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Thu Jan 3 2013 12:34:57

Amazon Sellers on FBA: Do You Have a Price Threshold?

By: Julia Wilkinson

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There's no question that items sellers send to Amazon's FBA, Fulfillment by Amazon, program, in general sell more quickly and often at a higher profit. Amazon "Prime" members are grabbing these deals, and they also stand out because consumers trust Amazon's fulfillment expertise, not to mention they are near the top of the list of products.

However, that doesn't necessarily mean sellers would do well to send everything in to FBA; there are storage fees involved. And as Amazon rep Jeff Moore counseled a roomful of sellers at the Monsoon Commerce conference last May, "Send items that will sell." In other words, it doesn't make sense to send something that is not likely to sell and may languish in storage, racking up storage fees (however modest). And as Ina wrote today, while Amazon's reported third-party sellers increased sales 40% over the holiday season, there was no specific reporting of profit.

So how do FBA sellers decide what that threshold is, for which items they do send in? A price threshold? A sales rank threshold? Or, as one seller on a discussion board put it, "We send everything in." He said they had tried to merchant-fulfill smaller items, but found that both past Christmas seasons "we could not possible keep up with shipping and ended up putting the store for mf stuff on hold too many times. Now everything is FBA. Nice to be on vacation and still make money!"

What about low sales rank? One seller said  only send in low sales rank items "to be sure they don't just age in a warehouse generating storage costs forever." But what constitutes a low sales rank? It may be different for different sellers. Plus, once an item is sent to FBA, its chances of selling generally go up quite a bit: what if the relatively obscure item would never sell if it didn't have the "Amazon Prime" teaser next to it? I've sent in some books which I felt were very specific to a niche topic, and rare, and they have sold via FBA.

"The good thing about FBA is you can often only have to compete with other prices that have the prime option (other FBA vendors and Amazon themselves)," said one seller. And items that sell via FBA can often sell at a higher price than other items.

Still, sellers need to look at the numbers and keep their costs in mind. "A simplistic way I view it is I lose about 25-35% my listing price to all the pick and pack and shipping fees, etc. The storage for basic small-ish items is about $0.50 per cubic foot per month," said a seller who deals in CD's.

Another discussion was about the infamous "penny books" and CD's. I personally don't go there in pricing, but some sellers do, to make money on the postage. "I sell some books at 1 penny, but make money on the postage," said one UK-based seller. "It is worth checking out. If you are in the UK it is worth it only on large letters, not on packet postage."

But if one factors in one's time, which for a seller is valuable, it doesn't seem worth it. About light books, one seller said, "Most of them, though, are selling for 1 penny, which brings me up to $4.00 with shipping, and then Iam charged $3.08 to ship the book. Take time and shipping supplies (tape, cardboard, labels) out of that .92 cents and there's no profit left."

My question for you is, if you use Amazon FBA, how do you choose what items to send in? What are your criteria? Do you have a dollar value criteria, or sales rank, or just go case-by-case on instinct? Post a comment here!

Comments (5) | Permalink

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Amazon Sellers on FBA: Do You Have a Price Threshold?   Amazon Sellers on FBA: Do You Have a Price Threshold?

by: Digmen1 This user has validated their user name.
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Thu Jan 3 21:54:05 2013

It just shows how silly we online sellers are.
Before ebay etc, when you bought something mail order, you paid a fair prices for ''shipping and handling'', which also covered their time to pack the goods. Now we do it all for free and are probably working for 50 cents an hour.

Amazon Sellers on FBA: Do You Have a Price Threshold?   Amazon Sellers on FBA: Do You Have a Price Threshold?

by: Moonwishes This user has validated their user name.
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Fri Jan 4 00:44:10 2013

I've been curious about how sellers decide what they want Amazon to pack and ship for them and still make a profit. One of the things that our store is known for and that is good customer service and the last thing I would want is some dude in a warehouse not understanding what he is pulling and then shipping the wrong item which could create a domino affect. I'm especially surprised about the relatively low prices that many FBA sellers are willing to take knowing full well if they are FBA they are paying even more fees than a regular 3P seller. I see my time as worth way more than 92 cents and it seems like it would even be less 'profit' when you add in the cost of getting the item, listing the item, shipping it to Amazon, etc. I don't know how the whole thing works, but I wouldn't want to do it.

I have found lately with selling on Amazon the best thing for me is getting a featured merchant spot and also the 1 click buy now spot. I've sold items in the same condition as others have listed for up to $4 or more than the other sellers. I'd rather have that extra $4 than the nothing profit of FBA. I would be interested in what sellers that do it use as the decision model with what to send in and what to handle themselves.

Amazon Sellers on FBA: Do You Have a Price Threshold?   Amazon Sellers on FBA: Do You Have a Price Threshold?

by: Tiffee Jasso This user has validated their user name.

Fri Jan 4 01:52:49 2013

From what I have seen Amazon, Ebay and penny sellers believe that if you are making 25 cents per item profit, you are a making a good haul for your investment.
I will never forget hearing one flea marketer brag (before internet came along) how they had had a "killer day." After I had heard him say this to several people, I ask him how much did you take in? His answer $25. Setup fees were $10. Total hours put in were 8 and that didn't count commute time or gas or stock. But he was happy and thought himself to making a "killing."
Everyone has their own level for what is successful for them, but that doesn't mean they are making any money at it.    

Amazon Sellers on FBA: Do You Have a Price Threshold?   Amazon Sellers on FBA: Do You Have a Price Threshold?

by: Daisy909 This user has validated their user name.

Fri Jan 4 06:44:36 2013

Not only do I send everything to FBA, but I also have them sticker everything too. I have a FT job and sell on 3 websites so it is a huge time saver to have FBA ship and sticker my items. My bottom price to still make a (tiny) profit with FBA is $4.99. I don't mark anything down to that price unless it is about to incur long term storage fees and I need to move it out of my inventory.

Amazon Sellers on FBA: Do You Have a Price Threshold?   Amazon Sellers on FBA: Do You Have a Price Threshold?

by: Robinsellsitall This user has validated their user name.

Fri Jan 4 16:12:07 2013

I've been selling through FBA for about 2 1/2 years. I send almost everything in to the warehouse. I try not to send anything in that retails for less than $10.00 but often it ends up selling for lots less than the original list price, but once it bottoms out at $4.50 it's time to dump it for me.  

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