What is arbitrage?
Put simply, arbitrage is the purchase of an item on one market for immediate sale on another market in order to profit from a discrepancy in the price between those markets.
Arbitrage is a term more commonly used in the worlds financial and securities markets where, for example, traders search out and take advantage of differences in currency prices between different county's currency markets.
In any situation where a difference in price of a product, service or item exists an arbitrage opportunity presents itself because it allows you to buy at the lower price and sell for the higher price making a profit in-between.
So what does arbitrage have to do with eBay and how can you apply the concept to make a profit?
Every day, sellers list items on eBay in inappropriate categories or with poorly worded, incorrect or misspelled titles and descriptions. Due to the way that most people search for items on eBay (by entering keywords in the search box) these poorly listed auctions are hidden from the vast majority of buyers.
Given the sheer volume of auctions being listed and running at any one time, these poorly listed auctions are a constant source of potential arbitrage opportunities.
Lets take a look at the different types of arbitrage opportunities on eBay …
Misspelled titles and descriptions
Taking advantage of misspelled titles and descriptions is probably the most well known and popular type of arbitrage on eBay. These opportunities exist simply because people don't realize how important their auction title is to the success of their listing.
As we mentioned earlier, most people search for an item by entering keywords in the search box on eBay's main page. What most sellers don't realise is that eBay by default only searches the auction title and not the auction description as well. In order to search the auction description as well as the title the user has to use the “advanced search” option and check “search title and description”.
Very few people know of this “feature” and even fewer take the time to use it.
To give you an example, searching just titles for the keyword “Playstation 2” today returns 10576 items but searching for “playstation 2” in titles and descriptions returns 59879 items.
This is not to say that there are almost 49000 arbitrage opportunities with “playstation 2” as a large proportion of these will be genuine items that simply don't have PlayStation 2 in the title, but it does prove that these opportunities exist and are there waiting to be found.
It really is a just a matter of common sense and simple maths; If a listing rarely gets displayed because the keywords in the title are misspelled then it simply isn't going to a lot of bids. The fewer the number of bids, the lower the final price of the item is going to be!
So how do you use this information to your advantage, and profit? Just search the listings for items with misspelled keywords in the title.
An easy way to do this is to use a free search engine designed to highlight these arbitrage opportunities such as http://www.ebooboos.com but you can just as easily search the listings yourself for misspellings. http://www.searchspell.com/typo/ is a free website that will generate misspellings for you based on keywords you enter. For instance, entering “playstation” gave me the following misspellings;
playstatiom, playstation, praystatiom, paystation, plystation, plastation, playtation, playsation, playsttion, playstaion, playstatin, pleighstatiom, preighstatiom, pleighstation, pleighstaton, preighstation, preighstaton, pleighstashon, preighststash, pleighighunstron playstashun, playstashon, praystation, praystaton, praystashun, praystashon, playstasion, pleighstachun, praystachun, preighstachun, playstachon, pleighstachon, praystachon, preighstachon, playstachun, p1aystat1on, playstat1on, playstation, playstation, playstatat, playstate palystation, lpaystation, playstatio, laystation
ok, some of these are going to be way off the mark (pleighstashon for example) but these will give you a good place to start.
You don't have to search for each misspelling in turn, eBay allows you to use a sort of logical OR functionality in your searches by entering your keywords in parenthesis separated by commas, for example;
(playstatiom, paystation, plystation, plastation)
The only limitation here is that you must limit your entire search query to 300 characters.
Once you have found a potential arbitrage opportunity your next step is to investigate the typical final selling price of equivalent but correctly spelled items on eBay.
To do this you need to search the closed auctions for the exact same item as your potential arbitrage opportunity. Simply click “advanced search” from any screen, enter your description and check “completed listings only”. Checking this box will only return listings that have already ended allowing you to research completed auction prices for your item.
It's important not to search for exactly the same title when researching completed prices, particularly if the item has something like a model or serial number in the title, just search for the most obvious search phrase.
(If you find you are getting irrelevant results just use negatives in the search box to search for items that don't contain the word, for example “playstation 2 –controller” to search for all listings that contain the keyword “playstation 2” in the title but not the keyword “controller”)
When analyzing the completed items it makes sense to ignore any closed auctions where the final selling price is considerably higher than the others. It's tempting to focus on these blips but these are exceptions rather than the norm so be sure to look at what the typical final selling price is, and base your potential final selling price on that.
You should always factor in the delivery charge into the final selling price of the item. A $ 20 item with a $ 5 shipping is essentially the same price as a $ 5 item with $ 20 shipping so when investigating your potential final selling price you need to take both figures into account.
Assuming you find equivalent items that sold on eBay at a price high enough for you to turn a profit you are in business. The only thing left to do is decide how much you are willing to pay for the misspelled item, including shipping then place your bid.
So the next question is when to place the bid?
If there are no other bids on the item then you should immediately bid the minimum amount, if there are already bids on the item then you should either wait until near the end of the auction to place your bid or use a sniping tool to bid in the dying seconds of the auction.
Why should you place a bid on the item if there are no existing bids? Simple. eBay only allows sellers to revise their items if there are no existing bids. If the seller realises he has misspelled a critical word in his auction and there are no bids then he can revise his listing and the arbitrage opportunity is lost. Placing the bid means the seller is locked into the auction.
This type of arbitrage is a numbers game – some you'll win, some you'll lose. There are lots of people out there searching for things like “playstaton”, “pearl neklace” or “camra”.
Cross Auction Arbitrage
Cross auction arbitrage is simple; you just look out for items on eBay that you can sell on other auction sites (or any internet site that allows you to sell items.)
For example, many computer games sell on eBay at prices below what their used equivalents sell for on Amazon.com. The secret to success here is to place bids on lots of items (once you've researched their Amazon prices) you'll lose most but the few that you do win will make you a tidy profit.
Books are another potential cross auction arbitrage opportunity between eBay and Amazon.
To explain how positioning works as an arbitrage strategy you need to understand the mentality of buyers and sellers on eBay.
When people are interested in either buying or selling a particular item they pretty much remain within their own specific market. For example, if you were a collector of antiques you would browse the “collectibles” categories looking for items to buy and likewise if you were a seller of collectibles you would list your items in the same category.
But as a seller there are other markets that are potentially open to you that many people just don't think of capitalizing on.
To continue with the collectibles example, there are people out there who may be more interested in the specific subject matter of the item rather than its specific collectibility. Take old signs, aside from their potential value to a collector, these signs may be of a higher value to someone looking for something nice to hang on their wall!
All that is missing is you in the middle buying the items as a collectible and re-listing as an object of art!
The secret here is to list the item in the more appropriate category using keywords and phrases that would appeal to your new market – not the current market.
Almost nobody on eBay uses the favorite searches feature, but for those of us interested in finding arbitrage opportunities, it's a potential goldmine.
When you search eBay using keywords (the way most people search) and hit the search button you'll be presented with a link at the top right of your results labeled "add to favorite searches". When you click this link you'll be taken to the “add to my favorite searches” page which allows you to save this search for future use.
Now this is where it gets interesting – check the “email me daily” box and you'll get an email from eBay highlighting potential arbitrage opportunities as and when they are listed – you don't even need to search!
We hope this article has given you an insight into the many arbitrage opportunities that exist on eBay. For more free tips, ideas and strategies for successful eBay selling, visit us at [http://www.learn-to-sell-on-ebay.com]