When I have a little extra spare time, which is not very often these days, I like to jump into projects where I can make a few bucks on the side. Some people enjoy golf, others enjoy fishing, my hobby is money-making projects. One that I have tried a little on-and-off over the years is something I call “eBaytrage.” It is a way to make money with a little extra effort searching and selling online.
What Exactly is Arbitrage?
The dictionary defines arbitrage like this:
The simultaneous buying and selling of securities, currency, or commodities in different markets or in derivative forms in order to take advantage of differing prices for the same asset.
That might be a little dense for most of us, so let me simplify it for you. The basic idea of arbitrage is finding something that you can buy one place at a lower price and sell somewhere else at a higher price. This is most commonly seen when people take advantage of a difference in a buy price and sale price of foreign currency or stock prices in a short time period. Currency arbitrage is probably the most popular way to make money fast on a small margin with arbitrage. Super wealthy investors and professional traders may find an arbitrage opportunity on a currency where they can make a fraction of a cent several billion times in a deal. But 1/10th of a cent a billion times is a $1 million dollar profit. With scale and precision, there is a lot of money to be made.
However, I don't have millions of dollars, let alone the ability to quickly make a billion 1/10th pennies. So I looked to smaller markets with less competition where I can buy something at a low price on one website and sell somewhere else for a profit. I call it eBaytrage. Here's how to get started.
Finding Things to Sell Online
To start, you need to find something at a very low price that you can then re-sell later on at a higher price. When I was actively trying to make money through eBaytrage on a regular basis, I always started my searches at SlickDeals.net or the Amazon Gold Box. You can occasionally find great products on eBay as well, but it is much more competitive. You can also try local garage sales, thrift shops, or Craigslist. The best deal is finding something free on Craigslist that you can then re-sell with little effort for a 100% profit.
When you are searching for things to sell, look for a product that is selling super cheap but has a high demand. I have successfully re-sold digital cameras, for example, but have not bought a computer or TV that has a higher capital investment and less liquidity. I do know of people re-selling more expensive goods and products, but you have to be an expert to know you are not getting ripped off on the buy and will get stuck with something you can't sell.
Here's an example I tried once. I found a deal for a digital camera for $39.99 on Slick Deals. I then looked for what that exact camera costs on other websites. I visited websites for Best Buy, Amazon, Walmart, and did a Google shopping search as well. Comparing to the average price there, I was able to find out if I found a money making opportunity. If the average price is higher than $39.99, I have an opportunity for arbitrage. I only bought if the spread is was well over $10, which it was in the case of the $39.00 digital camera.
It is not worth the time if you are only going to make $2, but it may be worth the time it to make $25. It is up to you to decide if the item is too risky or will not pay enough to make it worth the effort.
Selling Products Online for a Profit
Once you have the product in hand, the first place to put a listing is Craigslist. Because you can list and sell for free on the site, and everyone is local so you can avoid shipping costs, this is the best place to sell for a profit. Be sure to include a high quality picture and great description to increase the odds of a sale. When someone contacts you to buy, you might have to do a little price negotiation, so you may want to increase the price slightly to make up for negotiated prices.
If you do sell on Craigslist, remember to be safe. Meet at a public place like a coffee shop. When I sold the digital camera that I bought for $39.00, I met the buyer at a Chipotle near my house. That way, I didn't have to tell them where I lived and was able to ensure a safe, public meeting spot. Only ever take cash only on delivery. If you can, always avoiding giving out your phone number or home address.
If you don't have any luck on Craigslist, you can lower the price, re-post the item later, or look to selling on eBay or the Amazon Marketplace. Remember that other online stores have selling and shipping costs which eat into your margins, so try to understand the margins and costs before buying an item to sell later.
Bigger Stuff Can More Money
I have met people who own a large SUV or truck and pick up free or low-cost furniture on Craigslist for re-sale. You can often find items people are trying to unload on Craigslist due to moves or furniture upgrades. Sometimes they need a little polish or even a quick refinish and they can turn a huge profit. Check out the “free” section on Craigslist on weekends and you may be able to find free desks, dressers, tables, and couches. Do a little cleaning and re-list it for a fair price. I've picked up full encyclopedia sets and desks for free that I was able to sell later on for a nice profit.
If you don't have a truck, maybe you can find a friend to partner with. If you pool your resources you may be able to make a lot more together than you could ever make alone.
Have any questions or re-selling stories? Let me know in the comments or drop me a line at Ask Eric for a response on the new Narrow Bridge Finance podcast.
Originally posted March 23, 2009. Refreshed November 17, 2014.