What Retail Arbitrage Is And The 3 Main Types Of Arbitrage
In this post we explain what is retail arbitrage and the 3 main types of arbitrage…
Arbitrage is the simultaneous purchase and sale of an asset to profit from a difference in price. It is a trade that profits by exploiting the price differences of identical or similar financial instruments on different markets or in different forms.
Let’s give a simple example of an arbitrage opportunity. Let’s say you buy a toy doll from New York for $5, but are able to sell the doll for $15 in San Francisco. If you are able to buy the doll from New York and sell it in the San Francisco market, you can profit from the difference without any risk.
Types of Arbitrage
There are so many different types of arbitrage, but in this article we’re going to discuss the following:
- Retail Arbitrage (RA)
- Online Arbitrage (OA)
- Amazon-to-eBay Online Arbitrage
Retail Arbitrage (RA)
Arbitrage in the retail sector is where products are sourced from brick and mortar retail outlets and resold in various marketplaces online or offline, such as an online store, eBay, or Amazon.
Online Arbitrage (OA)
Arbitrage in online selling means to source products online with the specific aim of exploiting a price mismatch between two marketplaces, so that you can resell them for a profit.
If you are selling on Amazon as a reseller, this means you are trying to find products that are being sold in an online store or marketplace at a lower price than the current price on Amazon.
This is a bit different than online arbitrage, but more of a subsection to it. In this case you don’t actually purchase the stock up front. Instead you locate appropriate products and list them for a higher price on eBay.
When you get an eBay order, you buy the product from Amazon and have it delivered directly to the customer. The benefit is that you are not fronting the money; although the margins tend to be considerably smaller than traditional online arbitrage.
In this post we explained what is retail arbitrage and talked about the 3 main types of arbitrage. Personally, we recommend private labeling a product to sell with Amazon FBA.
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