In recent years, the word ‘drop shipping’ has become increasingly prominent in business articles, especially in the retail sector and amongst online sellers. For those who are scratching their heads, wondering what it’s all about – this article is for you.
While online arbitrage is extremely lucrative for some, not everyone is guaranteed to find success. But by ensuring you avoid some of the most common pitfalls, you can greatly increase your chances of making it work for you.
Insufficient researchOne mistake many online arbitragers make (especially when just starting out) is failing to do sufficient research into the market.
Some sellers even source their products based on what they would personally buy or think would sell, rather than acting on the data provided by Amazon.
Adequate research can also help you avoid other possible pitfalls, such as only focusing on profits – a product may offer considerable profit margins, but this is meaningless if the product in question fails to sell!
Fortunately there are a number of tools available online which allow you to learn more about a product’s sales volume and pricing history, allowing you to source products that are more likely to guarantee consistent returns.
Snubbing small ticket itemsOne common pitfall is to only focus on items which stand to offer the greatest net profit.
If you overlook small ticket items, which may only bring in a few pennies at a time, in favour of those products which have the potential to net £50+ worth of profit, you could be missing out on a sizeable, consistent profit.
Whether your products can fetch triple figure prices or are just marked up items from a Pound store, all ROI profit goes towards improving your bottom-line and helping your business grow.
These sales can also positively contribute to your business through improving your Amazon seller rating, a key factor in improving your visibility on the marketplace.
On top of this these smaller items are great way for just dipping your toe into online arbitrage, without having to make a major financial commitment.
Getting drawn into pricing warsAll sellers want to move stock as quickly as possible, and pricing your products competitively is a great way to achieve this.
However be wary of falling into the trap of attempting to continually undercut your competitors, especially if it threatens to undermine your profit margins.
As always patience is a virtue, prices on Amazon are in constant state of flux, sitting tight and letting the competition burn through their stock offering ridiculous prices will see your products sell eventually.
Also steer well clear of trying to beat Amazon prices. Amazon is happy enough to lose money on the sale of an item to ensure a customer’s continued patronage and it’s highly unlikely you’ll have deep enough pockets to compete!
Not taking advantage of the online tools availableThere are a whole host of tools available to sellers on Amazon, including some very impressive third party programs.
However it’s surprising how many online arbitrageurs choose to forgo these tools, either due to being unaware of what’s available or being unwilling to pay for access to some of the premium services.
Unfortunately this leaves them at a clear disadvantage to many of their competitors who can save significant time by automating parts of their operation.
If you want to keep pace you should look into one of the various arbitrage deal finders available online, these automate the process of trawling through the internet looking for opportunities and simply provide you with a daily list of products which can be resold on Amazon for profit.
Other useful programs include those which manage your product listings, altering prices automatically to remain competitive, or help with logistics, by managing inventory and comparing couriers to give you the best deals on shipping.
Ignoring replenishable goodsIf you’re looking to turn your online arbitrage into a full-time business it’s important to ensure you can source a regular and reliable income.
Chasing sales, clearances and promotions is a big part of online arbitrage, however this can be unreliable and make it difficult to build a sustainable business.
Instead when looking to go fulltime you should find a steady base of goods which yield consistent turnover and can be sourced regularly.
Successful sellers suggest diversifying your inventory with replenishable goods such as health and beauty products, which will continually tick over and keep you in the black while you’re searching for other opportunities.
Not moving money efficientlyOne final pitfall is not managing the transfer of profits from sales in foreign currencies in the most cost-effective manner – but this can be easily avoided.
If you’re buying products from stores located abroad or selling items on Amazon’s international marketplace you’ll probably need to make regular currency transfers, and you could be eating into your profit margins if you decide to do this through Amazon’s in-house service or your bank.
By making these transactions through a leading currency exchange specialist like Currencies Direct, you’ll gain access to excellent exchange rates and a fast, reliable, fee-free service – helping you maximise your profit and grow your business.