It's 10 p.m. and a big outdoor store has put a pair of hiking boots on clearance for $42. You search eBay and see the same boots selling for around $85. That looks like $43 of profit for a few clicks, and you never have to leave the couch.
This is online arbitrage. It can work. It also fails often, and it usually fails for the same reason. The buyer compared two prices and skipped everything in between.
This post walks through the costs in between, using eBay as the place you resell.
What is online arbitrage?
Online arbitrage means buying a product from one online store and reselling it on another site for more. You are betting that the price gap is bigger than your costs.
It's a close cousin of retail arbitrage flipping, where you walk into a store and buy clearance items off the shelf. The math is the same. The only change is that the item comes to your door in a box.
There is one eBay rule you need to know before you start. eBay does not allow you to list an item, wait for it to sell, and then order it from another retailer that ships straight to your buyer. eBay does allow you to fill orders from a wholesale supplier. For a clearance find, the safe path is simple. Buy the item, wait until it's in your hands, check it, and then list it.
That rule exists for a reason. eBay wants its buyers to get what they ordered, on time, and it holds you responsible for both. A retailer you don't control can cancel your order or ship late, and the buyer's complaint lands on your account.
The costs between the two prices
A price gap is a starting point. Five costs sit between it and your profit.
First, sales tax on your purchase. Most online stores charge it at checkout. Some states let registered resellers buy inventory tax-free with a resale certificate. The rules differ by state, so check yours.
Second, shipping to you. Many stores ship free over a set order size. If you add items you don't need just to reach that size, count them as a cost.
Third, the eBay fee. In most categories, eBay charges 13.6% of the total sale plus $0.40 per order ($0.30 on orders of $10 or less). The total sale includes the shipping your buyer pays and the sales tax eBay collects from them. Some categories have their own rates, so look yours up.
Fourth, the postage and supplies to ship the item out. Boots need a box, and a box of boots is not light. Our reseller shipping strategies guide explains how to estimate those costs before you list.
Last, the returns you can't avoid. If the boots show up scuffed, you have to send them back or sell them for less. If your eBay buyer returns them, you may pay postage twice.
Online arbitrage on eBay: run the math on one deal
Here are the boots with every cost filled in. The tax rate and postage are example numbers. Use your own.
You pay $42 plus 7% sales tax. Shipping to you is free.
- Your cost: $42 × 1.07 = $44.94
You sell the boots on eBay for $85. The buyer pays $9.50 for shipping and 7% sales tax.
- Total sale for fee purposes: ($85 + $9.50) × 1.07 = $101.12
- eBay fee: 13.6% × $101.12 + $0.40 = $14.15
- You collect $94.50 (item plus shipping). The tax goes to the state.
- Your postage is $11.20 and the box costs $1.50.
Profit: $94.50 − $14.15 − $11.20 − $1.50 − $44.94 = $22.71
The $43 gap turned into $22.71. That is a 24% sale-revenue margin on the $94.50 you collected, and a return of about 51% on the $44.94 you spent. These examples divide profit by item-plus-shipping receipts; Upcyclist's app margin uses revenue after sales tax and platform fees instead. If those two numbers confuse you, our guide on reseller profit margin vs ROI explains the difference.
Whether $22.71 is good depends on your goal, and you should set that goal before you shop.
Work backward to a maximum buy price
Most people look at a deal and ask if it makes money. A better question is what the most you can pay is. That number lets you say no fast.
Most you can pay (with tax) = amount collected × (1 − margin goal) − eBay fee − postage − supplies
Say your margin goal is 30%. For the boots:
- $94.50 × 0.70 = $66.15
- $66.15 − $14.15 − $11.20 − $1.50 = $39.30
That $39.30 has to cover the store's sales tax too. At 7% tax, the shelf price can be no more than $36.73. The boots cost $42. They miss the goal.
You can still buy them. A 24% margin is real money. But you should know you are making an exception, and you should know why. You know you've stopped checking deals when every exception feels like a good one.
Our free What Can I Pay? calculator does this step for you. Enter the price you expect, your fee rate and your shipping, and it shows the most you can pay. It works from a target ROI, so set that to match your goal.
If you also use an eBay fee calculator, check which category it used and whether it counted sales tax.
The price you saw may not be the price you get
The $85 was the price when you looked. It may not be the price when your box arrives.
A clearance sale is public. Other resellers see the same deal on the same night. A week later, ten new listings show up on eBay, and someone prices at $70 to sell first.
Run the boots again at $70 with the same shipping.
- eBay fee: 13.6% × ($79.50 × 1.07) + $0.40 = $11.97
- Profit: $79.50 − $11.97 − $11.20 − $1.50 − $44.94 = $9.89
A $15 price drop took out more than half the profit. This is the real risk in online arbitrage. Your cost is locked the moment you pay, and your sale price can still move.
You can lower that risk in three ways.
- Check sold listings, not asking prices. On eBay, filter your search to sold items. An asking price is what a seller hopes for. A sold price is what a buyer paid.
- Count the sellers. If 40 people already list the item and few have sold, a low price won't save you.
- Buy one first. If it sells at your price, go back for more. Missing a deal costs you nothing. A closet full of boots at $9.89 each costs you a month.
Where online arbitrage deals come from
You don't need special software to find deals. Most people start in a few places:
- Clearance and "last chance" pages on store websites
- End-of-season sales, when stores clear out sizes and colors
- Coupon codes stacked on top of sale prices
- Cashback sites and store rewards, which lower your real cost
Be honest about coupons and cashback. Count them only when the money is in your account. A reward that arrives in 90 days does not help you pay for this week's inventory.
Some sellers also buy on one marketplace and resell on another. People call this marketplace arbitrage. The same math applies, and so does the same eBay rule. Have the item in hand before you list it.
FAQ
Is online arbitrage legal?
In the US, you can generally resell an item you bought legally. Some brands limit who can sell their products on certain sites, and each marketplace has its own rules. Read eBay's policy for your category before you buy a large amount of anything.
How is arbitrage online different from dropshipping?
With arbitrage, you buy the item first and hold it. With dropshipping, a supplier ships to your buyer and you never touch the item. eBay allows the supplier kind only when the supplier is a wholesaler. It does not allow ordering from another retailer after your item sells.
How much money do I need to start?
Enough to buy one item and ship it. Start with a single deal, write down every cost, and see what you keep. Our guide on how to track reseller inventory and profit shows a simple way to record it.
Upcyclist's Inventory Planner reads the sales you've already recorded and shows how many of an item you sold, your average selling price and a suggested buy price (40% of that average). The suggestion leaves out fees, taxes and shipping, so run it through a fee calculator before you trust it. You can also set a Margin Goal (50% by default). Upcyclist uses it to suggest a listing price of cost ÷ (1 − goal), and your dashboard turns gold when your overall margin meets it.
What's next
Once arbitrage items start selling on eBay, the next thought is to list them on a second site too. That brings a new problem, which is selling the same pair of boots twice. Our next guide covers selling on multiple platforms and keeping your records straight.
