Is Your Online Auction Business Related to Retail Arbitrage?
The term “auction arbitrage” is often used interchangeably with “retail arbitrage”. However, the difference between the two markets is significant.
Retail arbitrage is one of the most basic concepts in trading. By definition, this refers to “buying low and selling high”. It could also be described as “selling high and buying low”. To see what I mean, think about this example: you are trying to decide if a pair of shoes has a good chance of selling in the near future.
You should buy a pair and see what the price is at your current level (liquidation possibilities). You can see that the shoe is a good buy, but you are not in a position to sell it for the price you are willing to buy it for. You have no way to make money.
Buying low will only produce profits if you are able to sell high, but at a higher price. That is what “auction arbitrage” is all about. If you can sell a product at a higher price than you bought it for, you can make a profit.
The difference between retail arbitrage and the many other methods of trading on eBay that use wholesale pricing is that the customers are not paying with cash or a credit card. They are buying products online from someone else and then selling them to the general public for their own personal use. This means that the retailer has no financial incentive to profit as a result of selling the product.
The only direct profit that retailers can make through auction arbitrage is the cost of shipping the product. If you happen to sell a million dollars worth of products, you will pay eBay a million dollars in shipping costs. If you sell a couple of hundred thousand, you will pay eBay $500,000.
However, for most people, the retail arbitrage model is more likely to prove profitable because it does not require much physical inventory. A typical seller would buy as many products as he can, then sell them off at wholesale prices. Retail arbitrage, on the other hand, usually requires a large amount of physical inventory and supplies.
In addition, since all the sellers on eBay are competing with each other for the same customers, they are all marketing to a similar group of potential customers and increasing their sales and revenue with high volume of items sold. eBay, which claims to have the largest “worldwide marketplace” of any website, ensures a consistent supply of product and a high demand for sellers.
As a result, selling on eBay is like having a brick and mortar business. You pay a franchise fee, rent a store and pay taxes. There is a lot of paperwork involved and some regulations as well. There is also a lot of competition to get that place at the top of the rankings.
If you sell on eBay, however, you are only competing with other retailers who have established retail arbitrage sites. That means you do not have to worry about the high cost of setting up, the high cost of inventory, or the high cost of purchasing merchandise. On the contrary, you have an established business which has been around for many years, at a time when the online auction market was just getting started.
If you want to have an established online retail arbitrage business, you might want to look into eBay’s wholesale business model. You may be surprised at how easy it is to start this type of business.