This week, a fellow blogger at the Lending Club blog asked whether shopping on Woot is financially responsible and gave advice on how to make sure that it is.  To his commentary, I’d like to add how to make money using Woot, or what I affectionately call Woot Arbitrage.

For those of you who don’t know, Woot sells one product each day at a typically unbelieveable price.   Once the item is sold out, you’ll have to wait until the next day for the next deal.  They occasionally hold Woot-offs as well, in which they dump excess inventory by offering a product until it sells out, then moving on to the next product until it sells out, etc.

So how can you make money from the phenomenon that is Woot?  The product offered there is typically well below the price available anywhere else.  No one would want to buy the product from you the same day that Woot is offering it because they could get the best price from Woot directly.  But once the clock strikes midnight, or Woot sells out, the dynamics change.  Once the product is no longer being sold at Woot, you can sell it for more than Woot but less than the nearest competitor.

For example, Woot recently offered a Blue Raven Maestro 1070 IPod speaker system for $49.99 plus $5 shipping.  Online price comparisons showed it was also available from Ebay for $94,  Buy.com for $145, and Amazon for $199.  So buying it from Woot today could lead to a decent proffit tomorrow.  Listing it on Ebay for $85 would probably lead to a quick sale, and a nice $35 profit for each one you sold.

The main negative of using Woot arbitrage is that other people understand the concept as well.  That means a surge in Ebay listings for a product can be expected within a few days of the product being offered on Woot.  Also, some products will benefit from this method more than others.  Woot has some great products, but they also sell crappy products from time to time.  They even have a highly coveted mystery offering know simply as a “Bag of Crap” that costs $1.

Shopping with Woot can be great if they are offering something that you actually need, but it can also be profitable with many of the other products they sell.  Buying a large quantity of a product with the right price, demand, and profit margin could be as addictive as needing to check Woot on a daily basis.