Newbie Help – What Is Arbitrage?

The most common method of obtaining products for resale is through arbitrage. In the context of resale arbitrage is the buying of an item in one marketplace and the resale of that same item for a higher price in another marketplace. The difference between the purchase price and the sold price is the profit.

When I was a teenager I practiced arbitrage at flea markets. I would get to the flea market before it opened and walk around talking to people while they were setting up. I would make offers on buying a large number of items from them, and then take those items back to my table at the flea market. I sold everything from toys to a car that way!

Both selling on Amazon FBA and dropshipping are forms of arbitrage where you find something at a lower price in one market and resell it for a higher price in another market. “Buy low, sell high” is the basic idea behind all retail sales, except most retailers purchase directly from the manufacturer or a wholesaler (Walmart, for example, does not go to Target and buy their clearance items and resell them at their stores. They are generally dealing directly with the manufacturers or with wholesalers the manufacturers use for distribution.)

Retail arbitrage and online arbitrage open up the doors for the small businessperson to buy as little or as much inventory as they want, and to get a return on investment that is comparable or better than the standard brick-and-mortar retailers.