Arbitrage in Unexpected Places: How I Made Money Buying and Selling Xbox One Kinects in High School

Introduction

Arbitrage is a financial concept that involves buying and selling assets in different markets to take advantage of price discrepancies. When executed correctly, arbitrage can be a highly profitable venture, but it usually requires a keen eye for overarching market trends and an understanding of pricing dynamics.

When I was still a student in high school, I stumbled upon an arbitrage opportunity that allowed me to make some money buying and selling Xbox One Kinects. The Kinect was a device developed by Microsoft that could be used as a motion sensor for gaming, but it also had a range of professional applications due to its high-quality camera and sensors. However, many consumers were unaware of its capabilities beyond gaming and were getting rid of their Kinects due to a lack of practical use cases and discontinued support for Kinect games on the Xbox One. This created an opportunity for arbitrage as the Kinects could be purchased at a low price from online auction websites such as Goodwill and sold for a profit on eBay.

In this article, I will share my experience with the Xbox One Kinect arbitrage opportunity, including how I identified the trend and executed the plan. I will also share the lessons I learned from this venture and how it impacted my approach to personal finance. Finally, I will discuss the importance of recognizing value in overlooked products and considering potential arbitrage opportunities in the future.

Background

To understand the Xbox One Kinect arbitrage opportunity, it’s important to first understand the device and its versatility. The Kinect was developed by Microsoft as a motion sensor device for the Xbox One gaming console, but it also had a range of other applications due to its high-quality camera and sensors. The device could capture detailed information about human movements, which made it valuable for a variety of professional applications, including research and development.

Despite the Kinect’s versatility, many consumers were unaware of its capabilities beyond gaming, and as Microsoft began to wind down the release of games that supported the Kinect on Xbox, more and more general consumers began getting rid of their Kinects. This created an opportunity for arbitrage as the Kinects could be purchased at a low price from online auction websites (such as Goodwill Auctions) and sold for a profit on eBay, where the new “research oriented” audience would be likely to purchase from.

The value of the Kinect in professional applications was often overlooked by consumers, but it was well-known to professionals and researchers. In fact, many researchers relied on the Kinect as a cheap way to get a high-quality camera bundled with useful sensors that could be used for a variety of different research purposes. The Kinect’s versatility was a major selling point for researchers, who could use it for applications such as motion capture, 3D scanning, and even medical imaging. I was first made aware of this when I visited a particular museum that utilized a Kinect to track the arm movements of a guest to mirror those movements to a robotic arm that was a part of an exhibit.

The Kinect’s versatility and potential for use in professional applications made it an ideal candidate for arbitrage. With many consumers getting rid of their Kinects, there was a surplus of devices available for purchase at a low price. This presented an opportunity to purchase the devices at a low cost on various online auctions websites and resell them to professionals and researchers who were willing to pay a premium for their functionality, on eBay, a more active or more “liquid” market.

Identifying the Opportunity

Recognizing this trend and the apparent discrepancy in between the demand from the general consumer and demand for specialized use cases, I began to research the market for Xbox One Kinects. I looked at completed sales on eBay to determine what the devices were currently selling for and what price I could potentially sell them for. I also monitored the quantity of Kinects listed on Goodwill’s online auction website to determine the supply of available devices.

Based on my research, I identified a significant price discrepancy between the Goodwill auction website and eBay. Xbox One Kinects were selling for significantly less on the Goodwill auction website than they were on eBay, creating a potential opportunity for arbitrage.

Executing the Plan

Executing the arbitrage plan involved carefully monitoring the market and executing bids on the Goodwill auction website. I was able to purchase Xbox One Kinects at a low price from the Goodwill auction website and immediately turn around and sell them on eBay for a significant profit.

To ensure that I didn’t overbid on the Goodwill auction website, I monitored completed sales of Xbox One Kinects on eBay. I used this information to set a threshold for the maximum amount that I was willing to bid on the Goodwill auction website. This threshold was based on a target profit margin of at least 30% net of the auction price, estimated shipping costs, and the cut of the sale that eBay takes upon completion of the sale.

Once I had purchased the Xbox One Kinects from the Goodwill auction website, I had them shipped to me. I then immediately listed them for sale on eBay, pricing them at a 30–50% premium from what I had bought them for on the Goodwill auction website. This allowed me to capture a significant profit margin for each device sold.

I carefully monitored the market throughout this time to ensure that I was still able to achieve my target profit margin. Eventually, the two auction markets converged in terms of pricing, and the arbitrage opportunity was no longer viable. This forced me to move on and look for new opportunities elsewhere.

Lessons Learned

Exploiting this arbitrage opportunity has taught me a number of valuable lessons that have stayed with me throughout my life. Here are some of the key lessons that I learned:

1. Monitoring market trends: The success of the Xbox One Kinect arbitrage opportunity was largely due to my ability to recognize a trend in the market. Monitoring market trends can help identify opportunities for arbitrage.
2. Understand pricing and demand dynamics: The arbitrage opportunity was successful because there was a significant discrepancy in pricing between the two auction websites. Understanding pricing and demand dynamics is critical in identifying potential arbitrage opportunities.
3. The importance of patience and discipline: The arbitrage opportunity required patience and discipline in setting a target profit margin and sticking to it. It was important not to overbid on the Goodwill auction website and to wait for the right opportunities to present themselves.
4. Taking advantage of opportunities before they disappear: Eventually, the Xbox One Kinect arbitrage opportunity became unviable as the two auction markets converged in terms of pricing. This taught me the importance of keeping an eye out for new opportunities and being willing to adapt and pivot to new ventures.

Conclusion

This arbitrage opportunity was an eye-opening experience that allowed me to make a solid amount of money while still in high school. It demonstrated the power of recognizing value in overlooked products and understanding market dynamics to identify potential arbitrage opportunities.

I feel that I learned very valuable lessons about market trends, pricing dynamics, and the logistics of online auction sales. These lessons have stayed with me throughout my life and have helped me to approach investing, personal finance and other ventures with a more informed and nuanced perspective.

As mentioned before, this opportunity eventually came to an end as the two auction markets converged in terms of pricing. However, this taught me the importance of keeping an eye out for new opportunities and being willing to adapt and pivot to new ventures.

In conclusion, this endeavor was a valuable experience that taught me a lot about market dynamics and how to potentially exploit them to your own advantage. It also highlighted the importance of recognizing value in overlooked products and considering potential arbitrage opportunities in the future more broadly across other areas of interest. It has inspired me to continue to seek out new opportunities and to approach them with discipline, patience, and a willingness to learn.