Why do big brands sell the same products at different prices?
The answer is complicated:
- Supplier offer and order quantity
- Cost of inventory
- Discounts and coupons
- Demand (how much you’re willing to pay) and competition
- Profit margins
Anyhow, these businesses work because they buy from a manufacturer (or fabricate it themselves) for cheaper than the price. Many variables appear since the mass order until a customer buys them in their store.
If they can profit from market inefficiencies, what’s stopping you from doing the same?
It’s true you get it cheaper when buying high quantities. But even if you buy one, you’re still making profits with a cheap supplier.
That’s retail arbitrage 101. Once you find the sources, it can make you passive income from home with no investment.
Are you looking for quick cash? Don’t miss these opportunities.
What Is Arbitrage?
For complex reasons, when selling the same product, sellers offer different prices. If you could get a client to buy high and you buy for low, you’d make profits.
If you think it sounds too good to be true, you may haven’t heard of the thousands of “flippers” who live off of this trick. But is it fair? Does it hurt big brands?
Well, customers are getting the same high quality at lower prices. And compared to the millions of daily sales big brands get, retail arbiters won’t impact their margins. They gain more exposure because a customer bought from them: You.
Here’s the million-dollar question:
If I can do it, why aren’t all shoppers doing the same?
- Minimum order quantity (MOQ) is the most common. High MOQs lower prices, but buyers just want to buy one item.
- Trust. One would rather buy from eBay or Amazon than from a retailer you never heard about, even if it’s cheaper. If you don’t know their quality standards, you’ll reject the deal.
- Other problems. Maybe the cheap seller has no refund guarantee, or it takes forever to ship the product.
- Intrusive. Small online retailers don’t have many choices to compete against the giants. They promote their business with intrusive marketing, which pulls customers back.
If the manufacturer doesn’t promote at all, that may explain low prices as well. If you don’t spend on marketing, you have bigger margins and can compete with a lower price. But it will be harder for buyers to find you.
Finding a supplier is the hardest part. But once you do, all that’s left is creating the listing and collecting payments.
Types Of Arbitrage
By the way, it doesn’t apply only to physical stores. These tactics work whenever price differences exist, including service businesses and trading. Here’s what we’ll cover:
- Retail arbitrage: Low entry-level, high scalability, and decent profit margins.
- Drop-servicing: Low entry-level, medium scalability, and almost guaranteed demand.
- Currency/Stock Arbitrage: Low amount required, medium scalability, and almost guaranteed returns.
Before you choose one or another, try all of them to know which ones work better for you.
Here’s how to do it almost for free:
- For retail find a page offering deep discounts or giveaways. Reserve a few units, offer them to clients for the standard price and sell.
- For drop-servicing, you pay nothing. You pay the freelancer after the client pays you.
- You might do trading with very low amounts, but profits would be minimal.
Don’t worry. We’ll explain how this works in a moment.
Online Arbitrage Explained
Here’s how the model would look like:
Someone wants to buy a product, so they visit sites like Etsy, eBay, or Amazon. They type the keyword and find that your listing offers the same product they want for cheaper.
By this point, all you did was create the ad. You found a supplier but didn’t take any orders.
So the client places the order, and you get paid. Now, you have to deliver the product to the customer.
With the money you just earned, you buy a unit for your supplier and tell them to send it to your buyer’s address, which you also got from the order. Once you pay for the item, the rest is profit.
Days or weeks later, your client will receive the package. Everybody wins.
But of course, it’s not as easy as it sounds. You may find difficulties along the way. For example:
- The supplier only offers the product discounted for a limited price
- The client may request a refund, which complicates returns.
- You still need to pay your seller fees to the e-com platform.
- If many sellers are flipping the same product you are, that will lead to a price war and lower profit margins.
- Some buyers won’t trust sellers with no reviews or tracking numbers.
There are a few ways to get around those:
- As you keep selling, customers may leave positive feedback because of the good deal you made them.
- Guarantee refunds and free shipping. Although it may hurt your profits, it will get you sales traction.
- Look beyond the numbers and avoid problematic products: healthcare, supplements, breakable items, products with complex parts, and certain tech.
As for the step-by-step process:
- You open an account on eBay / Etsy / Amazon
- You search online until you find products and suppliers (more on that later)
- You contact the provider to double-check the price. Some of them are limited promotions or outdated.
- You create the listing at a reasonable price. On eBay, you don’t need any previous sales to get your first customers.
If you opened your own store instead (e.g., Shopify), you wouldn’t need to pay e-commerce fees. However, that requires you to have a marketing strategy to get customers: paid traffic at the very least.
When listing on Amazon/eBay, you already have all the clients who want to buy. But if a product sells well, then it might be cheaper to run Facebook ads to a Shopify store instead.
At this point you might also be interested in our ultimate guide to eBay scams and how you can avoid being taken advantage of.
Guided Example: Reselling on eBay
Unlike Amazon, you don’t need much marketing to sell well on eBay. If you have a great deal, people will buy within 24-48 hours.
One big factor making this possible is their internal algorithm. When you first list a new item, it gives it priority over older listings and places it higher in the search rankings.
Selling on eBay is free up to 50 listings per month, but you can raise those limits with monthly subscriptions. Because we have limited listings (and time) we only want to upload the most profitable products.
Here, you will find an endless list of retailers where to look for deals. If you don’t know where to start, visit giveaway pages such as SlickDeals, Jumpsend, or RetailMeNot.
For this example, we’ll pick Jumpsend:
1. Find deal pages
People use this giveaway site to launch and get sales velocity (some require approval, others are instant). Not all of them are profitable to flip, so set the right filters on your search.
As with product research, your profits will depend on how skilled you are in e-commerce. We’re looking for simple products with high margins (for minimal refund rates).
Because the discount only works with a limited-time code, make sure you have enough time to sell before it expires (five days or more unless you sell very cheap).
2. Verify your product
Here’s a product we found.
If it doesn’t qualify you instantly, request and wait until the seller approves you. You will have a higher chance after you verify your account.
When approved, it will display a code, which you can paste on Amazon’s checkout page for the discount. Taxes and shipping costs may apply, although you can use Prime to skip this last one.
3. Watch the market
We try to understand what the main keyword is and search it on eBay. You can copy and paste Amazon’s title to find more similar products. The goal is to find the exact same item for a lower price.
As you browse, pick the listing that looks the closest to your product. If you copy and paste this title in the search bar, you may find many sellers with the same photos.
If prices look higher than what you’re paying on JumpSend, that’s good news. But that doesn’t mean eBay shoppers are paying the price listings show.
Go to the left side of the search bar and click Advanced Search. You will find a toggle option for eBay Sold Items.
Now, everything that displays on the page is the products people bought, how much they paid, and when. In my example, someone bought on October 25th (three days ago) for much more.
4. Create your listing
Let’s take advantage of all the keywords the seller researched. If you’re selling the same item, you can find a Sell button below the image.
Here, you can copy the images you found on the Amazon listing. You can reuse titles, keywords, and descriptions. You choose if you want to add international shipping, return policies, and whatnot.
Once you set your price and click on publish, your listing will be live!
5. Process the order
You can collect payments with Paypal because most clients prefer it. When someone buys, you’ll get a message like this.
You can see that they paid you and where to ship the item. NOW, you use that Jumpsend code and use their address to complete the Amazon order. Fill up their address.
At the checkout page, you will find an input field to enter the code. If you tested it first thing, it should be active already. Once you enter it, you get the discount and can click on “Place Order.”
As the last step, let your customer know you shipped the item. On eBay, go to your sales history, more details, and mark the item as shipped. Because it ships with Amazon FBA, you don’t need any tracking numbers.
If the code doesn’t work, you can ask the seller to give you a new one. Otherwise, cancel the customer’s order.
Before you proceed with the Amazon journey you might want to take a look at these entrepreneurial dangers: Amazon FBA scams.
Drop Servicing Explained
Here’s what it would look like for a customer:
A person wants to outsource some work, but they can’t just pick anybody. If they don’t know any professionals, they will visit freelance sites and post their projects there. They will explain what they look for in a freelancer, what their rates are, and how to complete the task.
Let’s say you come in, apply, and get approved. Now that you have the job, you can offer it to someone who can accept doing it for less. Rates are subjective, especially when you ask in countries with a low cost of living.
Ironically, you’re going to qualify freelancers just like the client did with you. But because you won the contract, you already know what the client wants.
You find that someone, he/she gets the job done, and you send it to your customer. If the client is happy, pay the freelancer and keep the difference. Otherwise, ask your worker for a revision.
Best of all, you can work with the same people again and again IF everyone is happy. Imagine having a long term client AND freelancer (and you in the middle).
You will (or should) earn less because the worker does all the work. But because you invest no time actually working, you’re free to find as many clients and freelancers as you want. Agencies are the closest thing to passive income.
Now that I got you excited, let’s see how you could start earning cash right now.
Guided Example: ACX & Fiverr
By the end of this section, you’ll know how to potentially flip $50 into $200 contracts.
But first, here are a few disclosures:
- Hiring others doesn’t make it easier. It can be really challenging to find the right client and freelancer.
- Freelancers may not trust you unless you keep them a retainer. You might need to pay upfront.
- Clients give preference to verified experts who work on their specific niche. Just because your freelancers can do “anything,” you shouldn’t promote yourself as a generalist.
- Open accounts on ACX and Fiverr
Every freelancer will have heard of Fiverr at least once. Because it relies heavily on reviews, you can still find exceptional workers charging less to get those initial reviews.
Because you’ll be hiring, open a client Fiverr account, verify your identity, and add a payment method. Also, you can choose any other platform where you find better rates.
But what is ACX? It’s a secondary site owned by Amazon focused on audiobooks. Ironically, Amazon started its early days as an online book store.
ACX hires narrators, authors, publishers, and literary agents to create professional audiobooks. An author who wants a visibility boost will post here. They pay narrators decent money to transcribe their books.
Registering here should be almost as simple as opening an Amazon account.
2. Select your offer
You can always find workers and clients at any rate. But because finding them is the hardest part of our job, we want to get the best profit margins.
After you click on Narrators on ACX, complete all the steps. You can start finding narration gigs on step 4. Click on Search for Books, and you will find hundreds of books available.
You won’t always find good offers, but don’t worry. Every few days, new authors publish offers. Just make sure you get the gig before someone else takes it.
Although compensation depends on your preference, I suppose you’re looking for quick cash. Set these filters to select only the books that make decent money.
If you’re lucky, you will find multiple authors paying over $200 per recording. Shockingly, one of them is only a 1.5h read!
Don’t be surprised if you don’t find any on this tier. But the more often you check, the sooner you will find those great ACX offers.
3. Find your freelancer
What does the client want in our example? It’s a 1.5-hour narration covering around 13,000 words. Before you accept the contract, you can click on More Details. It will explain what voice and style the author wants.
Next, I went to Fiverr and typed “Book Narrator.” It took, at least, ten minutes to find a narrator within our budget. I don’t want to imagine how hard it must be if they paid you $50-$100 instead of $200+.
This one looks professional but barely has any reviews. I searched after page ~20 until finding the new freelancers. These narrators have everything a professional would have (samples, introductory video), but they haven’t got popular yet because of reviews.
If I hired him to narrate ~13,000 words, it would cost around €25. Compare that to the $200-$400 offers. It’s unlikely he will always charge like that, but even if he raises the rate, there’s a long way to reach $200.
4. Complete the task
Take the details from the ACX offer and ask the Fiverr freelancer to do it. If they agree, accept the ACX offer and wait until the narrator completes it. Once it’s done, you upload it to ACX, and the author decides whether to accept the work or not.
If they don’t, you can ask for a revision. If your margins are generous, you can afford revisions. After the author accepts, you get paid, the freelancer does, and you pocket the difference.
Best of all, it took no narration skills on your part. Even a non-English speaker can apply for narrations this way.
How Much Can I Scale With Drop-servicing?
On ACX, you have minimal interaction with the author. It’s like taking assignments from an invisible client: profitable, but no chance of long-term work.
On Upwork, there’s constant communication among professionals on long-term projects. Start low to gather some reviews and create a profile based on your personal data. You can start working on the gigs yourself, and once you raise your rates, look for other freelancers.
Next, you filter these workers until you find those who can imitate your style and quality. Now that you have enough reviews and a freelancing team, you can work with clients and outsource work.
Mind that some may ask for video-interviews. It may not be a problem if you hire writers/designers/coders/producers. But if you want to do the narration, either decline the video-interview or pick narrators that resemble your voice.
Whenever you are researching different online money-making opportunities, learn how to recognize work at home scams and be on the safe side.
Arbitrage Trading Explained
Buying low and selling high is, by definition, arbitrage/trading. But since you buy until you sell, multiple steps appear, complicating and delaying the process.
Although currency/Stock trading presents higher risks, it’s also the fastest way to profit. But can you make money from the markets with no trading skills?
Risks will never go away, but yes, you can.
Just like drop-servicing, you can leverage other people’s time and skills to make you money. Costs are higher on lower trades, so moving large sums makes it easier to profit.
Traders who manage millions of customer funds can use low-risk strategies to guarantee returns. Although the strategy is complicated, one can just deposit money on their account and watch it grow steadily over the months.
You can call them HYIPs, mutual funds, sometimes scams. The idea is to trust money to a company with a reliable history, which will pay itself with a service fee after you profit.
Take a look at what are and how to navigate through HYIP scams.
Guided Example: Trading Early On Exchanges
We will always recommend risk-free arbitrage such as online re-selling and drop servicing. But in case you’re curious about higher-risk strategies, we will show you this one.
Do you remember the early days of any stock? If you bought back then, it would be worth a lot today. You may know nothing about trading psychology.
If you arrive early before everybody else buys, you can almost guarantee an increase.
- Find the opportunity
Of course, not even technical analysts can determine the market direction all the time. But once thing traders do love is novelty. Have you ever stumbled with any of these examples?
Cryptocurrencies are known to be volatile. But whenever a new token appears, it tends to create a demand spike only to go down hours later. Best of all, Binance tells you about their release dates in the News section.
You don’t need insider information, not even trading skills. Just show up early. You can use this idea in any exchange of any investment type.
- Buy early enough
Let’s imagine your exchange posts and article introducing a new stock release tomorrow at 9 AM UTC. Whether that stock will be valuable or not, it will likely create a spike on its inception.
There will be two types of traders.
- Those who read the news and are ready to buy at 9 AM.
- Those who didn’t know about it but later found that this stock was raised by 70%+ in a day. So they buy later.
Not all stocks behave this way, but as a general rule:
- Prices will increase as soon as it goes live.
- After the spike, it may bounce back within 24h. Late buyers may try to join the trend.
If you wanted to buy-sell fast here, you can:
- Buy in the first five minutes and sell after ~10min, or after the candle has grown enough. If you wait for it to fall, you may not get out on time.
- Wait 10-15min until the spike ends. When it’s low, you buy. You can watch the price throughout the day or set the auto-sell limit order a bit higher.
Small accounts can enjoy 1.5x-10x returns doing it. As your account grows, focus on managing risk with other strategies instead. You will rarely see six-figure traders doing this unless they have some insider information.
What Have We Learned?
You can make money without having to spend hours on a task. The only skill you need is the ability to find great deals. Once you find market inefficiencies, you can generate passive income until they stop working.
Which one should you choose?
Online/retail arbitrage is the easiest one to start. Drop-servicing is the most profitable long-term. The rewards from arbitrage trading are immediate if you can bear the risks.
With that in mind, the right choice depends on your personality.