What is Amazon Arbitrage and How to do it?

Amazon Arbitrage guidelines

Making money with Amazon Arbitrage is the easiest way to make passive incomeĀ online.

When I say it’s the easiest it’s important to note that it doesn’t necessarily mean it’s the most powerful or the most scalable, but it is the easiest.

Making money with Amazon doing arbitrage is very easy because of the following: When you decide to start in this line, if you do it right, you are only going to focus on products that you know in advance that have a good sales volume and that also you have no problem to be able to sell within Amazon.

For this reason, arbitrage has excellent advantages

  • You don’t need to create a new product or brand
  • No need to invest in large inventories
  • You can dedicate from half an hour to two hours per day
  • You don’t need to do affiliate marketing
  • You don’t need to deal with suppliers by Dropshipping
  • You don’t even need to know how to sell
  • Best of all, you take advantage of Amazon’s existing marketplace where there are buyers EVERY DAY.

This all sounds great, but what is arbitrage?

Arbitrage is an economics term that is often used in the stock market. And what it basically means is that when one person has a price advantage over the rest of the buyers in the market, they take advantage of it, buy a stock at a preferential price and then sell it at market price making a profit.

In short, it is the basis of all trading: buy low and sell high, making a profit.

There are many methods to make arbitrage, it can be done with physical products or with services.

Making money doing arbitrage with services

People who arbitrage with services what they do is find a person who offers a service at a very cheap price, and then they take advantage of that offer and offer the same service as if they were the ones doing it, but at a higher price.

Once they get a client, they hire the original person who offered the service, they do the work and get paid, and they deliver the work to their client as if they did the work and make a profit, often higher than what the original person earned.

You see this a lot on Fiverr although it is not the only place where this happens.

Making money doing Arbitrage with physical products

As I’ve already explained, arbitrage is actually taking advantage of a very cheap purchase price to obtain a product and then selling it at a public or market price to make a profit.

But wait, isn’t that the definition of a product’s distribution chain?

No, although it sounds very similar and technically the process is very similar, there is a very big difference. In a normal distribution chain, products originate with the manufacturer and then go through a whole chain that can go from the importer of that product, if it is internationally sourced, and then goes through distributors, wholesalers, retailers, retailers, etc.

Until the product reaches the customer.

When we do arbitrage, what we actually do is go to the last link in the chain (the store) and look for products that are heavily discounted or on clearance.

That is the difference.

Now, there are two ways to do arbitrage with products

  1. Retail arbitrage
  2. Online arbitrage

1. Retail Arbitrage

This method of arbitrage can be carried out in many ways

  • Go to physical stores and look for products with large discount margins.
  • Search in second-hand stores and look for products in good condition.
  • Visiting importers or stores where products are on clearance, etc.

Once you find the products you are looking for at a much cheaper price than you can normally find in stores, then your job is to buy those products and resell them.

To resell them, the ideal is to do it through the Internet, using platforms such as Facebook Marketplace, eBay, Amazon, etc.

I mention Amazon until the end, because although the goal is to make money with Amazon doing arbitrage, Amazon is the most demanding platform with the issue of originality and legitimacy of the origin of the products, i.e., even if your product is original and you have acquired it legally, if Amazon does not accept your proof of purchase, it will block your product.

This is much more flexible in other media.

2. Online Arbitrage

In essence you do the same thing you do when you visit physical stores, but in this case you search for discounted products through online stores, buy them, they arrive at your home (or a third party’s home) and then you post them on any of the aforementioned platforms and wait for them to sell.

The method I use is to buy the products directly from Amazon using my Amazon Prime account and resend them back to Amazon FBA to be sold again.

In essence it is very simple, now comes the basic question.

Is it easy to make money with Amazon doing arbitrage?

Of course it is, like everything else it is a painstaking method that you have to learn and master. I have received messages from many people who have decided to do arbitrage on their own without knowing in detail the method and have ended up with suspended seller accounts.

Below you will see an example of one of many messages I constantly receive because they didn’t do things right

“If you say Amazon is the hardest, why is it the one you recommend the most?”

First of all I recommend doing arbitrage through Amazon from the US.

But now, answering the question, the reason why I recommend doing it through Amazon unlike other platforms, is that Amazon has the FBA (Fulfilled by Amazon) service.

This service consists of you as a seller sending all your merchandise to Amazon’s warehouses, and when a sale of one of your products is generated, they take care of all the logistics of delivering the product to your customers.

This is a great advantage because it allows you to automate your entire sales process, making your real job to look for good product opportunities, buy them and ship them to Amazon. The rest happens automatically. Come on, you don’t even have to worry about having to create listings for your products on Amazon, because those products are already sold there and Amazon doesn’t allow duplicate listings.

Once you understand all this, you probably have more questions. Every day I receive questions on this topic, and here I want to answer the most frequent ones.

Is it legal to do Amazon Arbitrage?

Yes, it is totally legal. We live in a free market economy, which means that anyone who wants to, can participate in it.

I will not go into the technicalities of what is a free market and how much it applies to the Mexican or US economy, but it is important to understand that any product you buy, by definition is already yours, and therefore, you can do with it whatever you want, whether you want to give it away, lend it, rent it or sell it.

What is not allowed is to make a copy of the same product and say that it is the same. That is piracy.

It is true that some brands prohibit the sale of their products to other people, for example when there are exclusivity contracts with certain distributors. However, when you offer a very small volume of products, for example a maximum of 5, this does not usually cause problems.

As I mentioned before, to make money with Amazon doing arbitrage, you should not confuse it with being a wholesaler of products. Although in essence you are doing the same thing, in arbitrage you do not handle volume, let’s say it is an “informal” method to start making money.

On the other hand, when you are a wholesaler, you will perform a very similar task as with arbitrage, however here there are contracts, documents, higher volume of purchases, etc. We will leave that for another time.

Doesn’t doing arbitrage on Amazon go against Amazon Prime rules?

No. Although Amazon Prime’s rules clearly specify that you should not use their service to resell their products. Doing arbitrage the way I do does not violate any rules.

To understand this, we first need to understand what Amazon Prime service and product purchases under this membership consist of.

When you are an Amazon customer and you decide to have a Prime membership, you have many extra benefits that a non-membership buyer cannot enjoy. I will not describe all the benefits but only the one that concerns us in this article.

When you have a Prime membership, any product that is in Amazon’s warehouses (i.e. any product that your seller has sent to FBA or Amazon’s logistics), and that you decide to buy; its delivery will be guaranteed within two days and the shipping will be free.

This is the great benefit of using Prime membership. When you as a customer buy a product, you only pay the price of the product, and you do not incur any logistics costs (no shipping costs), as those costs are covered by the seller.

What Amazon says?

When I was contemplating the possibility of making money with Amazon doing arbitrage. Before I started doing this method, I communicated directly with Amazon staff, and asked if there would be any problem in doing it, to which they replied the following:

This rule is intended for people who want to use their Amazon Prime account for dropshipping. That is, for people who want to offer products in their online stores, that when the customer buys, they then buy the product and send it to the customer’s home without incurring shipping costs.

So making money with Amazon by doing arbitrage by circling a product in Amazon’s warehouse is totally valid.

The next thing I’m going to discuss, I wasn’t told directly, but it’s just a matter of understanding how business works, and how the priority first and foremost will always be profits in finance.

Think about the following:

When a seller ships products to Amazon FBA inventory, Amazon will charge each product a storage and logistics cost based on the volume and weight of the product. The more volume it takes up, the more space inside the warehouses it takes up and therefore the more expensive it becomes. Think about this: the space that a 65″ TV occupies in its box is the same space that maybe 500 packs of headphones could occupy. Therefore the cost of storing one or the other, as well as the cost of shipping, will be totally different.

Amazon by providing this service to sellers also makes a profit. Which brings us to the following.

  • When you buy a product through Amazon Prime, Amazon is already making a profit on that unit of product.
  • You receive the product and then as a seller you send it back to Amazon FBA.
  • The same unit of product again creates a logistics and warehousing cost within Amazon.

When you understand this, you understand that Amazon will actually make a profit for every turn the product makes inside their FBA warehouses. So if it represents profit for them, then they are not going to limit it.

Is it risky or can you get into trouble?

It is not risky as long as you know what to do and what not to do. I mean Amazon has very strict regulations regarding originality, legitimacy and trademark rights.

You always have to be able to prove the originality and legitimacy of the products you are sending to Amazon FBA. It is very important to understand that if you are doing retail arbitrage, it is much easier to have problems than if you do Online Arbitrage through Amazon.

I leave you with the following example that I received from a person who started doing arbitrage after watching my videos.

It should be noted that I have made a whole series of videos where I talk about the risks of doing arbitrage with Amazon, and although this person had already seen them, he decided to ignore my advice because he thought “If others can do it, so can I”.

Although this attitude is commendable, because the most important thing is to take action, you should always know what you are doing before jumping in head first.

If you are going to do Retail Arbitrage I recommend that you do it through Free Marking or Facebook Marketplace. If you are going to do Online Arbitrage, you need to make sure you have the necessary documentation to justify that your products are legitimate, otherwise you may end up with a suspended account.

Can it be done in any country?

It depends on how you are approaching this question.

If you live on the outside of America, say Mexico, and you want to do arbitrage on Amazon Mexico, technically you can, but it is not viable and I do not recommend it.

The reason is that in other countries you can’t get discounts like you can get in the US, which will limit your earning potential. In addition, as I mentioned before, the market in other countries is much smaller, which will again affect your earning potential.

Now, if you live in Mexico and you want to make money with Amazon doing arbitrage in the United States, then it is possible. You can do it from any country that allows you to create a US Amazon seller account.

Do I need to have physical space in my home to be able to arbitrage on Amazon US?

No, to do this method you have two options:

  • Have a family member or friend living in the US who can receive the merchandise for you and then ship it to Amazon FBA.
  • Hire a logistics center to do the work for you.

Is it required to have multiple Amazon accounts?

Amazon allows you to register under the same email address as a buyer and as a seller. However, I recommend that you use two different emails for each function. That is, use your personal email for your purchases and your work or business email for your seller account. The reason is that if you have problems with one of the two accounts, this will not affect the other one.

However, it is important to know the following:

Amazon only allows you to have one seller account, if it finds out that you created two seller accounts, it will suspend both and will not allow you to create another one.

Buyer accounts you can have as many as you want.

How to Sell Arbitrage on Amazon?

Going back to what I said in the beginning, making money with Amazon doing arbitrage in the US, is the easiest method I have found to start making money through the Internet. The only thing you have to master perfectly is to know how to evaluate products to determine if they are good opportunities, and what does this mean?

That the products have an attractive volume of sales so you can guarantee that they will sell fast and therefore you will recover your investment quickly, and also that they are products that Amazon allows you to sell without problems.

Conclusion: What do I need to get started?

The following requirements are basic so you won’t have any problem

To be able to do it without problems, it is important to meet the following requirements

  • Have a bank account in your name in the US, which is easily solved with Payoneer.
  • Have a bank account in your name in your home country that can receive wire transfers.
  • Have a credit card in your own name
  • A recent proof of address in your name (Amazon sometimes asks for this as confirmation of identity)
  • Have at least $200 or $300 USD per month to invest in software products and tools.

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