Understanding Online Arbitrage Competition
In private label, sellers offer similar products from the same niche or category, and their goal is to reach the top of the search results on Amazon. Additionally, private label sellers need to consider metrics such as the number of similar products, their sales history and reviews, overall demand trend for the product and how they can differentiate from competitors.
On the other hand, none of this is important for OA sellers. Competition in online arbitrage refers to the number of OA sellers offering the same ASINs as you on the Amazon platform, along with their in-stock number. Lastly, the competition analysis covers the long term in private label, whereas in online arbitrage, sellers analyze the competition for the short term.
Why is Competition Important in Online Arbitrage?
Competition can affect online arbitrage in several ways, which is why it’s crucial to analyze the competition for an online arbitrage lead:
- Price wars – as more sellers compete to sell the same or similar products, some may lower their prices to attract more buyers, leading to a price war and reduced or negative profit margin for all the sellers.
Slower sales – when competition for a specific ASIN is too high, you will be forced to wait while your products sell over weeks or even months instead of being sold quickly and offering you a reasonable ROI. This results in idle capital and many other issues associated with it.
Key Competitive Factors in Online Arbitrage
So, which factors should we consider when we analyze the competition for an online arbitrage lead? The most important factors are:
- Number of sellers of an item on Amazon
- Competitors’ stock levels
- Evaluating Buy Box competition
Keep reading to find out how these factors affect competition between online arbitrage sellers on Amazon.
Number of Sellers of an Item on Amazon
The number of sellers is the first factor to consider when analyzing an OA lead. This factor can impact the market competition level, affecting profitability and how fast the product gets sold. With the increased competition over a particular product, prices may drop, and it may be harder to win the Buy Box.
So, how can we determine the number of sellers of a specific ASIN on Amazon? There are two methods to do this – first, you can open the product page on Amazon, check out the list of sellers offering the product, and count how many sellers there are. Take the picture below as an example:
The other method is to use tools such as RevSeller or AZInsight. When you open the product page, these tools will show you how many other sellers are offering it, as shown in the picture:
FBA Sellers vs FBM Sellers
You may wonder why determining whether your competitors use FBA or FBM is important when analyzing the competition. Since it’s easier for FBA sellers to win the Buy Box than FBM sellers, if you are using the FBA method, you can consider the FBA sellers as your competitors. On the other hand, if you use FBM, you have to consider all sellers as your competitors.
Consider Competition Within Your Price Range
Competition within your price range is another factor to consider when you analyze the competition for an online arbitrage lead. When many sellers offer the same product as you, but their prices are considerably higher, you don’t have to consider them as competitors. This is because you will be competing with sellers with a similar price range.
You can check the product listing on Amazon to see if the competitor is selling the product within your price range. You can also use price tracking tools such as Keepa and CamelCamelCamel for historical pricing data.
Assessing Competitor Stock Levels
Another essential factor to remember when you analyze the competition for an online arbitrage lead is the competitors’ in-stock levels. Imagine this – you’re analyzing a lead that 15 other sellers offer, but their in-stock level combined is 20. The product has a monthly sale of 100, so you can consider it a good lead with low competitor stock levels.
Now, imagine another lead offered by 5 sellers, but they combined have 1000 units of it in stock, and its monthly sale is 100. In this case, the competition is higher, and you may want to avoid this lead. So, you can see how competitor stock levels can be an even better and more reliable metric than the number of competitors. It’s best to consider both metrics to get the best results. Combining this metric with another one, like monthly sales, can be even more beneficial; for example, the number of estimated monthly sales divided by the in-stock level of competitors.
To assess the competitors’ stock levels, you can use tools like AMZScout, Unicorn Smasher, or Sellics to receive real-time data on competitors’ inventory levels.
Evaluating Buy Box Competition
Buy Box is the box on a product detail page where customers can purchase by adding items to their carts. Sellers who win the Buy Box tend to make more sales than those who don’t. Amazon rotates the Buy Box among eligible sellers so multiple sellers can win the Buy Box over time. If various sellers have had the Buy Box for short periods, it means it’s likely that you also win the Buy Box for a reasonable time period.
However, suppose you notice that a few specific sellers have repetitively won the Buy Box over the past months. In that case, you may want to consider this lead as a higher competition lead because these sellers are hard to compete with – they’re either offering lower prices or having high inventory levels. All in all, it’s good to consider Buy Box competition as a metric when analyzing leads and other competition metrics.
When you analyze the competition for an online arbitrage lead, you can use Keepa to analyze the Buy Box for specific products. If you want to know how to win Amazon Buy Box, click here.
Monitoring Price Fluctuations and Trends
Price fluctuations and trends can also impact competition on Amazon. During specific events or holidays – such as Christmas or Mother’s Day – some products experience higher demand. By checking the product’s price history during last year’s event or holiday, you can estimate how trendy it is and for how long.
For example, one product may have high competition during Christmas, but it’s so in demand that you can also join the market and sell many units. However, be careful not to stock up too much, or you will be left with a lot of unsold inventory that you can’t really sell after the event because it’s not in demand anymore.
Again, you can use price tracking tools like Keepa and CamelCamelCamel to track pricing trends over time. You can also set up price alerts using these tools to notify you when the price of a product falls within your desired price range.
Tools to Simplify Online Arbitrage Competition Analysis
Various tools and software can help you analyze the competition for an online arbitrage lead without going through the hassle of manual analysis. The best online arbitrage tools you can use for competition analysis include the following:
- Keepa – provides historical pricing data for products
- RevSeller – provides real-time data on competitors’ prices, sales rank, etc.
- AZInsight – analyzes competitor listings and provides insights into their sales history, pricing strategies, and inventory levels
- BuyBotPro – analyzes competitors’ pricing strategies and provides real-time data on competitors’ sales history, inventory levels, etc.
Developing a Winning Online Arbitrage Strategy
So, how can we incorporate competition analysis in our decision-making process to choose the best OA leads? The best way to develop a winning OA strategy is to develop an individual and personalized strategy that you will refine as you gain more experience. Here are our suggestions for developing a winning OA strategy regarding competitors:
Diversifying Product Selection
You can diversify your product portfolio and, for example, offer products with high competition but high profits alongside low-risk products with low competition. This lets you test everything and see what works best for you. It also allows you to find a perfect balance between risk and reward.
Staying Ahead with Continuous Market Research
By continuously monitoring your products and analyzing the consequence of your decisions and the metrics you have set for yourself, you can refine your strategy and keep learning new things. This will allow you to stay ahead of the competition in the long term and develop metrics and strategies that are unique and tailored to your needs and goals.
It’s crucial to analyze the competition for an online arbitrage lead, but you should also keep in touch with fellow sellers and online arbitrageurs to keep yourself up to date and learn new things every day. More importantly, there’s no one-size-fits-all strategy that works for every seller. So, if you find a competitor with a winning strategy, do not try to copy them – learn from them and keep your business needs and goals in mind to develop an individual OA strategy tailored to your specific situation.