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A Simple Illustration of Arbitrage on eBay

Updated on June 19, 2013
Multnomah Falls, Oregon
Multnomah Falls, Oregon | Source

What is Arbitrage?

Arbitrage is the art of buying in one market and simultaneously selling in another.

Indeed, arbitrage has been going on ever since prehistoric times when two or more cavemen put aside their fear and their cache of rocks and sticks--makeshift weapons along with grunts, yowling, and other guttural responses--and decided to start a society.

Through the years, the players and ever-evolving forms of arbitrage have become more and more sophisticated, but the basic premise is always the same-- buying in one forum to make a profitable and timely sale in another.

Or, in an alternative form, arbitrage can also take place involving the same commodity within the same marketplace. This article will provide you with a simple and easy to understand illustration of this particular version of arbitrage.

Who Am I, and Why Should You Listen to Me?

First of all, I want to be absolutely clear that I'm just an ordinary guy trying to make a living. And the kind of living I'm involved in at this point in my life is a daily scratch and grind. I'm not rich by any means. I struggle like most Americans these days to pay the bills, and I do a stand-up job of meeting my financial obligations and providing for my family.

What I lack in financial abundance, I make up for in resourcefulness. I can travel through any social circle and do an adequate job of contributing my share of great conversation, personality, wit, and empathy. I'm pretty good at tuning in to my environment, listening to and reading about what others have to share, and I see relevance and significance in every human being I meet. To that end, the veteran holding a sign asking for help on the corner is as vital to my existence as the executive with the fancy suit sitting twenty feet away from me in the coffee shop where I'm spontaneously spinning this Hub.

In short, I know how to hustle. And I don't mean that in the manipulative way it's come to mean in current times. I'm old school, and I learned about hustling from my father. It's the resolve to do whatever it takes to provide for one's family. And when it's time to lay my head down on my pillow at night, I know I will have a good night's rest knowing full well that I did my very best today to contribute to my family's well-being.

So why should you listen to me? No reason, except to, at best, learn something new...or, at least, to be somewhat amused or irritated, your choice.

Afghan Girl with the Haunted--and Haunting--Green Eyes; National Geographic, June, 1985
Afghan Girl with the Haunted--and Haunting--Green Eyes; National Geographic, June, 1985 | Source

An Example of Arbitrage

Less than a year ago, I retired from a job as a bagel baker and went to work full-time as an eBay seller.

In my constant search for inventory to market online, I came across a near mint copy of a very popular National Geographic issue (June, 1985) featuring a cover photo of a beautiful young Afghan woman with haunted--and haunting--green eyes. I had bought a huge amount of Life, Look, Saturday Evening Post, Scientific American, and other magazines the previous week from a woman at an estate sale in Walla Walla. I received a phone invitation from her a week later to purchase another huge lot of magazines for a ridiculously low price. I'm so thankful that I made the decision to go back and browse through her leftover issues.

For a mere dime, I purchased the above-mentioned issue.

After diligently conducting research about this particular magazine, I learned that it was arguably the most famous NG cover of all time. The Afghan woman, a refugee at the time, had a most remarkable and compelling story, and yet it was her lovely yet angst-ridden image, brilliantly memorialized by NG photographer, Steve McCurry, that promoted the issue to amazing and record-breaking popularity all over the globe.

Not long after, I sold it on eBay for a profit just shy of twenty dollars. I had banked on the magazine's appeal to command a higher than average National Geographic price on eBay, and my gut feeling was right.

A few months later, while attending another estate sale with my wife in the southeast Washington town of Waitsburg, approximately a half hour's drive from Walla Walla, I found an even finer copy of the magazine. About this time, I wrote both a blog post and a complementary Hub article about the Afghan girl issue and did some elementary social media promotion of it.

A relatively short time later, I sold the issue for about $25.

The two successes convinced me that I could repeat the process. This is where my first experience with arbitrage came in.

I did a search on eBay and noticed that there appeared to be about a dozen listings or so of this issue. In my opinion, most of the respective sellers were listing the issue for an absurdly low price. With this in mind, and confident about my ability to bring in a reasonable profit, I opted to purchase one of these eBay-listed items. I bought and immediately paid $4.99 for a copy.

On the same day that I received the copy in the mail, I listed it at a price of about $25. A week later, it sold.

I then purchased another copy for $3.99. The seller didn't mention that there was a slight tear in the margin. I was a little miffed but decided I could still list the issue. I changed my template description and mentioned the imperfection. However, I still asked for the $25 price. Lo and behold, just yesterday, I made another sale.

I've thus bought and sold different copies of the same issue four times on eBay. Odds are, I'll continue to successfully market the Afghan girl issue.

Honestly, these are nominal profits that I'm making. But it illustrates the effectiveness of arbitrage.

A host of other sellers are doing the same thing on a grander scale. For example, one could purchase an item low on Amazon and sell it high on eBay. Or the opposite scenario could be just as effective. As more online marketplaces emerge, the possibilities are endless.

Without leaving the comfort of your computer room, den, or kitchen chair, or --if you're a coffee shop nomad like me--a table at your favorite neighborhood java haunt, you, too, can soon be engaged in the fun and profitable online activity of arbitrage.

After reading this hub, do you have a better understanding of what arbitrage is?

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  • hawaiianodysseus profile image
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    Hawaiian Odysseus 4 years ago from Southeast Washington state

    @rajan jolly

    I have a feeling, Rajan, that you will be a most successful eBay seller once you take the plunge. Look what you've done right here with HubPages! Aloha, my friend!

    Joe

  • rajan jolly profile image

    Rajan Singh Jolly 4 years ago from From Mumbai, presently in Jalandhar,INDIA.

    Very interesting and a very easy to understand form. I really am learning so much from each hub of yours, my friend. Thanks for teaching us the finer points in this business.

    Voted up, useful and interesting.

    Aloha and have a great rest of the week.

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    @pagesvoice

    As a mutual "time traveler" influenced by and waxing nostalgic over the fifties, sixties, and seventies, I am honored to hear from and share with you our respective interesting experiences on this wonderful literary venue.

    Have a wonderful rest of the Labor Day Weekend!

  • pagesvoice profile image

    Dennis L. Page 5 years ago from New York/Pennsylvania border

    Voted up, useful and interesting. You have a unique ability of breaking things down into an easy to understand format. I find what you have done and continue to do on eBay is cleaver and intriguing. I have read a couple of your Hubs and I certainly look forward to reading more.

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    Thank you, Gamerelated. We can hopefully learn a lot from each other as time goes by. I don't know about you, but I'd like to see if the "cloud" of Hubbers I'm associated with in this, our rookie season, can do something about challenging those leaders on the home page. I appreciate your feedback, as I know you do mine, and along with the rest of the gang, we're sure to make a positive difference on this terrific site. Best wishes to you for continued success. Keep up the great work! I'll be dropping in now and then...Aloha!

  • Gamerelated profile image

    Gamerelated 5 years ago from California

    As an econ major in college I know exactly what arbitrage is. You did a great job of explaining something technical in an interesting way. If I wrote the same article it probably would have come off as dry. I can learn a lot from you. You have gift for crafting narratives.

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    @nmdonders

    Hi! Thanks for stopping by! I'd be very much interested to hear from you in the near future should you ever try your hand at this arbitrage strategy. It truly is just another version of "buy low, sell high," but what's unique about it is that it can be done on the very same site or in a similar online genre. I am looking forward very much after settling in this weekend at the Oregon coast or upon my return to Walla Walla to read your Hubs. I truly enjoy the community aspect of HP, and I'm honored to connect with great writers like you. Aloha!

  • nmdonders profile image

    nmdonders 5 years ago

    This was interesting to read. I have also witnessed this with similar sites and it's something I've been considering doing. Not this particular idea, but with other products. Congratualtions on your success and thank you for documenting it.

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    @zionsphere

    True to the positive affirmations and EFT which you so adeptly write about, I like to treat each day like a new beginning with amazing and fascinating possibilities. It goes hand in hand with my passion about restoration as opposed to trashing. With that in mind, I thoroughly enjoy what I do for a living, never forgetting for one moment that God is in the same business of restoration.

    Thanks so much for stopping by! Keep up your wonderful writing on HubPages and beyond!

  • zionsphere profile image

    zionsphere 5 years ago from Oregon

    Wow. This is a perfect example of 'ones man's trash is another man's treasure. i have heard of buying and reselling to make a profit, but I am not currently confident enough with my appraising skills to make the jump. Maybe someday....

  • ChristyWrites profile image

    Christy Birmingham 5 years ago from British Columbia, Canada

    What a great comment and compliments! Just a quick note back to say thanks and *waves* over to Hawaii :)

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    @ChristyWrites

    Thank you, Christy! Yes, I'm really having a fun and very busy go at it. The eBay activity, along with the writing on HubPages, seems to make the days zip on by. Thanks to the encouragement, support, and wonderful writing of fellow Hubbers like you, I'm finding new energy in my autumn years. I thoroughly enjoy your interesting, informative, and entertaining writing. Aloha!

  • ChristyWrites profile image

    Christy Birmingham 5 years ago from British Columbia, Canada

    You are rocking the eBay market! Way to go with the National Geographic magazine as well.

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    @kashmir56 Thank you for your kind feedback. My days are filled with the stress of..okay, what do I do first? Write a Hub or list on eBay? LOL! But I'm having lots of fun. Aloha!

  • kashmir56 profile image

    Thomas Silvia 5 years ago from Massachusetts

    This was such a well written hub which made it a very enjoyable read. Glad to hear that ebay is working well for you and you are making some money. Keep up the good work,both here and on ebay .

    Vote up and more !!!

  • wetnosedogs profile image

    wetnosedogs 5 years ago from Alabama

    Glad to hear Ebay is treating you right. Happy you got the right customer rep to help you out.

    We are all doing well and they say aloha bark and aloha meow back to you.

  • hawaiianodysseus profile image
    Author

    Hawaiian Odysseus 5 years ago from Southeast Washington state

    @wetnosedogs Thanks, faithful colleague! Glad you asked about eBay. After months of wrangling with them about why my traffic was simply decimated since February, a young female customer rep went the extra mile and gave me an honest response, thereby affirming my hunch all along that it hadn't been a result of something I'd done or hadn't done. It took about a half hour for me to make the necessary adjustments, but it was well worth the effort. Yesterday and today, I actually started making multiple sales again, and I'm back on the first eBay search page for my respective categories. So, to answer your question, yes, eBay has been treating me well...finally! :) How are Roscoe, Felix the Cat, and the rest of the canine gang doing? Aloha (and Bark-Aloha!) to you all!

  • wetnosedogs profile image

    wetnosedogs 5 years ago from Alabama

    I like how you explained this. I also enjoy the picture of the falls, it's fantastic.

    I hope ebay is treating you well.