing or shipping of inventory to reach Amazon FBA warehouses. Immediately after purchasing, you can list items in their inventory for sale.
- The competition will reduce because you find the goods in clearance and sales at your local store.
- Shopping always could be fun!
- Restricting yourself just to provide products from local physical stores can limit your inventory from the variety and stock availability.
- The cost of fuel is notable especial nowadays with the fuel cost increase
- Going around and finding products on sale is time-consuming
- Collecting goods and transporting them to your home is a lot of physical work, mainly if you are alone.
Nowadays, it is possible to earn profit by online reselling products through two methods. They are Retail Arbitrage and Online Arbitrage. Succeeding in your business totally depends on an organized system and a well-laid-out plan. Otherwise, you may have as much profit as you expected. Generally, Online Arbitrage can be more lucrative because of its convenience and scalability.