Online book arbitrage seems like magic. Why does it work?

The answer is "pricing leverage."

When people learn about online book arbitrage, their first thought is this seems too easy. It doesn't seem real.

For some, it's not enough to know that online book arbitrage works. They need to know: Why does it work?

The answer is Amazon Prime. The best way to look at Amazon Prime is that it is a cult. Amazon Prime basically puts people under a spell where they spend insane amounts to obtain Prime-elgible (aka FBA) offers they could otherwise obtain for much cheaper.

Amazon Prime members will pay way, way more just to get the benefits of Prime.

That is pricing leverage in a nutshell.

Some facts to highlight the dominance of Amazon's Prime program:

• Amazon Prime subscribers increase their spending almost double after moving from a normal Amazon account.
• There are 100 million+ Prime subscribers.
• Over 80% of Amazon customers have never purchased a non-Prime eligible offer.

Here are the main reasons FBA offers can command such high prices:

• Free 2nd day shipping.
• The trust that comes with the Prime logo.
• Preference for the Buy Box.
• Hassle-free returns.

Ultimately, it doesn't matter if pricing leverage makes sense to you, it just matters that it works. And it does.

- Peter Valley

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