Have you ever bought an item on eBay then received a package from Amazon, with a gift receipt inside?
Maybe you’ve come across DS Domination, or another site like it, promising to teach you how to run an automated ecommerce business?
Or if you’ve dug deeper you may have found tools for repricing eBay listings when prices change on Amazon, or even for automatically purchasing items from Amazon.
If you’ve encountered any of those, you’ve dipped a toe in the frankly murky world of “Amazon to eBay arbitrage”. In this post I’m going to explore it in depth. Yes, it’s dominated by get-rich-quick schemes, but that’s only part of the story. Beneath all that, there’s an interesting phenomenon going on, with innovative technology available and genuine businesses in operation.
An online arbitrage success story
British scientist Ben Hovell started arbitrage selling on eBay in 2008. He bought an item on eBay, only to have it arrive in a box from Amazon.co.uk. Ben then discovered that the item was cheaper on Amazon than on eBay, and pieced together what had happened:
- He purchased the item on eBay
- The eBay seller purchased the item from Amazon, and entered Ben’s address for delivery
- Amazon shipped the item
- The eBay seller kept the difference
It’s important to understand that this isn’t Fulfillment by Amazon (FBA) and the seller does not purchase the item in advance. The key is that the item is only bought from Amazon once a sale has been made on eBay. Amazon is effectively being used as a drop-shipper.
Having understood the basics, Ben decided to get into the arbitrage selling business himself:
Hard drives were very expensive at the time, so I listed ten on eBay and copied the prices from Amazon, with a bit added on. Then I sold one, which was wonderful. I sold another one a week later, which was wonderful again.
The next sale did not go as smoothly. The price had gone up on Amazon, and he lost money on the sale. Amazon actually makes millions of price changes every day, which creates a major challenge for arbitrage sellers. But Ben stuck with it, checking Amazon’s prices every morning and changing his price on eBay accordingly.
Expanding an online arbitrage business
The next step was creating a piece of software to check Amazon prices three times a day and if they had changed, create an upload for eBay’s File Exchange system to update the prices. With this automation in place, Ben scaled up his business, and had hundreds of eBay listings running:
It had gone from a hobby to a little more serious. We are talking about £100 or £200 in profit per week. Not a living, but worth having. I realized my constraint on growth was twofold: one, I needed more eBay listings and two, I needed to update prices more frequently.
Next Ben commissioned more powerful software to check prices every hour, and found a company in India to outsource the work of writing eBay listings. Both constraints were resolved, and the business “just ballooned and ballooned.”
Sales were growing rapidly, and both eBay and PayPal fees started to go down thanks to volume discounts. By using an Amex credit card with cash-back, the Amazon purchase price was in effect lowered by 1.5%, reducing costs further. At this point Ben employed someone for 2 to 3 hours per day to place orders on Amazon – up to fifty a day – and was making tens of thousands of pounds in profit a year. He was spending millions of pounds on Amazon.
What did he sell?
Anything and everything on Amazon’s best sellers lists, as long as it was priced between £50 and £500. There was no other market research – listing was so cheap it just wasn’t worth refining it further. He’d list everything on eBay for the Amazon price plus a percentage and a fixed “fee”, a kind of commission for handling the transaction.
But then things changed:
It got increasingly difficult to buy. Amazon said “hey, this isn’t for personal use”, and stopped me from buying. I don’t know why it happened, there’s no dialogue there. There are ways to get around it but I decided that it wouldn’t last forever and went back to being a scientist. That was in 2012.
Ben’s style of arbitrage selling was based on high volumes, and clearly it can be profitable. With good software and outsourcing, it seems like he found internet marketing’s holy grail of a “passive income”. So what’s the catch?
It’s a zero-sum game with a race to the bottom. Not everyone can make money doing the same thing. But arbitrage selling will continue to exist as a niche, run by people with the willpower and programming knowledge to do it. It’s like trading on the stock exchange, which still has arbitrage with fast frequency transactions, and we still have arbitrage in the betting markets. It’s exactly the same game and will always be there. It just happens to be doing it with consumer goods.
Ben is now working on making his software public, and free, using Amazon affiliate links to generate an income from it. The service will be able to create new eBay listings based on Amazon products. It will then check Amazon every hour and update the eBay listing if the price changes, or end the listing if Amazon goes out of stock. It will work for eBay and Amazon US and UK.
How do you automate Amazon to eBay arbitrage?
So arbitrage can work, providing high customer satisfaction and generating a profit, but is it a “real” business? Generating a large chunk of income from a personal cash-back credit card, while profitable, doesn’t seem like a great business foundation. And crucially, if you are not adding any value to the transaction then there’s nothing to stop a competitor doing exactly the same thing, and a price war will soon begin.
To find out more I spoke to Doug Feigelson of Zinc Technologies, who make a software tool called PriceYak.
PriceYak calls itself “the most advanced repricer for eBay”, but what it really specializes in is – you guessed it – Amazon to eBay arbitrage. It’s particularly interesting because it automates more of the arbitrage process than any other tool out there, to the best of my knowledge. This is what it can do:
- Create eBay listings from Amazon products
- Reprice eBay listings when Amazon prices change
- Automatically order sold items from Amazon
- Post tracking information back to eBay when the order is dispatched by Amazon
Automatic ordering from Amazon is the biggest deal here, because nobody else does it (a notable exception is an Amazon buying API provided by Segemai Technologies).
From arbitrage selling to arbitrage software
Doug was also an arbitrage seller himself before getting into the software side:
About six years ago I was selling a lot on eBay, and realized I could do arbitrage from Amazon to eBay. I was learning software and could automate a lot of it. The part I loved about it was writing the software, and the part I hated was customer support and calling eBay when there were problems with the account.
With 200,000 listings on eBay, and over 100 orders per day, Doug was the seventh-largest bookseller on eBay. He had automated buying from Amazon, while other arbitrage sellers were limited by the need to place orders manually. With ordering taken care of, Doug found customer support was making the biggest demand on his time. Many eBay sellers will be able to identify with time-consuming problems like wrongly classified returns, policy violations, selling restrictions, and long calls with eBay seller support.
Is online arbitrage a legitimate business?
Having moved on from selling to software, Doug works with many arbitrage sellers. I asked him about the perception of Amazon to eBay arbitrage today.
It’s a very legitimate way to run an eBay business. There’s a niche real business there, and a whole aura around it of Multi-Level Marketing (MLM), and people just trying to get rich selling the information. We really hate that. It’s really annoying and very noisy. There’s a lot of people out there who are not looking to do any work, but it’s a real business and you need to put real work into it.
In terms of strategy, PriceYak’s sellers fall into two main camps. One strategy is to have a relatively small number of listings, perhaps a few hundred, and work on the titles, photos and descriptions, creating original content such as detailed buying advice. “Those guys get a lot of sales on the few listings they have”, explained Doug.
What is the profit margins for online arbitrage?
Margins can be as high as 20% above the Amazon price, although around 8% is more typical. On average, PriceYak’s customers sell about 1% of their inventory a day, so a seller with 1,000 items on eBay might get around 10 orders a day.
Another strategy is to list as much as possible. eBay’s selling limits can be a real barrier here, as they restrict the number of active items for sale, and can only be increased once a month. Sellers following this strategy will compile a list of popular products, and create eBay listings in bulk using an automation tool. A lot of sales can result, but margins are smaller and there can be a high demand for customer support. Some high volume sellers only break even, and make a small profit from credit card rewards.
So what’s the future like for arbitrage sellers?
Nothing is permanent. Everybody knows that the niches come and go. Maybe they have a product category where they’re doing very well, but that usually won’t last more than a couple years. It shifts around. That being said, none of the really serious sellers are scared of the people who buy a get-rich-quick video and dabble with it. Those people are generally not committed enough to be a threat. The most successful sellers are not necessarily the ones with the most experience or talent, they’re the ones with the most commitment – the ones who’ll wake up every day and answer the support questions without fail.
It’s the more committed sellers that PriceYak serves, and it’s staying firmly in the area of Amazon to eBay arbitrage selling. Recently they improved the speed at which eBay listings can be created, and also introduced a blacklist of brands who have made VeRO trademark infringement claims on eBay against their sellers – so future listings featuring that brand can be avoided.
PriceYak has three software engineers working for the company full-time. On their site it’s not clear at first glance about what the software does, but it’s well known on forums for arbitrage sellers.
Amazon to eBay arbitrage selling FAQs
Is Amazon to eBay arbitrage ethical?
Opinions differ. This form of arbitrage is similar to drop shipping – ordering direct from a wholesaler, but only when a sale is made. Like drop shipping, no stock is held by the seller. Drop shipping is well-established, widespread, and used by many well-known retailers, particularly for bulky and expensive items. Nobody thinks drop shipping is unethical.
But the key differences are that Amazon is a retailer anyone can buy from, and the arbitrage seller does not tell the buyer they will simply purchase the item from Amazon on their behalf. That’s what puts this type of selling in an ethical gray area.
Of course, you can argue that there’s nothing stopping the buyer from checking the price on Amazon themselves, and that’s true. And there’s no obligation on sellers to say if a better price is available elsewhere – it would be absurd to expect that.
Still, even with all the rational arguments going in its favor, Amazon to eBay arbitrage has an air of injustice about it. It’s so far removed from the way people expect a retailer to operate, that I doubt it will ever be seen by everyone as an honorable way to do business.
Do eBay buyers get upset when they receive their order from Amazon?
Yes, sometimes, but it doesn’t happen very often. In fact it’s surprisingly rare. Some arbitrage sellers refund the difference if a buyer complains, which normally prevents negative feedback and can be built into the cost of doing business.
One seller who uses this model, the_book_i_want, is a Top Rated Seller on eBay with 99.8% positive feedback. While they do have negative feedback from buyers who were boycotting Amazon, or felt cheated because they could have paid less, as a percentage of their total feedback it is very low.
Why don’t people buy from Amazon if it’s cheaper?
Most of the time, they just don’t look. There are many different buying habits, and checking prices on both eBay and Amazon isn’t all that common. Some will go direct to eBay, believing it will always have the best price. Others might compare prices, but a comparison between a high street store and eBay, for example, may favor eBay even if the product is actually sourced from Amazon and marked up.
Another possibility is that eBay’s Global Shipping Program makes a product available to an international buyer who is either not able to buy directly from Amazon, or who finds Amazon shipping to be prohibitively expensive. The buyer may know that the item is cheaper on Amazon but still choose to buy on eBay. The seller then arranges for shipping from Amazon to eBay’s domestic warehouse, and leaves it for eBay to arrange shipping to the buyer abroad. That’s how the Global Shipping Program works.
And finally, a buyer with a balance in their PayPal account (from the auction of unwanted gifts or hobby items, for example) may choose to buy on eBay to make use of their balance. While it’s more rational to withdraw the money then buy from the cheapest retailer, it might be more satisfying to spend the balance directly.
Could sellers get banned if they cancel eBay orders?
Yes, if sellers cancel too many orders then eBay will limit their sales or even ban them completely. Using a repricer specifically designed for Amazon to eBay arbitrage addresses the risk of price changes happening before the sale is made. Once an item has sold the price is fixed, but there remains the risk of price changes on Amazon until the order is placed there.
Arbitrage sellers need to avoid order defects like any other eBay seller, so some will take a loss if Amazon prices go up before they place their order. Others will cancel the sale, and risk being penalized. Flawless automation of changes to price and availability, and automatic ordering, are the only way to mitigate the risk completely.
Is it OK to take the description and photos from Amazon?
The copyright on the description and photo may belong to Amazon. Or possibly the first seller to list that particular product on Amazon, if they took their own photos. To avoid complaints, some arbitrage sellers write their own descriptions, and source photos that can be used more freely, such as the manufacturer’s.
Arbitrage sellers are unlikely to take their own photos, as they rarely handle the items themselves.
What is the future of online arbitrage selling?
Amazon to eBay arbitrage is much more common than most people think. Sellers who do it don’t advertise the fact, so they are difficult to identify. Perhaps they have feedback that mentions receiving a package from Amazon, or use Amazon images directly in their eBay description, but very few buyers would notice either.
But there is a bigger concept to arbitrage selling than just buying from Amazon and selling on eBay. Whenever there is a sufficient gap between the price that buyers will pay, and the price that a retailer will sell at, arbitrage becomes possible. Sometimes this will be in cross-border selling, with products that are expensive or unavailable in the buyer’s country. A listing on their local eBay site, in their own language, will make the product seem much more accessible.
Consider also that the source of products doesn’t have to be Amazon, and the target marketplace doesn’t have to be eBay. A seller could list on New Zealand’s Trade Me or Poland’s Allegro, but source products from Nordstrom or Walmart in the US. A forwarding service can handle international shipping if it’s not offered (or too expensive) direct from the retailer. Zinc Technologies already provides a flexible buying API with support for several different retailers, making it easy to automate the ordering part of the process.
Today, most would agree that Amazon to eBay arbitrage is a covert practice – those who do it certainly do not shout about it. But perhaps, in a few years’ time, we’ll see a world where every product, from every retailer, anywhere in the world, is available on every marketplace.
In that world, with all products available everywhere at a competitive price, exorbitant local prices will become impossible. All thanks to arbitrage sellers, once dismissed as shady middlemen, adding grease to the wheels of international ecommerce.