What is Online Arbitrage?
Online arbitrage means reselling a product to make a profit. The products are branded, and a factory or a person owns the product. You can buy your inventory from anyone or anywhere, a garage sale, or a famous website. In Online Arbitrage, you are always trying to buy something at a lower price and sell it at a higher price.
Advantages of Online Arbitrage
If you want to make the best decision, you need to find the benefits and problems of each model. So here is a list of advantages of online arbitrage:
1. Easier than other business models
In online arbitrage, you don’t want to make or design a product from scratch and sell what others have made before. So it has fewer hassles than other models.
2. Many different products ready to be sold
How many products do we have? Millions? Billions? We don’t know the accurate number of products we can sell using online arbitrage, but we know every product is an opportunity to make a profit.
3. Small capitals work too
In online arbitrage, you don’t need to invest hundreds of thousands of dollars to establish your business. Small capital can work to start your business.
4. Selling different products to different customers
You are buying the products, so what would stop you from having a different list, from toys to kitchen appliances? You can supply many different categories and items like Walmart!
1. The brand isn’t yours
A few years ago, it couldn’t be a noticeable problem, but now brand owners and Amazon are restricting more brands. It means sellers need to go through an approval process to be allowed to sell the items.
2. The profit margin is varying
Your profit margin depends on the product, time, and the provider you buy from. It can be very small or very big. Your profit is limited because the retailer, brand owner, and Amazon want their shares from the profit.
3. So many hands-on responsibilities
You must find good online arbitrage deals daily, source the products, list them, and follow up on customers’ problems. If you want to do everything on your own, it’s time-consuming and a bulky process. But if you can automate your business or hire a VA, you can free off your time.
What is a Private Label?
Private labeling means placing your label or brand on a product. You can manufacture the product yourself or order a company to make them for you. When you are doing private label, you own a product.
It’s your brand so you don’t need the approval process to sell your products. Usually, the vendor is in China and you can find them through Alibaba.
Advantages of Private Label
1. Full control of the product
You decide how to design your product, how are the label and packaging and how much the price is. It is a great advantage because you can earn the biggest part of the profit.
2. Long-term asset
If you can sell your product successfully, you can keep producing it again and have a few products that sell very well.
3. Selling your brand
When you have a successful brand, many want to buy it, and you can sell your brand for millions.
4. No daily bulky process
Once you’ve decided to do private label, you don’t need to do research every day and spend so many hours. You can do it again and again and just should keep the selling high. Even you can put it on different platforms or open a brick-and-mortar store.
5. Optimizing a product
Sometimes you use a product, and you think, “it would be way better if it could do this”. Or you see the reviews about a product, understand the customers’ expectations, and try to improve the product. So you can consider it when you are ordering the product. You can redesign or optimize the product.
Disadvantages of Private Label
1. High capital is needed
You have to invest highly upfront. The manufacturer never accepts orders of 10 units. All the manufacturers have a minimum order quantity that costs high.
2. High risk
Before researching and investing, you don’t know if your private label business will succeed. In online arbitrage, you face lower risk. Using different tools and software, you can predict many things and do limit the risk.
Online Arbitrage or Private Label; Which One Is Better for You?
So, which one is better? Private label and online arbitrage? There’s no certain answer. You need to choose the best business model based on your situation. If you are starting your arbitrage business, we suggest you choose online arbitrage. It’s easier to learn, and you don’t need to invest so much money upfront. But there is always the risk of facing a restricted brand you cannot sell. You don’t need to choose one; you can make money from online arbitrage and private label together. Fund the money you make from online arbitrage to establish your private label business.
Private label has many advantages like big profit margin and owning the brand. But you should invest a few thousand dollars upfront. So, you need to know the market beforehand and research a lot.
How to Start Online Arbitrage with OABeans
Starting a business in online arbitrage doesn’t necessarily mean spending hundreds of dollars, at least not in the first few months. At OABeans, we make one of the more challenging parts of the business easy for you: sourcing products.
What you sell and where you purchase it matters. Your sourcing decisions affect your profit and the business’s livelihood in the long term. We have different subscription plans with different prices you can choose from. For as little as $99 a month, you can kick-start your Amazon Business and make money using updated good lists. These lists include the top 1% (or 2%) OA products, helping you sell quickly.
Selecting a path for your business depends on many different factors, one of the most important ones being how much time you are willing to spend. Private Labeling takes more time and effort in comparison with OA. Know your sources, gain knowledge about the ups and downs, and then make the final decision.