How I went from online book arbitrage skeptic to true believer.
Update: I am no longer directly involved in the day-to-day operations of Zen Arbitrage, the book arbitrage tool mentioned elsewhere in this article.
What follows is a story of going from old school purist, to fumbling online book flipper, to Jedi Knight of online book arbitrage – making money from a Starbucks patio.
(And, I get a little personal. I hope you don’t mind.)
The story of online book arbitrage begins…
It started with me moving cross-country.
About a year and a half ago, I moved to a new town two states away. Basically I wanted to live somewhere nicer and cooler (and more expensive) so I moved somewhere new where I only knew a couple people.
The move marked another shift, where I began to assess where this Amazon thing was going.
This was not a crisis of faith by any means. Rather, I began to look seriously at going to the next level by supplementing my existing business model.
I had to go in one of the two extremes:
- Scaling up and building a legit, large-volume bookselling operation.
- Or the other direction: adding some super automated passive revenue (like going the private label FBA route, which a lot of people are doing now).
Note I said “supplementing my existing business model.” The scanning-everything-in-sight thing is in my blood. Reselling used items on Amazon is coded into my DNA at this point. That wasn’t going anywhere.
The entrepreneur’s dilemma: lifestyle business vs. a “real” business
On this existential quest, I had a bigger, identity-based question to answer.
There are two kinds of entrepreneurs (maybe three).
- Those who are fueled by the drive to build something. (The larger, the more satisfying.)
- Those who are led by lifestyle goals. (A specific level of freedom is sought, with a business created as the means).
A third, of course, is the person “just trying to make ends meet.” Generally if you just want a small, comfortable living, you would just get a job and that “steady paycheck.” But some choose less volatile business pursuits to achieve the same thing.
I decided I was the second one. I was led by lifestyle. I like to travel, and do a thousand other things, and Amazon provides a perfect mobile business, allowing me to make my own hours (and get paid well for them).
So scaling up and building a large operation – with employees and infrastructure – might be in the cards for my future, but not yet.
So within the lifestyle-business framework, how do I scale up?
This is where we get into another one of my bookselling epiphanies. It’s almost too simple, and it took me way too long to figure out.
Keep in mind I consider most internet chatter to be toxic, and barely use Facebook, but it was hard to ignore the “online arbitrage” trend that everyone was talking about.
For those that don’t know, this is the practice of buying things online at one price, and reselling them elsewhere online at a higher price. It sounds so simple, and so appealing.
This is why I hated any mention of “online arbitrage”
Hated it. Rolled my eyes every time.
Basically, online arbitrage is fundamentally at odds with several of my business philosophies, which I believe to be true:
- The “efficient market” hypothesis: Basically that all significant price discrepancies are squeezed out of the market almost immediately. Ever look up a book on Amazon, and compare against eBay? The price difference is almost never enough to make a profit.
- Any “easy” business model becomes saturated almost immediately. The average person is lazy. Making profits with a few clicks? Everyone is going to swarm on this, and the best opportunity is going to be obliterated almost immediately.
- If there was a magic bullet, the people who know about it wouldn’t talk – or sell it to you. Ever see a late-night TV ad telling you so-and-so is a great investment, and asking you to buy it through them for a huge return? The scam here is so obvious its almost hard to believe: If it were that easy, they wouldn’t be selling it – they’d be buying it and making the money themselves.
Everything I was heard about online arbitrage confirmed my suspicions
Tons of people are going to freak out when I say this, but everything I was hearing about online arbitrage indicated it was less opportunity than some of the hype would suggest.
That’s not to say there aren’t people making money, that’s not to say there isn’t sufficient opportunity to “buy low / sell high” online, and that’s not to say there aren’t people who are really good at it. But once a ton of people got on board with this idea, most of the “easy money” had been siphoned off.
And least that’s what I was hearing.
And what I was hearing also indicated that what was left was a lot of opportunity if you were willing to sit on your inventory for awhile (like until Christmas), and accept lower margins than many are comfortable with.
(Major BTW: I have friends teaching online arbitrage and this in no way undermines their work, or suggests they don’t deliver on exactly the promises they make with their teachings and products. My skepticism is focused solely on the buzz among some of online arbitrage’s practitioners and evangelists who may not understand it’s limitations.)
But there was one “online arbitrage” idea I hadn’t heard anyone talking about yet
Most Amazon booksellers are part of what I call “cult of the $1 book.” We’re so spoiled with cheap inventory and high margins that we feel entitled to never pay more than $1 (or $2, depending on where you live) for anything.
This is why I always go for book sources that have high-priced books – most Amazon sellers won’t touch them. I’m happy to pay $4, $5, or more for books if I know I’m going hit my desired profit margins. The secret is hedging your investment by knowing your numbers.
So one day I had an idea that I hadn’t heard talked about before. I’m not saying I invented it, but it was new to me:
What if it was possible to buy cheap books on Amazon, and resell at a much higher price via Fulfillment by Amazon (FBA)?
Sure it was “online arbitrage,” but would it work?
There were a few reasons I thought this might work
- One, no one was talking about this. It doesn’t mean this wouldn’t catch on, but as of now, I was confident if there were a million people doing it, I would have heard of it.
- Most FBA sellers are afraid to price “too high.” They’re too sheepish. Look at the glut of books online ranked 10,000, selling for $4 (+postage) merchant fulfilled, with $9.99 FBA offers. Good news is that there’s no room for profit when you’re paying $4 for a penny book on Amazon, and can’t stomach pricing only $6 more via FBA.
- The “cult of the $1 book.” The cheapest you can pay for a merchant fulfilled book is $4. Most sellers don’t have the stomach to tie up this much money in a single unit of inventory. Like I said, we’re spoiled.
- It would be hard. The more “barriers to entry,” the less likely anyone would be to do this, and the fewer people who had the fortitude to figure out how to do it profitably. Between having to have an FBA account, having to know how FBA works, having to understand which books work best for pricing high (such as textbooks), and there being no simple way to find cheap books with high-priced FBA offers, I couldn’t see this catching on.
I decided to try it
I surmised there were two kinds of books that were suited for online book arbitrage, which I would be looking for:
- Textbooks (People pay crazy amounts for Prime-eligible / FBA textbooks)
- Books with a high cover price (Since you can’t outprice Amazon, anything well-ranked with a price to order from Amazon directly at $20 or up would have resale opportunity if third party offers were cheap enough).
Out of the gate, online book arbitrage was working
It wasn’t easy. In fact, Amazon made it hard in virtually every way possible. Your search options are so limited on Amazon, the factors that contribute to cheap books having high-value FBA offers (like the number of third party offers – see my last article) aren’t searchable.
What’s left is doing general searches, and hunting-and-pecking through the results for arbitrage opportunity.
But it was working. I was finding books priced one penny to $5, that could flip for $25, $35, and more.
Then I started to hear about other people doing it
It was that weird thing that happens when you train your focus on something – you start to hear about it everywhere.
In this case, not exactly everywhere. But I started hearing second and third-hand stories of people buying cheap books on Amazon and reselling FBA – and making more than I ever made sourcing books “the old fashioned way.”
While my early attempts were rocky, these stories had me encouraged to plod forward.
Slowly, I was learning some online book arbitrage tricks
I started out working in an extremely scattershot fashion. But slowly, I was figuring out a few tricks. No “magic bullet” hacks, but things that increased my efficiency a little.
One example is the use of keywords. There were words that were extremely broad, and brought up a lot of extraneous results. And then I started to learn what keywords only applied to the kind of books I was looking for (mostly textbooks, because that was a niche I was familiar with.)
(I can’t wait until the end of this article to mention it, so I’ll let you know I’m talking about the things I learned in my free webinar happening in a few days: “Introduction to Online Book Arbitrage.” Grab your spot here.)
Even if it started out tedious, the profit was pretty good
Even if I only found two books an hour using my primitive methods, if I was averaging a return of just $12 each, it wasn’t bad for hanging out on the Starbucks patio.
And I could do it all day long.
And it was a source that never closed.
And it was a source that never got picked over.
And I was beginning to think Amazon itself was the best book source anywhere.
One, I’m not a big fan of a scarcity mindset. That’s a subject for another article.
Two, while there are ways to make it much easier, there aren’t ways to make it “easy.” (Or weren’t – more on that in a second).
Three, there are just way too many cheap books on Amazon. Seemingly the majority of books are a penny (+postage). And among them, there are tons and tons that have high-priced (or no) FBA offers. And of the ones that don’t, there are many that just have one lowball FBA offer, making your higher-priced offer the next in line. And if you’re willing to pay more, the opportunity skyrockets exponentially.
Amazon has over 15 million books. All of us reading this going scorched earth with this tactic right now wouldn’t even make a dent.
This is where the story starts to take a turn.
I started to fantasize about a magic wand solution
Sourcing books from a computer was pretty cool, even if it lacked that visceral “thrill of the hunt” satisfaction you get from sourcing in 3D.
If only it wasn’t so tedious.
So I started to wonder: If there was a way to find cheap books on Amazon to resell FBA, what would that look like? If Amazon were designed with the book arbitrager (I made up a word) in mind, how would that work?
I figured there were only a few factors that contributed to the likelihood of resale value.
Specifically, you could hone in on resellable books if you isolate a few factors, such as:
- Number of third-party offers.
- Sales rank.
… and a few others.
That’s all it would take.
Enter some mad scientist computer people
There’s no need to go into huge detail about what happened next.
This was essentially a technical problem, and one day I was complaining to a tech savvy friend about how limited Amazon’s search functions were, thus making my online book arbitrage work extremely hard. He said:
“I know someone you should talk to.”
He said there might be a way to solve it through some sort of elaborate computer code that I didn’t understand.
He put me in touch with a computer programmer friend, and we batted the problem around:
- What would a “magic wand” solution to finding books to resell on Amazon look like?
- How would it work?
- Is it possible?
As for the last one, the answer was yes and no. But mostly yes.
You can not ask Amazon to tell you which books have no FBA competition (or high-priced FBA competition). As I’ve covered recently on FBA Mastery – Amazon does not share most FBA data.
But through some computer programming magic, you can ask it to tell you a lot of useful data.
All you have to do is look at this site to see clear evidence I know nothing about anything having to do with computers. But pens and napkins…. I can do that.
After going back and forth, I finally I told the computer programmer: If you can build me a “magic wand” tool to solve my problem, I’ll draw out some stuff on a napkin and let’s make it happen.
And six weeks later, I had a magic wand
It was crudely designed. It was stupidly simple. And it was brutally, ruthlessly effective.
This weird glob of computer code (with some HTML makeup smeared on it) was finding me one book I could flip for 100% profits (and often 300% or more) every few minutes.
Update: Why you should care about all this
Because I decided to grant access to this tool, for serious Amazon sellers only.
It’s called Zen Arbitrage. It’s the first and only tool that finds cheap books on Amazon, that you can resell via FBA for a profit.
All the details are here.
And you can try it free here.
Update: I am no longer involved in the day-to-day operations of Zen Arbitrage.