There’s a whole industry which promises to make you money through what’s known as arbitrage. Basically it’s finding a product at a low price from one supplier and selling it at a higher price to the customer. That might sound like your business, but the difference is that instead of buying cheap in bulk, with arbitrage you’re often buying from a retailer and getting them to ship direct to your customer.
Arbiship
Now a new service, Arbiship, has launched in the US with the promise to automate the whole arbitrage process for you. It’ll allow you to sell on eBay.com whilst automatically scanning, processing and shipping orders from multiple vendors including Walmart and Amazon.com.
Without automation you would be placing manual orders, finding the correct items on retailers websites, copying address lines manually, double checking buyer information, filling in payment details and having to calculate your profits. Arbiship say that they can do all this for you.
It’s certainly not unusual for marketplace sellers to drop ship orders, I also personally know sellers who list stock that they don’t have in the knowledge that they can order from a supplier on a 24 hour delivery to onward ship to the customer.
Arbitrage is slightly different though, would you be willing to trust that the product would still be available from a retailer when you got a sale. What if they sell out or the price changes. You could very quickly find that your eBay account has a ton of orders that you can only fulfil at a loss, but equally if everything goes well you could be making profits without holding any stock or touching a single product.
How far would you be willing to go to automate an eBay business – is arbitrage something you’d be willing to try, either manually or automated with software like Arbiship
6 Responses
Should you be encouraging this?
From the perspective of the seller who has the stock its a bad deal.
Yes you get a sale, but often if the order is on ebay and the seller is shipping an item direct from Amazon, then it will arrive in an Amazon box with an Amazon invoice.
The buyer then only has to search on Amazon to see that the item could have been purchased significantly cheaper there and they have been ripped off.
They then return the item in order to get a refund so they can buy the cheaper item. So the seller of the item on Amazon gets an increase in return rate. if your return rate on Amazon gets high enough, then you will be banned from selling that item on Amazon. Bad news indeed for the seller, through no fault of theirs.
I have consulted multiple arbitrage eBay sellers. In my opinion, arbitrage is not a legitimate, long-term business model. It is often referred to as dropshipping, but in reality it is not. The dropship model requires a retail relationship with a genuine wholesaler. Profit is determined by your costs to the wholesaler and the retail price your selling platform (eBay) will bear. In arbitrage, it’s another, continually fluctuating retail market (such as Amazon) that determines your costs. For instance, if you find an item that sells well on eBay, but the price you’re paying for it on Amazon goes up, you’ll no longer be able to sell that item at a profit. On the other hand, if you had had a legit dropship relationship with the wholesaler, you could go on selling the product and make a good profit. Also, arbitrage is one of the major causes of market saturation on eBay. It is overwhelming the platform with product that doesn’t sell well over the long term and is being sold by sellers interested in a quick buck without concern for the health of the marketplace.
I have to deal with these people everyday. After having a few of them opening AtoZ claims and Cases on eBay because they’re saying the item doesn’t work when In reality the customer they sent it to has realised they’ve been done for money and opened a returns request with them – they then go onto open a claim with us in hopes we will just refund them. Most of the customers contact us as its our details inside the item too.
Also it makes Invoicing a complete nightmare.
Appalling for our metrics and trying to keep a top rated seller status, we are not protected from this kind of thing and Amazon & eBay should be doing something about it.
Arbitrage simply falls under basic economics, and the same thing happens with any commodity that can be bought and resold. Believe it or not there are a decent number of sellers who are making 50k+ profit per month just by doing this method on eBay alone. The buyer gets what they ordered at the agreed upon price from a familiar marketplace, and both sellers get a sale. The rate of return is negligible because 99% of the time there is no invoice and the buyer doesn’t care where the item came from as long as they got what wanted.
The reason Arbitrage is so appealing is that it doesn’t require a large investment of time or money. It’s possible for sellers to provide thousands or hundreds of thousands of a large variety of items without having the impossible and expensive task of managing relationships with all of those suppliers. In order to sell even 20-40 items per day it is necessary to have an automated software like Arbiship that can manage this long fulfillment process for you.