|Thu Jan 3 2013 12:34:57|
Amazon Sellers on FBA: Do You Have a Price Threshold?
By: Julia Wilkinson
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!