New Internet Income Streams – Amazon Marketplace Arbitrage

New Internet Income Streams – Amazon Marketplace Arbitrage

amazon marketplace arbitrageAs I’ve talked about here before, successful affiliate marketing is a long-term project. You don’t dream up a great idea for a site, build it, get it ranked overnight and have income flowing in after a few days (at least, not in most cases). It takes time to build a quality site that generates both traffic and sales.

And really, this is a good thing. When you think about affiliate marketing, I want you to think about it as a legitimate business – one that requires consistent, dedicated hard work to succeed with, as that’s truly the only way to win in the long run with internet marketing.

But I know you’ve got bills to pay – just like I do – which is why I’m always looking for new streams of income that I can add to my portfolio to bring in some faster cash. So today, I want to share the details on an Amazon Marketplace arbitrage strategy I’ve been trying lately that’s showing some interesting results.

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First, the background. As most of you know, I finally made the leap to the world of smartphones and bought myself an iPhone back at the end of April. It’s something I’d been planning for awhile, and although it only brings my monthly cell phone bill up to about $80/month total for both my husband and I, I still wasn’t entirely comfortable with the thought of adding more regular expenses to my bills.

So I promised myself, “If I get an iPhone, I’m going to find a way to make it pay for itself…”

Enter Amazon Marketplace arbitrage. The idea behind this particular income stream is to purchase used books at a low price and then sell them in Amazon’s Marketplace at a markup. Here’s how the plan looks in more detail:

Step 1 – Find places where people are selling books cheaply. For example, I used the website Book Sale Finder to identify a few library book sales in my area where I knew I’d be able to get books for between $.50 and $2.00 a piece, although plenty of people use this strategy at auctions, estate sales and garage sales.

Step 2 – Install a barcode scanning app and a book scouting program on my iPhone.  These programs enable me to quickly look up the Amazon Marketplace sales data (including price, number of copies available, bestseller’s rank, etc) and determine if a book will be profitable on the fly, taking the guess work out of purchasing books for resale.

Step 3 – Purchase books and create listings for them on Amazon Marketplace. Be sure to track sales stats to determine which categories of books are most profitable to direct future purchasing efforts.

Sounds pretty simple, right? Use a combination of apps to find books that sell online for more than I have to pay for them and turnaround and flip them on Amazon. Pretty basic arbitrage principle, really.

Of course it’s more complicated than that… Although there’s certainly tons of potential with this business model, there are a few challenges that I want to share with you before you rush out and start trying this on your own.

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First of all, although I know you all think I’m a brilliant business visionary, I’m actually not the first one to think of this idea… 🙂

What that means is that at every used book sale I attend, I’m competing for the best picks against a group of professional book sellers who have a) more experience, b) better margins, and c) better equipment than I do.

In terms of experience, these professionals know which categories of media will be most profitable when it comes to resale, so they’re able to jump in and start checking prices while I’m still standing back, trying to decide which book to scan first. Obviously, I’ll get better with practice (and it’s actually pretty helpful to step back and see what they all go for first), but until then, it can be a little intimidating to be working alongside people who are much more advanced than you are.

These professional book sellers also have margins that I can’t compete with right now. Because they sell in greater volume, they get discounts on things like bubble shipping pouches (the best way to ship books cheaply) and can handle selling books for a smaller profit. As someone who also works a day job, I need each book I purchase to bring in more cash in order to justify the time spent processing sales and shipping out purchases.

But the difference in equipment between what I use and what the professional sellers use is probably the biggest obstacle. For my first book sale, I used the Amazon PriceCheck app, which scans the barcodes of books using the iPhone’s camera, converts the picture to data and retrieves information on the book’s stats from the Amazon Marketplace.

Two problems here. First, the time it takes to retrieve this information is significantly slower using a barcode scanner/camera combination, compared to the specialized barcode scanners most professionals use. But because I don’t plan on investing $300-400 to purchase this equipment, I’ll just have to live with the time delay.

The second problem is that the free Amazon app can’t be manipulated to show specific results – something I discovered *after* my first book sale. Initially, I didn’t realize that I was looking at the “New” prices on Amazon, which meant that the bag full of winners I thought I’d purchased was only worth a few pennies in their used condition…

To resolve this problem, I decided to upgrade to a book scouting program called ScoutPal, which integrates with a different barcode scanning app (Pic2Shop PRO) to report any information I want. For example, I can program it to show the number of used copies for sale in Amazon and their prices before the new results, which helps me make decisions faster. I can even program a formula that will display a “Buy” or “Pass” rating, depending on whether or not a book meets specific criteria, like the sales rank, average price or estimated time to sell.

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To this point, my investment in the project has been $10 for the upgraded barcode scanning app and $10/month for the ScoutPal program (I’m still evaluating whether or not it’s worth it to keep up this subscription). I’ve also had to pay $5 in fees to join the “Friends Club” at one of the library branch sale I attended in order to get first dibs on the books, plus the total cost of my book inventory.

So far, I’m up about $10 and I have roughly $20 in inventory on hand, waiting to sell on Amazon. Clearly, that’s nothing to write home about, but I made a couple of mistakes in the beginning that prevented these first few sales from being as profitable as possible. Now that I’ve attended a few sales and learned a few lessons, I’m confident that future sales will be much more profitable.

If this idea intrigues you and you’d like to join the world of book selling, the following are a few of the tips I’d recommend to anyone who’s just getting started.

1. Get to book sales and other events early. Yes, most sales are on Saturday mornings and it sucks to have to get up early and go stand in line just to look at some books – but just do it. You’re competing against professionals, and if you aren’t there with them, the only things left for you to sift through when you finally roll out of bed will be their leftovers.

2. Join “Friends of the Library” clubs at the branch libraries in your area that hold book sales. Your membership fee (typically only $5-10/year) lets you in before the general public and may give you access to special sales or book listings. It’s a must for the same reasons as in Tip #1.

3. Get the proper equipment. Trust me – there’s no way to develop a “gut feel” for which books will sell well after just a few hours of book scouting experience. So unless you want to spend a few weeks or months picking up unprofitable inventory, invest a few dollars in the setup I described above which will allow you to determine immediately which books are worth your time.

4. Buy only “New” quality books. This one is a personal preference, and certainly there are people out there who are making money with used quality books as well. But because I have limited time available to commit to this income stream, I’m not willing to spend time picking through books looking for marks, highlighting or creased pages. New books are more profitable and they’re less hassle on my end.

5. Avoid textbooks and exam study guides at all costs. Another rookie mistake I made (twice…) was buying two study guides that had good sales prices, without first checking to see if they’d already been filled out (they had…). Textbooks and study guides lose value quickly as new editions come out and it’s nearly impossible to check every page for markings while you’re at the sale, so I just avoid them instead. 🙂

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So far, I’ve enjoyed experimenting with this income stream, and I’m confident that I’ll be able to cover my cell phone data bill (and potentially other, larger bills in the future) by making a few of the changes described above. It’s definitely something I’m planning on continuing with, and hopefully refining my technique as I go.

Have you thought about different ways to make money on your smartphone? If you have any ideas, or if you have any questions about Amazon Marketplace arbitrage, ask them below in the questions!

Image: Ian Wilson

8 Responses to New Internet Income Streams – Amazon Marketplace Arbitrage

  1. Interesting post. I used to do something similar to this using thrift stores and eBay. I would go around to all the local thrift stores looking for big brands that were hot at that time. I would pick up a pair of Lucky jeans for $3 and sell them on eBay for $50. I eventually quit because it was so time consuming, but that was before all the mobile technology we have today.

    It’s never even crossed my mind to try something like this again. I’m really intersted to see how this works out for you.

    • Sarah says:

      Hey Jeremy – Thanks for stopping by!

      You’re right that there’s a lot of other applications for this kind of thing. I went with books because the barcodes make it easy to figure out what something is worth pretty quickly (compared to clothing, knick-knacks, etc), but you could use this system for a number of different things.

      I’ll keep you posted!

  2. Wilson says:

    Excellent tip, I do something similar. I actually take iphones from craigslist and resell them on ebay. The least I’ve ever made on a phone is probably $100 profit. Oh and if you can jailbreak or unlock the phone you can make more too.

    • Sarah says:

      That’s awesome, Wilson 🙂 Are there a lot of phones for sale in your area or are you willing to drive to pick up new inventory?

      Thanks for sharing!

    • Brian says:

      What criteria do you use to separate the worthwhile from not? Just price or certain models/features/extras?

  3. Jimmy says:

    Great post! Let us know about any other arbitrage strategies!

    Cheers
    Jimmy

  4. […] amazon affiliate on some of the sites but not making really anything there. Reading Sarah over at Common Sense Marketing about using your iphone to find books and items to sell on Amazon. So I took her info and started […]

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