According to investopedia arbitrage means taking advantage of price differences of same product at different markets. It is widely used by dropshippers around the world. What they do is:
- find a product that sells a lot
- build a simple (even 1-product page) web site.
- do some advertising on google or facebook/instagram
- when some one purchase the product from your web site, order same product from another source to the customer
- pocket the price difference
Let’s make a real example:
You find out that every one is buying fidget spinner from amazon or walmart at $15.99. Then you see it is only $0.99 at aliexpress with free shipping to USA. You create a simple website with a domain name (i.e. crazy-fidget-spinner.com). Put a price tag $12.99. Spend some advertising money everyday to get some traffic to your eCommerce site.
In the end of the month let say you spend $300 on ads and you get 3000 visitors. Of these 3000, 5% bought fidget spinners and each order included average 2 fidget spinners (note that you are selling it cheaper than amazon and walmart stores and you explicitly say it is cheaper at your site). 5% makes 150 customers and 300 ordered fidget spinners. You pay $0.99 and sell at $12.99. Your profit per spinner is $11.00. 300 by $11.00 equals to $3300. You have spend $300 on advertisements so you net profit is $3000 per month. Sounds like a real business isn’t it?
So that was how dropshipping works, you can still do it and it is still a good way of doing online business. Now I wan’t to talk about another way of arbitrage.
Every year software selling companies are doing extreme discounts at certain times, such as Black Friday, Cyber Monday, Christmas, 4th of July, etc. They also do extra discounts for bulk purchase. Let say average price of Norton Antivirus is $79 per year. At Black Friday you can find it for $19. And if you buy it for 100 PC licenses you can buy at $4 per PC.
After buying enough software, you will put all the software on your eCommerce site. Building a eCommerce site is very easy using WordPress+WooCommerce.
You should have an easy to remember domain name, maybe: buy-cheap-software.com
Then you will spend some money for advertising, google and facebook ads are recommended at this point.
You should sell licenses 1 by 1, not in bulk, you should check the price at online and should put a low price tag. If a certain software is sold at $79, you should sell it at $59 and tell them it is $20 cheaper from that site, maybe put a link to that site to prove that you are right.
Even if you sell it for $20 less you are still making 59-4 = $55 per sale. Let’s say you have $5 advertisement cost, you are still making $50 net profit.
After you get online payment, your email automation system will send download link and license key to customer. Also using this email automation system you can send regular weekly/monthly emails to customer about your new software products. For instance, if a customer buys an antivirus software there is a high probability he/she will buy a VPN software later. Using email automation you can cut your advertisement spendings a lot, because sending email is free!
Buy products cheap: Aliexpress
I hope you like this idea. Let me know if you have any improvement ideas on this article.