Amazon online arbitrage offers an enticing business model: buy low from one site, sell high on Amazon, and pocket the difference. But as lucrative as it sounds, it comes with its own challenges. In fact, for many beginners, these obstacles can seem like a labyrinth, leaving them stuck and unable to progress.
In this post, we will pull back the curtain on the seven most common problems new Amazon online arbitrage sellers face and, more importantly, how to navigate them effectively. Whether you’re just starting or are feeling stuck in your arbitrage journey, this guide will provide the insights and strategies you need to keep moving forward.
Don’t let these challenges catch you by surprise. Let’s dive in.
1. Time-consuming product research
There are several methods to find online arbitrage products to sell on Amazon. Manual sourcing, reverse sourcing, and storefront stalking are among the commonly used strategies. All these different methods require a significant investment of time and effort. Not to mention, the vastness of the Amazon marketplace can make this task feel like searching for a needle in a haystack.
This is where the real test begins: how can you optimize your time and maximize your profitability?
The solution lies in online arbitrage tools designed to streamline your product research. One of them is SmartScout. With its advanced filtering capabilities, SmartScout enables you to create a unique list of thousands of replenishable and profitable products for arbitrage. It transforms what could be hours of research into a few quick clicks, saving you time and energy.
For instance, you’re looking into a popular category such as ‘kitchen appliances.’ Instead of manually sifting through thousands of products, you can use SmartScout to filter based on your specific parameters like monthly revenue, price range, reviews, and more. It will then provide a list of potential products, making your research process more targeted and efficient.
2. Fluctuating prices
Prices on Amazon can change like the tide, swinging up and down due to various factors like competition, demand, seasonal trends, or even algorithmic changes by Amazon itself.
At first glance, these fluctuations seem like a gamble. But in reality, they’re a part of the game – a challenge that, when approached strategically, can be managed effectively. The key lies in understanding the market dynamics and using the right tools and strategies to ensure profitability.
One effective approach is to examine a product’s price history before buying it. Tools like Keepa and SmartScout’s Scope can help you delve into the historical pricing data of any product listed on Amazon. Is the product you plan to sell profitably in the past 90 days? If so, then short-term price dips or spikes are less likely to erode your profitability.
3. Competing against Amazon
As a rule of thumb, never compete against Amazon – especially if you’re a beginner seller. It rarely ends favorably. Amazon has immense resources at its disposal. They can afford to offer lower prices and better shipping terms that may be difficult for a small seller to match.
Check whether Amazon is a seller of the product you’re considering. You can do this manually by inspecting the sellers on the product detail page. Alternatively, to save time and ensure accuracy, use specific tools to inform you if Amazon sells a particular product. By adopting this strategy, you significantly increase your chances of profitable arbitrage.
4. Selling products from brands that file IP complaints
If you’re new to Amazon Online Arbitrage, beware of selling products from brands that often file Intellectual Property (IP) complaints. Some brands will quickly report if they think their rights are being violated.
To avoid this, research your chosen brands thoroughly. Check out their approach towards third-party sellers and whether they often file IP complaints. You can find useful information about these brands in online forums and communities.
Start with brands that are more lenient with third-party sellers. As you get more experienced, you can handle brands that are more stringent about their IP rights.
Above all, respect IP rights. Not only to avoid complaints but to keep your business honest. Success in online arbitrage comes from making well-informed choices, planning carefully, and following the rules.
5. Scaling the business
Scaling up your online arbitrage business can be tricky. When profits start rolling in and you’ve gained some experience, you might want to grow your business. But making the jump from a small to a large operation comes with hurdles.
Start by taking a close look at your current process. Find out what’s working and what isn’t. Are there problems that might block growth?
Maybe you’re spending too much time finding products manually. A solution might be a tool like SmartScout, which automates the process. Solving problems like this can clear the path to growth.
Managing more inventory can also be tough when scaling. More products mean you’ll need more storage and more complex logistics. Consider using Amazon’s Fulfillment by Amazon (FBA) service. They handle storage and delivery so you can concentrate on other parts of your business.
6. Avoiding gated products
New Amazon sellers often mistakenly avoid gated products, reducing their profit chances. Gated products require Amazon’s permission to sell, which may seem complex but protects sellers and buyers from fakes.
This gating process cuts competition. Once approved or “ungated,” you’re in a less crowded market, which can mean higher prices and profits.
Don’t dodge gated products entirely. Instead, understand the ungating requirements. Amazon typically wants invoices from reputable suppliers, authenticity proof, and possibly extra fees. Put together these materials carefully, showing Amazon your dedication.
Start with less strict gated categories, advancing as your experience and confidence grows. As your business expands, keep reevaluating potential gated categories.
Remember, gating is Amazon’s quality control method. By committing to selling real, high-quality products, you can access these gated categories, expanding your online arbitrage business profitability.
7. Price Wars
Price wars are a common and challenging aspect of the online arbitrage business. They occur when multiple sellers continuously lower their prices to undercut one another, aiming to win the coveted “Buy Box” on Amazon — that ‘Add to Cart’ button buyers usually click. While this can seem like a quick way to increase sales, the downside is that it can quickly erode your profit margins.
Here’s how you can strategically navigate price wars:
- Understand your margins: Know the lowest price you can afford to sell your products while making a profit. Once you know your bottom line, you can avoid selling at a loss during a price war.
- Avoid overly competitive products: If a product already has dozens of sellers, you’re more likely to end up in a price war. Use tools like SmartScout to identify less competitive yet profitable niches.
- Provide added value: Instead of competing purely on price, find ways to add value to your offerings. This could be bundling products together or providing outstanding customer service.
- Leverage pricing tools: Automated repricing tools can help you remain competitive without constantly monitoring and adjusting prices manually. However, make sure you set minimum price limits to maintain profitability.
One important insight is to understand that price wars are often a race to the bottom. While they can sometimes be a necessary evil in online arbitrage, consistently engaging in them can lead to long-term harm to your business.
Instead of focusing solely on being the cheapest, strive to provide value and build a brand for which customers trust and are willing to pay a premium. This strategy will lead to a more sustainable and profitable online arbitrage business in the long run.