Trade Your Way to Profit With Deal Arbitrage
Today I’m spotlighting an opportunity anyone can use to make a substantial sideline (or even full-time) income.
Deal arbitrage is a relatively little-used approach to online auction trading (although as I’ll explain you don’t necessarily have to use online auctions at all).
While most online auction traders buy in bulk from wholesalers (and hope they aren’t left with crateloads of unsellable products), deal arbitrage is a relatively low-risk method that proceeds (initially at least) one item at a time.
The method involves buying products being sold cheaply in sales and special deals, then selling them on at a higher price once the promotional period is over.
It’s a method that can work particularly well at this time of year, when merchants both online and offline are discounting to improve their balance sheets, make room for fresh lines and boost interest in their stores.
A wide range of popular products can be used for deal arbitrage. Those with the best potential include electronic goods of all kinds, fashion, footwear, jewellery, watches, mobile phones, cameras and computer games. Lower-priced products such as books, CDs and DVDs can also be used, though your profit per deal is (of course) likely to be lower.
I recommend focusing on one particular product category initially as you build your expertise in deal arbitrage, but once you’ve done this there is no reason why you shouldn’t diversify to other areas as well.
Table of Contents
A Four Step Plan
Deal arbitrage is a very simple process. It can be broken down into four main steps. These are: (1) identify suitable deals, (2) check they can be sold at a profit, (3) buy them, and (4) sell them at an online auction site or elsewhere.
Let’s look at each of these steps in turn.
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Identify Suitable Deals
There are many places you can find deals. Starting in the real (physical) world, you could simply take a stroll down your local high street and make a note of any good deals you see advertised.
In general you shouldn’t buy there and then, but research the products online when you get home and see what prices they are selling for elsewhere. I will discuss this in more detail when we get to step (2), of course.
If you want to research which stores currently have sales and promotions running, a good place to start is the Money Saving Expert website, run by personal finance guru Martin Lewis. Click on https://www.moneysavingexpert.com/deals/high-st-sales-diary/ and a new page will open listing current (and forthcoming) high street sales, including both online and offline stores.
Other websites with up-to-the-minute information about deals and promotions include Hot UK Deals and Offer of the Day.
Of course, you can also source some great deals from websites directly. Two I especially recommend are Amazon and the UK’s number one online auction site, eBay.
For sourcing potential arbitrage deals on Amazon, click on Today’s Deals near the top of the Amazon homepage. Pay particular attention to the ‘Lightning Deals’ advertised here, as there are some great discounts to be had. When I checked just now they were advertising the Tacklife Digital Tyre Inflator for £8.47, a 79% discount on the normal price of £39.59. Lightning deals only last a day or two, so you won’t have long to wait before you can put your purchase up for resale.
- The Amazon Discount Finder on the Money Saving Expert website is another great tool for finding bargains on Amazon. Just enter the product you want to buy and the discount you are looking for and see what it comes up with.
There are lots of great deals to be found on eBay as well. Like Amazon it has its own dedicated deals page, which you can access by clicking on Daily Deals at the top left of the eBay homepage. Some of the discounts on offer here are better than others, but they include some real bargains with great profit potential.
In addition, there many ‘hidden treasures’ on eBay that casual browsers never see. These particular deals are not intentional special offers, but rather the result of errors made by vendors in their listings.
An example is where someone puts an item up for sale but misspells the brand name. This means visitors searching for that brand using the correct spelling won’t find it, and the item is therefore likely to sell for a lower price than it should.
A free tool I recommend for unearthing this type of deal is BayCrazy. This has a range of features to help you find products available on eBay UK at ultra-low prices.
For example, if you select Misspelt from the BayCrazy menu and enter a brand name, the site will display any listings with possible misspellings of that name. So when I entered Accurist, it came up with a listing for a luxury watch where the brand name had been misspelt Acurist. Not surprisingly, there had been no bids on the item in question.
BayCrazy also has search tools for other potential bargains. These include auctions ending soon with no bids, night-time bargains (where auctions end in the middle of the night when nobody is likely to be around), and local offers (where buyers have listed items for collection only, which means only people living nearby are likely to bid).
BayCrazy is an invaluable tool for deal arbitrage. It is well worth taking a little time to explore the site, and adding it to your Favorites list.
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Check Items Can Be Sold at a Profit
Before buying any item for deal arbitrage, you should of course check that you will be able to make a profit on it.
As it’s most likely you will be selling your product on eBay, your first step should be to search their current listings using the search box on the homepage.
Check how many results come up, how much interest the auctions generate, and what level the bidding typically reaches. If there are any Buy It Now auctions, make a note of the price being asked. This should help you assess what is considered a reasonable price for this particular product.
Of course, it won’t tell you whether the vendor actually achieves this price, so you should also search completed auctions. This is easy as well on eBay. Start by doing a general search as above, but then scroll down the left-hand menu until you reach the heading Show Only and click the box next to Completed. The results list will change to show completed auctions only.
These searches should give you a good idea of the ‘going rate’ on eBay, but many products can of course be bought elsewhere as well. So in addition it is important to check the best prices currently available to buyers using a shopping comparison tool such as Kelkoo. You can also search on Amazon to see if the item is sold there, and if so for how much.
Ideally, of course, what you want is a product that is in demand and regularly sells at a price which will allow you a decent profit. It should not be available for a cheaper price at Amazon or elsewhere, and neither should there be so many other sellers that it will be difficult to ensure that your own auctions stand out.
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Buy Items at the Best Price
If all is looking good, your next step will be to buy the item at the best (i.e. cheapest) price you can achieve.
If you’re buying from a store where the item is on a promotion, this is pretty straightforward, of course. Even so, you may be able to boost your margins a bit more by buying with a cashback credit card, where you get a small percentage of the purchase price back. You could also try haggling, of course.
For many online stores (and some offline) you can also get money back on your purchase by signing up with a cashback site such as Top Cashback and visiting the merchant’s website via a link from the cashback site.
If you’re buying through an auction listing, it’s a little more complicated. Here are a few quick tips to ensure you purchase at the best possible price.
- Don’t bid till the last minute.
- Work out the most you are willing to pay and bid this amount. You may still get it cheaper than this if nobody else bids.
- Add a few pence to your top bid, e.g. £20.15. If someone comes in at the last minute and bids £20, those few pence will ensure that you still win the auction.
- Consider using auction sniping software to place your bids at the last possible moment. There are plenty of free or low-cost services you can use. The Goofbid free sniping tool is a personal favourite of mine. You can access it at www.goofbid.com/free_ebay_sniper.html.
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Sell Your Purchase for a Good Profit
Finally, of course, you will want to sell your product for the best price you can get, which will hopefully generate a good profit for you.
In most cases your best bet is again likely to be eBay. With popular items especially, a bidding war can develop among buyers which pushes prices up.
Psychology also plays a part in this. Many people hate the thought of ‘losing’ an auction, so they end up bidding more than they could pay if they bought the item elsewhere!
Selling on eBay is a relatively straightforward process, and lots of advice is available on the site itself and elsewhere online. Here are some tips to get you started, though.
- Always include a good-quality photo of the product, taken against a plain background.
- Write a thorough description of the item (you can research this from other auction and online store listings). Double-check that you don’t misspell the brand name!
- Ensure that the auction finishes at a sensible time, so there is plenty of competition among would-be buyers at the end. Early to mid-evening is usually best.
- Start the auction at low price. You may think this is a risky strategy, but with popular items it will generate much more interest and potentially start a bidding war. The one exception is specialist items (e.g. antiques) which will only appeal to a small minority of individuals, but these are unlikely to be suitable for deal arbitrage anyway.
As I mentioned earlier, while eBay is likely to be the top choice for most arbitrage dealers, other options do exist.
For books, CDs and DVDs, you may get better prices selling as an Amazon merchant. I won’t go into detail about this here, but it is possible to set up as a merchant on Amazon free of charge, and your products will then be available via the relevant Amazon product page. Obviously, for this to work, you must be able to sell your item cheaper than Amazon and still make a profit.
One other option is to set up your own store and sell directly from that. One service you can use for this is the web-based, drag-and-drop Weebly service. Obviously you will have to work harder to convince buyers you are reputable than if selling via eBay or Amazon, but if you become a regular trader it is worth considering.
If your first few deals work out well, you may want to try buying multiple items while they are on promotion for resale later. This can boost your overall profits considerably.
In summary, deal arbitrage is a great way to make a useful extra income for minimum risk and little hassle. And because you can start with just one item at a time, it is very easy to try out and see if it appeals to you.
As always, if you have any comments or questions about this post, please do leave them below.
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