How To Outsource Purchasing In Your Online Arbitrage Business

The goal of this blog post is to help you outsource your online arbitrage purchasing. We are going to go through the 3 phases on how to do this confidently, to do this safety, and to give you the certainty and clarity that you are going to be protected, and that your business will be able to scale to the next level. 

I'm not just going to share with you the nuts and bolts, the strategies on how to do this, or the step by step on how to do this, but I am also going to go underneath the surface, too - I am going to share with you, some of the personal challenges Kev had, from a phycology point of view, what prevented Kev from outsourcing purchasing for eight months back in 2016, when Kev was doing for the very first time and Kev was doing everything himself with his team and experienced all of this.

So, this blog post is going to be fantastic for you if you are interested in outsourcing purchasing.

Major Systems In Online Arbitrage

In your online arbitrage business, you need need to see it from a birds-eye systematic point of view.

For Kev, he knew that online arbitrage could be systemised based on the stages of the business. So Kev created the major systems. There are 3 major systems, that if you are aspiring to have this as a business and you as a business owner that you can spend your time building other things and advancing your business to the next level, go into wholesale or private label, or starting any entrepreneurial journey which you want to go on.

The major systems in online arbitrage are as follows:

1. Sourcing

2. Purchasing

3. Shipping 

 Are you interested in learning about the major systems in more detail?

See here: 

These major systems, through the definition of those major systems are, if any of these pillars or major systems stop, then your business stops.

If you are interested in learning more about the major systems more specifically, we have a playlist which covers each major system fully in depth. 

The Ultimate Online Arbitrage Sourcing Amazon FBA Guide

The Ultimate Online Arbitrage Purchasing Amazon FBA Guide

The Ultimate Online Arbitrage Shipping Amazon FBA Guide

 The more you source, the more likelihood you are going to purchase, and the more you will ship. Whether you have lots of different methods of sourcing, 

Then you have the shipping, this is where we start to talk a little more about the warehouses, the teams, and prep services.

However, the purchasing is the most fundamental stage, it is the keystone. The purchasing stage is the make or break of your business. 

If you think about it, the success and failure of your business is what you decide to purchase, because if you purchase bad products; then it doesn't matter if you ship those products, you can ship good products, bad products, you can ship whatever you want here, but if those products which you have purchased are no good, you are going to have capital stuck in stock.

This means that the purchasing section is the most challenging major system to outsource. 

Many people will get help and outsource sourcing, and many will quite happily get help with shipping. But a much smaller percentage of people outsource purchasing, and it's those that are able to go to that next level and scale their business to the next level, and have a business that they are working on and not in, that is a critical step that everyone has to overcome - this is like the barbed wire, it is where a lot of psychology comes in, a lot of fundamental systems come in, and the protection for you and your business comes in. 

If you are going to outsource purchasing, there are two points for you.

Confidence 

The first point is confidence. When you think about when you are purchasing in your online arbitrage business and you are reviewing all the leads that you are coming in, you are the one who has gone through lots of experience, done lots of training, done lots of studying, you know how to use tools, you are in Facebook groups, and you know how to analyse products - what you have done during your time and during your journey, you have fundamentally built your confidence.

When you first started like many of us, you would have been stumbling through the major systems and you would have been doing everything for the first time. It is all about confidence. The great thing is that there are a lot of advanced tools out there, but from a phycology point of view, it is all to do with confidence. 

Trust

When you start to think about outsourcing purchasing, by definition, this is someone else being in control of purchasing. So, this starts to bring in other aspects that are super important. It starts to bring in trust. If there is no trust, will there be confidence? No.

Competence

This then starts to bring in competence. You have got competence in your business, because you have been sourcing, you have been reviewing, and you have spent many hours in your business. So, you have developed your competence, you trust in yourself, and therefore, you have got confidence. 

These 3, from a psychology point of view, 80% of success is psychology and only 20% is mechanics. 

The confidence, trust and competence are what you need when you are going to outsource purchasing. 

But the 20%, what exactly is it?

 We need to start developing systems, which are the nuts and bolts, on how you can develop the trust, confidence and competence, so you know, if you are going to outsource purchasing, you have got all 3. 

So now, we need to build systems that we can fundamentally build our online arbitrage business on. 

For Kev, there are number of things which are important here.

To be able to build competence, you have got to start training, and you have got to start recruiting virtual assistants, whether that is from the Philippines, India or from different parts of the world - you have got to do some recruiting, some hiring and some on-boarding. Then, you have got to have some fundamental systems that you are training on.

The best thing that Kev would recommend is what Kev calls Master Sheets. These are Google Sheet templates, and there are lots of different forms of Google Sheets, you can either build your own from the templates, there are lots of different templates which you are able to purchase. But, Master Sheets are essential from the mechanics point of view, and fundamentally, the foundation of you being able to outsource purchasing. The reason for this is because from a Master Sheet point of view, being able to gather all the information, regarding the products you are purchasing is key - all the buy for's, the sell for's, the margins, the basket totals, the units purchased, quantity purchased, the order number, the expected delivery date, and all these different things are essential, when you start to think about the competence to train on, trust, and then confidence. Master Sheets are essential. 

Google Drive

The folders in Google Drive can start to collect documentation. This is again, a very essential part, because as you start to purchase, you list different products you are purchasing, you are collecting all the information, you have got order confirmations, then from that point, hopefully you have got them referenced, then you will be able to save all the documentation, your receipts, your VAT invoices etc, in a Google Drive folder. So, if you ever need the documentation, you will be very quickly able to find that documentation.

Software

 These are your analytical tools, how you are reviewing products, whether that is from Keeper etc. But also from an accounting point of view. Hopefully you are using something like Quickbooks. These are essential when it comes to building everything we have discussed above, because this all fits in from a quality control point of view, from a trust point of view, and from a protection point of view. These all fit in very well, because what this is going to do, is with your Master Sheets, you are going to be able to collect all the products which you want to purchase, they are all referenced, everything from what the order totals are, then you can save that documentation into Google Drive ready for Amazon requests or account requests, then you have got analytical tools to help do the analysis, and you have also got accounting tools, where that transaction which come in from that order placed, they should match in your Master Sheet. 

In January 2021, Kev hired a senior assistant, who he calls his purchasing manager. Kev went through an eight-month spell, from January, all the way to August, going through how to outsource purchasing. This was through 3 phases. 

At the time, Kev was constantly struggling and battling with the confidence and the trust etc. So, first and foremost, when you hire a virtual assistant, a virtual assistant, and you start to build your team, a big part of team building is that trust - sharing your vision, sharing your results, sharing your business, and really from a staff appraisal point of view, from them being able to achieve the goals and the visions that they have in their life, by them becoming a part of your team, getting them involved in the journey.

Kev's first senior assistant, he shared with him what the goals were, and Kev wanted him to purchase for him. 

Phase 1

Phase 1 was all about being able to review and know the difference between winners and losers. 

You should spend a number amount of time with your senior assistant, going through the tools that you use, what your sales rank is, how you analyse Keeper, how to find the number of sellers - explaining the basics from a competence point of view, what an Amazon listing looks like and how we can review.

Then it goes onto the second phase. Kev would tell his senior assistant to let him know when he has reviewed, then Kev could go review their review. Kev wanted to see if they were choosing the right losers, compared to and are they spotting the right winners. 

At first, it is one of those experiences where it depends on how well you have trained them. 

If they are picking out all the right winners and all the losers, the goal here is to build confidence. The goal here is to build trust and to build confidence, that they know what a winner is and that they know what a loser is. And at one point, through phase 1, what is going to happen is you are going to start matching your result. Your virtual assistant and your senior assistant are going to start going, "I have got 15 winners today" , and you are going to go, "I have got 15 winners today". 

At that point, once you are going through that stage - this phase, you are going to transfer and you are naturally going to evolve into phase 2. Phase 2 doesn't start until you match phase 1. 

Phase 2 is then all about the competence, trust and your confidence, from a quantity point of view and basket creation. 

This is now, you have got the right winners, then now it is a case of what quantities would you purchase for these winners. You start to look at those products, and try and purchase these to be in stock for the next 30 days, and purchase 6-15 of the units.

You are trying to match what they would purchase compared to what you would purchase. You are trying to match you to your virtual assistant. 

Phase 2

The second phase is quantities and basket creation. You are now at a point where they are matching winners, they are matching quantities, and they are rejecting losers. If you think about it from that point of view, it is a start to gaining confidence with them, because they have got the right winners. 

Phase 3 

Now is the time in phase 3, which is actually allowing them to do the purchasing and documentation management. This is the time where you allow your assistant to complete purchases.

You have matched, we have covered phase 1 and phase 2 - you have got that confidence, competence and trust. The third and final thing when it comes to how you let them purchase, there are a number of ways that you can do this. This is where you can start to put in a number of different safety nets involved - purchasing rules, where you can say to your purchasing manager that they can have daily budgets, but not spend over the said limit; if you are going to complete an order which is more than £400, then let you know so you can approve it. If there is for an example, a unit, one particular item that the buy for price is above 20, 30, 50, 60 pounds, then that needs to be approved by you too. 

There are a number of safety precautions, which you can put in place before they place an order. 

From a safety point of view, there are a couple of things from a phycology point of view. 

Firstly, questioning the belief of, if you give your account details, Paypal, whatever it is, provide users to your account and funds, the purchasing manager may purchase wrong. 

We covered this in phase 1 and in phase 2, we have got the confidence. 

What if they take off and commit fraud?

There are a lot of protections, for example, credit cards. If they disappear and they have got your account and your details, what would happen then is your credit card would be protected. You would tell them that it is not you and you need your account cancelling. They would investigate the fraud. The truth is, throughout this time, you are building a relationship with a team member, if they were to commit this act, you wouldn't want them in your business.

If they were to do this, you would want them to do it quickly and swiftly so you can just get rid of them and move on. But the truth is, when it comes to a hiring point of view and a relationship point of view, by the time you reach this level, you start to build trust and you build a friendship - you start to build a professional understanding between one another, that you are building towards this bigger vision, you want to provide a promotion to them, you want to provide opportunity to them. They will then see where they want to be in their life, and that will encourage a lot of motivation and encouragement. 

The chances are, if you have built this relationship good enough, then they are not going to commit any type of fraud with you, and you would know about it straight away - you would know about it from the mechanics, the orders on your master sheets, you would know about it from the documentation going onto Google Drive, and you would also know about it from the accounting software that you have, because all the transactions that are electronically connected to all your accounts, immediately, as soon as you refresh, as soon as you log into your card account, you would know about it. 

Further reading:

How To Build Systems In Your Business

The Ultimate Online Arbitrage Shipping Amazon FBA Guide

The Ultimate Online Arbitrage Purchasing Amazon FBA Guide