My First Year Of Online Book Arbitrage: Top 3 Secrets I Learned

To drum-roll my new book (out next week), I reflect on lessons learned after one year of teaching (and doing) online book arbitrage.

TONS of stuff in this article:

1. Reflections on the first year.
2. My 11-step formula for combing Amazon manually for arbitrage opportunity.
3. Top 3 Secrets I’ve learned over the last year of online book arbitrage.

I generally don’t believe in epiphanies, but in the spring of 2015 I had one.

I was sourcing at my #1 most lucrative book source, which happened to sell their books for a flat $4 each. Despite these exorbitant prices (by used book standards), the quality was so high, I still made over $1,000 a month reselling these books FBA.

One day it hit me: There was something special about that $4 number. It wasn’t just the price of every book at my most lucrative book source. It was the price of the majority of used books on Amazon (penny + $3.99 postage).

That was the light bulb moment.

The best book source in the world might not be that overstock store. It might be Amazon itself.

What if it was possible to buy cheap books on Amazon, and resell at a much higher price via Fulfillment by Amazon (FBA)?

I decided to try it.

So I basically fumbled around Amazon, combing pages for books with big gaps between the cheap merchant fulfilled price, and the higher FBA price.

As it turns out, it worked. Manually flailing around Amazon, I found endless cheap $4 to $10 merchant fulfilled books, and resold them for $20, $30, $40 and more via Fulfillment by Amazon. My insane idea actually worked.

When I started seeing profits come in, I had the feeling of a guy who finds a bag of money on the street with a note attached that reads “Free Money.” It felt too good to be true.

My basic formula for doing online book arbitrage manually is this…

1. I pick the maximum amount I’m willing to spend (I started out at a penny, and as I got over my disbelief that this actually worked, today I’ll spend over $25 per book).
2. I pick a narrow search term. (Not too broad [i.e. “biology”], not too narrow [i.e. “dendrology”]. Generally, I look for search terms that return under 30,000 results).
3. I go into Amazon’s advanced search, and enter a title keyword.
4. I sort by “best selling” (contingent).
5. I start combing through the results.
6. I inspect for a high Amazon cover price, and total number of copies under 125. (Fewer the MF offers, the fewer [and higher priced] the FBA offers)
7. I check sales rank history through the Keepa extension. (Generally I’m looking for a rank no worse than 1.2 million in the Keepa sales rank history data).
8. I check the lowest FBA offer.
9. I check prices on other sites via AddAll (optional).
10. I buy the book.
11. I resell it at the higher FBA price, and profit the difference.

Yes, this actually works.

There’s a good chance you’ve heard me talk about this, and you’re wondering if I have anything new to offer on the subject of online book arbitrage.

The answer is yes. A lot.

But first: It was exactly one year ago that I went public with online book arbitrage.

I never said I was the first to discover it, but I was the first to teach it.

It started out as a couple articles on FBA Mastery. Then a webinar. Then Zen Arbitrage, and a private group for people who wanted to take this to another level.

Sure, my original manual formula for online book arbitrage was simple and bordered on crude, but it had one quality that matters more than all others: It made money.

Since then, I’ve taught online book arbitrage to thousands of people in private groups (I don’t think I’ve mentioned online book arbitrage publicly on this site in over a year), and I’ve leaned a lot about how to do it for maximum profits.

We’re not going to talk about anything involving fancy tools here. I want this to be relevant to everyone.

I’ll get into some tactical material in an upcoming article. In this one, we’re covering the top three high-level things I’ve learned teaching online book arbitrage over the last year.

The top 3 secrets to online book arbitrage I didn’t know when I started

     Secret #1: The money is in the keywords.

“The riches are in the niches.”

I sort of knew this when I got started, but I didn’t really get how important it was until much later.

Many people doing online book arbitrage have a particular niche of book they know to be profitable. Others have a list of particular titles they search for on Amazon daily or weekly.

If we can agree that the most money is in “scholarly non-fiction” (that doesn’t just mean textbooks), the money is in finding keywords that bring up these books on Amazon…

But not too many. Quality over quantity.

This is one of the biggest errors I see: People are combing Amazon for resale opportunity by utilizing broad searches, then getting frustrated wading through hundreds of thousands (or millions) of search results.

This is why I recommend choosing search terms that:

• Return a high concentration of academic non-fiction.
• Return less than 30,000 results.

     Secret #2. Explode your opportunity by buying twice as many books at half the profits.

Face it: You’re spoiled. I’m spoiled. We’re all spoiled.

For most of us in the used book market, we won’t touch a book we can’t at least triple our money on. That’s bonkers. You can’t name another business with those returns.

So here’s the lesson: You should be willing to accept lower profits for the privilege of being able to source books from a lawn chair.

But that’s not the only reason you should accept lower margins. The second is even more important.

I believe there is literally 10x more opportunity with books that offer 50% returns than books that offer 100%.

And I believe there is 5x more opportunity with books that offer 100% returns than 200%.

I have no statistics to back this up. But I’ve done a ton of business in online book arbitrage in the last year (as well as talking directly to hundreds of people doing it). When you start poking around on Amazon, it’s clear these estimates are in range of accurate.

Let’s take some hypotheticals to illustrate:

Book #1:
$1 merchant fulfilled ($4.99 total)
$12.99 FBA (your selling price)
$2.50 net profit (approximate)
50% return.

Book #2:
$1 merchant fulfilled ($4.99 total)
$15.75 FBA (your selling price)
$5 net profit (approximate)
100% return.

Book #3:
$1 merchant fulfilled ($4.99 total)
$21.50 FBA (your selling price)
$10 net profit (approximate)
200% return.

I’m pulling a number out of the air here, but I believe there are 50x more examples of Book #1 than Book #3. Even if I don’t have the hard stats (no one does), I believe I’m close with these estimates.

So there’s 50 times more opportunity in this range, but to yield the same profits, you would only need to buy 4x more books ($2.50 profits vs $10 profits).

So if your standards are to only buy cheap merchant fulfilled books on Amazon you can resell for 200% returns, you possibly limit your opportunity by 98%. So you’re putting in a lot more work to find those books (but you’re still in your slippers on your couch, so “work” isn’t really the word.)

If you’re willing to accept 50% returns, you reduce your search time by 98%. Or maybe it’s 75%. Whatever it is, its a lot.

And shouldn’t we be willing to compromise our usual (offline sourcing) standards for the benefit of not having to leave our love seat? I think so.

And what’s more, by the nature of the fact you’re pricing your FBA offers lower, they’ll sell faster. Its just an economic fact: The lower the price, the faster it will sell (While this is true, it’s still not an excuse for pricing lower than is necessary, but that’s another article).

So just think about it for a second. What would it mean for your online book arbitrage revenue if you could make half the profit per unit but increase your sales by 3 times or 5 times or 10 times?

This aren’t speculative numbers. This is how it works.

      Secret #3. Hacking human psychology by spending more per book and pricing insanely high.

Let’s take a basic online book arbitrage scenario: You spend $5 on a merchant fulfilled book and list it for $40 (roughly a $30 payout, or $25 net profit).

Second example: You spend $25 on a book and you list it for $100, and get an $80 payout.

Your net profit just jumped from $25 to $55.

You also had to suffer the discomfort of sinking $25 into a book. But there is one major (and little-understood) quirk of human psychology to consider:

There are more people willing to pay $100 for a $25 book than there are people willing to $40 for a $5 book.

It doesn’t make sense, because the former has a much bigger price-gap ($75 vs $35). Yet I’ve seen this play out time and time again. What’s going on?

I got the answer in a book titled “Mind of the Market”. One of the big lessons I got from this book is that humans are wired to think of increases in price in terms of percentages, not hard numbers.

Spending $100 for a $25 book is less discomforting than somebody spending $40 on an otherwise $5 book because of the percentage of the price increase.

With the first example, it’s a 700% increase in the price, but only a $35 price difference ($5 MF / $40 FBA).

In the second example, that’s a 300% increase in price, but a $75 price difference.  ($25 MF / $100 FBA).

Yet the second example is more attractive to a buyer. Why? The answer is that people have a weird ancient wiring in our brains that stems from the caveman era from where we’re trading rocks or something.

Subconsciously, we don’t judge price increases in terms of hard numbers. We measure them by percentage.

To tie all this together, when you spend more money per book, you start to notice two things:

1. There is a dramatic decrease in FBA competition.
2. People actually purchase those books more often.

Spending more per book = less FBA competition & more sales.

There they are: The top 3 secrets I’ve learned in the last year of teaching online book arbitrage.

-Peter Valley

 

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