Hello -
First-time poster, long-time lurker.
I have a product and after reading the back of it, I noticed the same dollar MSRP listed between two different currencies (usually for other similar products, they differ according to some avg annual spot rate). Naturally, my finance brain instantly screams 'arbitrage'. I was hoping you all could confirm if I am thinking about this right and weigh in on if it is something I should actually pursue?
The product lists a sales price of $10.00 Canada and $10.00 in U.S. on the back. Given the current spot of CAD/USD I could theoretically buy the product for the equivalent of ~$7.70 USD in Canada. I then could turn around and sell it in the US for $10.00 USD and pocket the $2.30 as profit.
It is impossible to know how many units are sold of this unit, but online sources reasonably estimate that between 4-7 of these units are sold per day on Amazon. Now there are also ~50 similar products by the same company. Assuming 5 of the units I own are sold per day on Amazon and assuming similar unit quantities are sold on the other 50 products, that is 250 units sold/day of this product line. Per year that is 91,250 units sold. Applying the $2.30 in profit/unit that is ~$210k in profit.
The biggest risk is liquidity risk seeing moving 91,250 units of these in a year or 5/day of each of the 50 products may be more challenging than selling that many units of a stock, for example. Additionally, there may be shipping costs involved acquiring from Canada but theoretically, you pass that through to the future seller once sold in the US.
Would this be worth pursuing if I were to believe that I can only sell 500 units a year (~1k profit). 1000 units a year (~2.2k profit) etc?
Thanks in advance for the thoughts.
Banksy
No. How much work is involved and tax implications for only $1k a year return?
Plus t costs of hedging your fx risk.
You should question what structural, economic or incentive-driven inefficiency has allowed this arb to manifest, especially if it is clearly both 10 USD and CAD from the same provider.
As mentioned earlier there’s going to be tax leakage, hedging friction, logistics costs, and price-demand elasticity concerns. You are already setting up to a fairly low gross margin to start with so not much error to make on other cost overruns…
Also you should consider the opportunity cost of time and potential earnings that this would take from your career job.
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