Online Arbitrage: Buying Low and Selling High Online
The classic arbitrage business model the difference in prices between two markets to generate revenue. For example, an investor might purchase goods in one nation, and then sell them to customers in another for a higher price. If the prices variance was large enough, a business owner could even profit from buying items at one convenience store and selling them to another.
The key to arbitrage is that it is a low-risk venture. Exchanges usually happen very quickly and with pre-determined pricing. Before expending any capital, a margin is already set for the particular deal. This same idea can be translated to a number of online ventures to turn hefty profits.
Online Retail Arbitrage
Much like discounted clothing stores, online retail sites often dump product en mass. In some cases, this may reflect that there is little demand for the item. Often, however, businesses are simply clearing their digital and warehouse inventories.
This is an opportunity to capitalize on the difference between this short-term market and the average consumer market. It is important first, however, to be sure of the value in the items. Sales on auction sites like EBay and pricing at local retail stores are two ways to identify the going rate. EBay and Craigslist are both great platforms for a quick sale after purchase.
Arbitraging Services
There are a number of online services perfect for arbitrage. These most commonly are contractor and customer relations. Many of the web design, content development and search engine optimization services purchase work from a freelancer and then mark it up from 30 to 50 percent. There is no hard pricing in these industries, giving plenty of room for arbitrage.
The key is building value in the final product. Customers who search online are bound to recognize that they could purchase the goods at a lower price. Offering a strong value proposition will enable a business to succeed in the market, regardless of bargain-brand options.
Google AdSense
One dying source for online arbitrage is paid advertisements on Google. In the past, people have created “Made for Adsense” sites that only display a list of links to other websites. Once a user clicks on a seemingly helpful link in their Google results, they are a presented with an almost useless page filled with paid links.
These individuals made money from the difference between the cost for their pay-per-click ad on Google and the profit from clicks on their website’s ads. This is a failing business model and considered a violation of Google’s TOS.
Staying away from the trap of AdSense arbitrage, both online retail and service businesses offer plenty of opportunities for arbitrage. The only absolute rule for success: buy very low and sell very high.
