Why Arbitrage is not a good business model on it’s own.
Arbitrage is nothing new… it’s basically making money off the middle. You find a product at one price, and you sell it at a higher price, and you don’t buy the product until you sell it.
The big thing has been taking AliExpress products, running paid traffic to them and then selling them, order them from AliExpress and then have them shipped to the customer.
First of all, Paypal hates arbitraging because the risk is higher. Merchant accounts are the same way. Turnaround from when you place the order for your customer and when they receive it can be 4-6 weeks. Customers typically don’t want to wait 4-6 weeks for their order, which leads to a lot of chargebacks, refund requests, and creates problems with the merchant account.
Do we use arbitrage? Yes, but we use it as a testing ground to test market a product that we’re thinking about.
Want to learn more? Ride shotgun with Tanner as he spills the beans!
let’s talk a little bit about arbitrage all right so in the econ world right now arbitrage is a kind of a buzzword it’s a hot thing everybody’s all excited about arbitrage and products from China using epacket shipping and stuff like that and using Aliexpress as a platform so arbitrage isn’t anything new basically it’s literally just making money off the middle so you find a product at one price and then you sell it at a higher price and you don’t buy the product until you sell it and when you lot when you sell it you take the customer data you go buy the product and then you ship it have it shipped to your customer now you can arbitrage on Amazon you can arbitrage on any site eBay whatever but the big thing right now has been taking Aliexpress products which is Aliexpress obviously is the little sister of Alibaba and putting these products up running pat paid traffic to them or whatever and then selling them and then going an order in different Aliexpress having them shipped to the customer now the problem here is this is being touted as a business model that’s something you know hey no money out of pocket you don’t have to buy inventory they’re kind of crossing it with the drop shipping and what they’re doing is the marketers who are selling it this way are making you think that this kind of business model is going to allow you to scale into a sizeable business and it’s not or it’s also very dangerous so first of all paypal absolutely hates arbitrage they don’t like it because the risk is higher okay same thing with merchant accounts they don’t like arbitrage specifically Aliexpress and Chinese arbitrage because there is weeks and weeks and weeks before the shipment actually arrive so you you sell the product you order it for your customer and they ship china ships in via epacket and four to six weeks later your product shows up a lot of times also the products not even the same product or not the same quality or everything like that but let’s just talk about time moat and in that their cellars are taking it on themselves to really announce to the customer that says hey it could take four to six weeks to get your product other or if they do announce it they put it in fine print at the bottom of their site and they do this because they know that if they’re honest with their customer the customer is probably not going to buy because they don’t want to wait four to six weeks to get her to get their product or sometimes even longer all right and this leads to a lot of chargebacks refund requests issues with the merchant accounts and paypal and it’s just not worth the risk for them so they are actually actively seeking out and shutting down merchants that are doing the alley there are the Aliexpress arbitrage model I have friends of mine actually mastermind members who had a five hundred thousand dollar a month arbitrage business going with tons of EA’s and everything else that was their gross and their merchant accounts shut them down striped shut them down said hey you’re done this is not this is not a good business this is high risk we don’t want it you’re done overnight their business was gone because of the arbitrage model now do I recommend that you do arbitrage as your business no do I think arbitrage is okay yes absolutely do we use arbitrage yes we do but the way we use it the way we teach it the way we recommend it is that you use arbitrage as a testing ground to either assimilate some market data get some test results test market a product that you’re thinking about selling or to see if a good complementary product can be found using this kind of model and then as soon as that happens to either move into a traditional drop shipping format words things your warehouse in your country or you move into the inventory space where you’re actually buying product and then either shipping it to your warehouse to fulfill to amazon FBA or to a third-party fulfillment house doing arbitrage that way it’s totally viable it’s using it as a testing platform and not as the end-all of your business so with that guys if you’re doing arbitrage I’m not saying hey you suck or anything like that i’m not saying hey it’s bad for you to do it i’m just saying hey wake up let’s think about it you’re at risk I don’t want you to lose your merchant accounts I don’t want your business to dry up overnight so if you are doing it start thinking about ways that you can you know transition out of it as your main income stream all right all right guys I’ll talk to you later you