Looking for a ‘Get Rich Quick’ scheme? Then arbitrage would definitely qualify! Arbitrage means buying commodities low in one market, and then rapidly selling them again for a higher price in another market.
Arbitrageurs take advantage of differences in price and demand in different markets to make money.
On eBay, arbitrage involves buying hot items at lower than usual prices and then selling them for a profit - either on other auction sites or offline.
Generally, the most successful arbitrageurs make money by buying and selling in specialized areas – areas they know something about. For instance, someone who is passionate about buying and selling cars will likely know other car enthusiasts. Thus, if they manage to buy a mint condition vintage car part at a bargain price, then it’s highly likely they’ll know exactly who would be interested in buying it off them. The key to successful arbitrage is being able to turn your items over quickly.
While it’s not essential to be a specialist, you do need to know your market. Some arbitrageurs do very well simply by buying items that are selling for low prices just because they are not reaching the right audience. By re-marketing the item, they can attract a more interested audience and profit accordingly.
Think of vintage posters for instance. While there are collectors of vintage posters, there aren’t that many of them. However, there is a much larger market looking for home furnishings and art. So many people want to find something a bit ‘different’ and interesting to hang on their wall. Targeting this audience might be much more lucrative.
But before we go too far, let’s look at why eBay arbitrage opportunities exist.
Sellers making mistakes: The leading cause of arbitrage opportunities!
One of the main reasons why eBay provides some great arbitrage opportunities is because many sellers don’t have a clue how to list their items properly! Some items don’t get bids simply because no one can find them.
With thousands of listings in each category, most people find it too daunting a task to search by any other method other than a simple keyword search. The majority of users just perform one keyword search in order to find their item, rather than using more advanced techniques.
If the sort after item doesn’t include the correct keyword in the title, then the item won’t appear in the search results.
These items essentially slip through the cracks, just waiting to be picked up by arbitrageurs!
In our experience, most arbitrage opportunities come from sellers making one of the following mistakes:
Seller mistake #1: Misspellings
One classic way in which valuable items disappear from view is when crucial keywords are misspelled in listing titles. There are two situations when this occurs:
- Unintentionally misspelled words – Some sellers have poor English skills, other don’t take time to spell check before submitting.
- Intentional misspellings - When sellers run out of space in the title, they sometimes shorten or abbreviate a keyword, unwittingly sending their item into the doldrums of eBay!
In the example below, the word ‘digital’ is misspelled as ‘digtal’.
In both of these situations, the misspellings mean that these items will not appear when searchers input the keywords spelt correctly. It’s only logical that the less people that view an item, the less likely it is that the item will receive any bids.
Seller mistake #2: Poor Images
Another way that valuable items can remain without bids is when the image is very bad. Dull, grainy photographs don’t give any real indication of value, and may put cautious sellers off.
For instance, if you were looking to buy a ring, would you be particularly excited by this photo?
Seller mistake #3: Titles missing an important keyword
The final way in which items "disappear" off the average buyer's radar is when sellers neglect to include the most important keywords in their listing title.
For example, a listing with the title ‘Gorgeous size 7 red heels’ doesn't mention the word "shoes" at all, and will not appear in search results for ‘women’s shoes’ or even just ‘shoes’. Unless someone searches for ‘heels’ or other keyword in the title, this item will not be found.
While it’s possible that some people may search with the keyword ‘heels’, I can guarantee it will be far fewer than those who will search with the keyword ‘shoes’ or by the brand name of the shoes.
With these "mistakes" in mind, how do you go about making great money through arbitrage?
Step #1: Get familiar with the "hot" items in your niche
Before you can begin searching for arbitrage opportunities, you need to decide on the kinds of products you want to focus on.
We recommend looking for products that sell for a decent amount of money, and that have good "sell-through rate". A good sell-through rate means that 80% or more of the items listed at the optimum price sell.
You can check out popular items – such as consumer electronics, cell phones, fashion items, or better still, research a niche area of your own.
Step #2: Start looking for poorly listed "hot" items
Now that you know what you're looking for, it's time to start digging to find those lacklustre listings that mean big bucks for you!
So how do you find these bad listings? After all, if regular buyers can't find them, how are YOU supposed to be able to find them? There are a couple of strategies here:
Strategy No. 1: Search for misspellings
Since we know that one of the main ways that items ‘disappear’ is through misspelled keywords, then it follows that one of the best ways to find them is by performing searches using misspelled variations of the product name.
Some of these will easily come to mind, but an exceptionally helpful tool for this purpose is Auction Speller.
Just enter the correctly spelled keyword for your item into this nifty little tool and it will return all variations of the word known to man, and will even perform a search in eBay for all of those misspellings. Easy!
Strategy No. 2: Search Using Multiple Keywords
If you're searching for misspellings manually rather than using a tool like Auction Speller, you'll run into the problem where each product can have 20 different misspellings. That's a lot of eBay searches you'd need to do!
The way to get around this problem is to use eBay’s search capability to look for multiple keywords at once. Believe it or not, you can easily search for auctions that contain one keyword OR another keyword just by entering your keywords in parenthesis separated by commas: E.g. (apple, pear, orange).
This means you can easily search for several misspellings at one time. The only difficulty here is that eBay has a maximum of 300 characters in the search box. In order to make your searches most efficient, you’ll need to divide misspellings up into a series of groups. E.g. (apple, appel, aple); (elppa, appel, appal); For items you mean to focus on, I recommend building a database of search terms to enable you to easily keep track of effective search combinations.
Or, you can use eBay’s Favorite Searches feature. Many sellers don’t even notice the Favorite Searches tool in eBay. Yet it seems obvious after it’s been pointed out, sitting on the right-hand side of the eBay search box! You can turn this unobtrusive tool into your very own arbitrage alert system.
Whenever you perform a successful search, just click the Favorite Searches button and eBay will email you whenever new items are listed that match your search. eBay will literally deliver arbitrage opportunities to your doorstep!
Once again, the search string has limited characters. But you can easily get around this by breaking up long searches into a series of shorter Favorite Searches.
Strategy No. 3: Search the Description
Misspellings aren’t the only way to pick up on arbitrage opportunities. Some items may have incorrect spellings in the title – or in some cases, they may not have the important keywords at all – but you’ll often find that the keywords do appear correctly in the description.
eBay’s search default is to only check the titles of listings for keywords. However, you can opt to search both the title and the description of listings by using the Advanced Search.
Just click on the Advanced search option on the eBay home page. Enter your search as normal and then check the box to search the title and description.
You can also search the title and description after performing a search. The check box for searching the title and description appears on the search results page.
Strategy No. 4: Search for Poor Images
Unfortunately there are no shortcuts to finding valuable items with poor images. These tend to be few and far between. Just keep your eyes peeled when performing your other searches!
Step #3: Verify your arbitrage opportunity
Aha! You’ve located a couple of potential bargain items! What happens next?
Research the True Price of your Item
What you need to do now is find the average price that an item such as the one you have found generally sells for. This will give you an idea of what your maximum bid should be to ensure that you end up making money on this transaction.
There are Two Stages to This Process:
- Search completed listings in eBay to see what the average selling price of used items similar to yours is.
- Search online stores for new prices.
If you plan to sell on an auction site apart from eBay, or in a trade magazine or paper, you should research these also. Closed auctions will help you decide what your bid should be. They will also give you an indication of the true market price for your item.
To find closed auctions for the same item, try a number of searches using different keyword formulations – including negative keywords.
In the example above, I can see that new Nikon Coolpix L4 digital cameras sell between $51 and $139, depending on the memory capacity. $139 represents the high end of the market, while $51 seems to be an aberration from the usual average selling price for these cameras and probably occurred because this item was listed as an auction, rather than a Buy It Now like the other similar listings.
Don’t forget to search using serial numbers if necessary. Details such as serial numbers, vintage, and model number can all make an enormous difference to value.
Consider how ‘used’ your item is and how that would affect the price.
In this case, it’s not particularly necessary for me to look at the new price as all the completed listings on eBay were for new items. However, if my arbitrage opportunity was new, or newer, than any of the completed listings on eBay for similar items, then this would be valuable research to help me price my item (and bid) accordingly.
Once you have finished your research, make an informed judgment on the true value of your item and then work out your maximum bid price accordingly.
Remember to calculate shipping costs into your final price. Email and ask for shipping price if it is not included. Some sellers will try to make money on the shipping and this could ruin your profit margin.
Step #4: Bid!
Once you've found a good prospect and it looks like a money-maker, it's time to make your move.
Bidding to Win and Other Secrets
If the item doesn’t have any other bids, then it is essential that you place one straight away.
The reason for this is that if the seller suddenly realizes that the title is misspelled – or decides to replace the photo with a better one, or re-write the title – then they are at liberty to make these changes while the item is without bids. And wham, you miss your arbitrage opportunity!
If you haven’t already, consider creating a separate account for purchasing arbitrage items. This is particularly important if you plan on reselling items on eBay. Potential bidders may be put off if they can see just how cheaply you purchased the item a few days previously!
To avoid giving the seller the opportunity to make changes, you need to place a bid right away if there aren’t any others. Just bid the minimum amount to secure the auction. If someone else has already placed a bid, then you don’t have to worry. Once you have placed a bid, set a reminder to come back to the auction a few minutes before it closes.
You can bid manually on your item, but this has two problems:
- You may be tempted to bid higher than your maximum bid in the heat of the moment if someone is bidding against you.
- If another bidder is equally determined, he or she may be using a sniping tool. This makes it almost impossible for you to compete and you will probably lose your item.
A much better idea is to use a sniping tool or service to place your maximum bid.
Sniping is the act of placing a bid during the last few seconds of the auction. Bids placed before the last 20 seconds will put the auction on auto-extend mode enabling competing bidders the time to place a higher bid. But, a sniping tool can time bids very precisely. Bids placed in the last few seconds of the auction mean that the auction expires before the previous bidder has time to respond.
Sniping tools abound on the Internet, but some good ones include:
Sniping tools are extremely easy to use. Just enter the auction number, your maximum bid and the time before the end of the auction that you want your bid to be placed. The sniping tool will do everything for you, so you won’t have to think about the auction again until you see an email from eBay congratulating you on your purchase in your Inbox.
As a general rule, leave 6 seconds before the end of the auction to place your bid.
Once you’ve set up your sniping tool, it’s important not to think about the auction again until it ends. Successful arbitrageurs must remain detached from items they are bidding on. It’s essential that you are not tempted to increase your maximum bid in a fit of whimsy – thus removing your profit margin. If you lose an auction, just move onto the next one.
Top tips for arbitrageurs
Find your Own Niche Market
Searching for ‘dimond’ and ‘Rollex’ may seem like a great idea, but believe me, it’s been done before. You need to find your own niche market to be truly successful. Often niche markets can stem from your own interests. Are you passionate about collecting pre-1900 money boxes? Chances are others will be too.
Another way of finding a niche market is by repositioning an item to target a different market. Sometimes, all it takes it listing the item in a different category and altering the keywords to attract a new audience of bidders.
For example, by placing an antique toy in the Baby category (rather than Collectibles or Toys/Hobbies), you could attract a whole new audience of mothers decorating baby rooms.
Avoid Items With Deliberately Misspelled Words
Some canny sellers are making money from putting the correct spelling and common misspellings into their title. This means that their items could potentially appear in your misspellings searches.
To avoid getting these listings in your misspellings search, add the correct spelling to your search as a negative keyword. E.g. (camra, camara) -camera.
Cutting Out Shipping Costs
As your experience grows, you can start listing items for sale as soon as you purchase them. Ask the seller if they would mind if you used their photo and list the item straight away. Email the seller you purchased the item off and say that the item is to be shipped to a third party and you’ll email them as soon as you know the address.
This is a great way of cutting out shipping costs and turning the seller into your drop shipper. This option does have an element of risk: Allowing the seller to pack and ship ‘your’ item does leave some things to chance. You just have to hope they have good packing skills and won’t give your buyer cause to leave negative feedback!
Be Wary of Knockoffs
It’s all very well finding bargain items, but some unscrupulous sellers try to make a quick buck off buyers new to arbitrage. It’s very easy to get wrapped up in the excitement of finding a normally high-priced item for a snip. But before you get carried away, make sure that you look for signs of fraud.
- If you are unsure, have a look at the seller’s feedback and read any negatives carefully.
- View the items they have bought and sold in recent months.
- Look for a certificate of authenticity.
- Stay away from sellers who have listed dozens of the same item.
Where to Sell your Arbitrage Items
There are plenty of places to sell your arbitrage items and make a profit:
- eBay itself (this is known as cross-eBay arbitrage)
- Through your own contacts
- Collectors magazines
- Other auction sites
Your step-by-step arbitrage plan of attack
- Research eBay and find a hot, high demand product with a high sell through rate.
- Determine minimum price point for this product – the price above which the item will sell 90% of the time
- Find common misspellings
- Search for items using misspellings
- When you locate a good prospect, determine what you maximum bid price will be for the item.
- Place opening bid if there isn’t one already
- Use sniping tool
- If you get outbid, don’t go back. Just forget about it.
Arbitrage is one of the most successful ways to make money quickly on the Internet. With a bit of research and the right tools, you can use Arbitrage to make a very good profit.