Online arbitrage (OA) is wonderful strategy for making money on Amazon and other marketplaces, but one of the drawbacks is that it can take a longer time to get your product to market compared to other models, especially retail arbitrage (RA).  Why is this increase in time so important?  In short, it has to do with the time value of money.  Let’s go through a theoretical example.  Let’s say you invest $1,000 in a product that you expect to sell in an average of one month’s time once it hits the market (in reality some will sell immediately, some will take longer than a month, but to easily calculate, we’ll assume one month).  Let’s assume your products have an average for 40% ROI.

If you purchase a product in your local store for resale (RA), then let’s say it takes you 1 day to prep, and an additional 3 to be live for sale on Amazon, your product cycle would be a total of 34 days.

Compare this to an OA purchase – in order to get free shipping, your product takes a week to arrive, another day to prep and an additional 3 to be live on Amazon for a total product cycle of 41 days.

Let’s run the numbers over the course of a year:

In 365 days, you could expect 10.73 product cycles with an RA model vs. 8.9 in an OA model.

Compound your gains over the course of the year into your principal and reinvest and here’s what we get:
At the end of the year for RA, you would have: $29,561.82
At the end of the year for OA, you would have: $18,594.94
For a difference of $10,966.88 per year per for $1,000 investment
Of course, this doesn’t take into account taxes and other real world factors, but this exercise tells us clearly enough that the time it takes to get products to market is significant.

Nevertheless, OA is attractive for many other reasons, so the question remains – what can be done to slim down the product cycle?  Here are some possibilities:

• Pay for faster shipping – It is tempting when calculating ROI to opt for the free shipping, but if the free shipping involves a significantly longer lead time to receive your products, then take the time value of your money into account.  Especially if the shipping fee is a flat rate, it may be worth the extra cost to pay to get your products to market faster.
• Utilize fast shipping programs – Many retailers are playing catch up to Amazon’s Prime program and now offering similar programs, often for a fee.  These include Walmart’s new 2-day free shipping program and Shoprunner, which offers 2 day shipping on 200+ websites, including many supported by OAXRAY.  Shoprunner is free to American Express cardholders and $49 a year otherwise (at time of posting, Shoprunner is offering Paypal users a free year of their service as well).
• Order in the morning – There are other reasons to order in the morning, but giving your items the best chance possible to get shipped as soon as possible can take a day off the product cycle for you.  Ordering your items at 10 am vs. 4pm can make a day’s difference.
• Buy RA if possible – Even if you’re sourcing with OA in mind, many items you decide to purchase may be available at your local store today.  If so, you can drastically reduce your product cycle time.
• Eliminate prep bottlenecks – Exactly how this plays out can be different for everyone.  Sometimes you are the prep bottleneck.  Sometimes a prep warehouse is the prep bottleneck.  Sometimes it is your packing supplies.  Whatever it is, take steps to eliminate the bottleneck.
• Diversify prep warehouses – Especially if you can identify where your OA products are being shipped from (not usually an easy thing to do), you can send to the closest one to minimize shipping time.  If you establish relationships with prep warehouses across the country, then you’ll have some options when the situations arise.
• Monitor time to market at different FBA fulfillment centers  – another reason to diversify prep warehouses, is because different fulfillment centers tend to have different rates of speed with which they are able to get your products to market.  Keep your eye on this and choose your prep warehouse based on which ones send to the best FBA fulfillment centers.
• List Merchant Fulfilled or other sales channels before item arrives at FBA warehouse – Proceed with caution here, this can be difficult to keep track of.  That said, it is possible to list an item as soon as you purchase it and have it live on the market immediately.  If you sell before your item arrives in the FBA warehouse, you can just create a fulfillment order when they are received (or if you’re prepping yourself, you can send directly after you receive).
• Sell faster – There’s several things you can do to cut down the product cycle here – reduce your price, advertise, keep up great metrics.