Make a plan and work the plan, but stay flexible enough to change the plan at a moment's notice.
Different FBA sellers have different business models. Some price low and some price high. Some buy for long tail, and some buy for fast turn. Some go deep and some go wide. There are many variables to these decisions, including product category, buy cost, ranking, ability to replenish, sourcing funds available, and risk factor.
This post will be a three part series: Low & High, Long & Short, and Deep & Wide.
Let's explore each of these ideas and consider the pros and cons. In this post, we will look at Low & High.
Price Low - There are sellers who fight for the low price, who are determined to dominate the buy box, and who start the race to the bottom on every product they touch. I'm totally convinced that many sellers who live in the low price model are losing money. The lowest I go on a price is $7.99, and this is for small, lightweight items that I sourced for a dollar or less. I only make a whopping $3 on this price point, but the investment is low, and the turn rate is reasonable.
Sometimes sellers need to move the product out and free up the investment dollars. Other times sellers have upcoming long term storage fees to avoid, or their product is closing in on expiration dates. If a product has been in your inventory for over three months, and you don't consider it a long tail item (something with a high ROI that is worth the wait), then you might bottom out the price as low as you can go to recoup your investment. But don't forget to calculate the fees! FBA fees can eat your lunch if you don't bother to figure them into your calculations.
I would caution against choosing to undercut the lowest price just to get the buy box. I have a product priced at $18.99. It was selling consistently at that price. Someone came in and undercut my price to $16.99. My cost is low enough that I could have engaged in a price war, but I decided to hold and let the seller sell out. Eventually they were gone and I had the buy box again at the higher price. That seller lost two dollars. We could have shared the buy box, and both of us would have been winners.
Price High - Personally, I try to price what the market can bear. I consider the rank, current prices (by both merchant fulfilled and FBA sellers), and my cost and fees. I always look to double my cost in profit at a minimum, but I've learned that I need some wiggle room as well in case other sellers come in and cause the price to drop. I've also studied the buy box, and I've noticed that it rotates every hour. The lowest 3 to 7 sellers tend to get their turn. I'm willing to wait it out for products that I believe can sell for a higher amount, but I try to price somewhere with the lowest ten sellers.
Sometimes sellers put an outrageous price tag on a item. There are reasons for this. Some reprice when their items reach the warehouse. Others discover a problem after they've shipped the item to Amazon, so they price it high to keep buyers from actually buying it. You have to watch out for this when you're scanning. If a price is off the charts, then make sure you look deeper before making a buying decision.
Keep in mind that as an FBA seller, you have access to Prime customers, as well as customers who fill their cart with purchases over $35 in order to receive free shipping. FBA sellers can generally sell their items at a premium price because Prime buyers want what they want and they want it now! As a Prime buyer, I can testify that I've paid a little more (over a merchant fulfilled offer + shipping) in order to use my Prime account to get the item in two days. Another thing to remember - if you have an item priced at $30-34.99, then you're missing out on a lot of Amazon customers. Bump your price to $35, so that buyers can take advantage of free shipping!
Everyone has their own formula for pricing, and many people tweak their prices on a daily basis. You can do this manually or use a repricing service. It's all a great experiment that requires flexible thinking.
In Part II, we will explore Long & Short.
Different FBA sellers have different business models. Some price low and some price high. Some buy for long tail, and some buy for fast turn. Some go deep and some go wide. There are many variables to these decisions, including product category, buy cost, ranking, ability to replenish, sourcing funds available, and risk factor.
This post will be a three part series: Low & High, Long & Short, and Deep & Wide.
Let's explore each of these ideas and consider the pros and cons. In this post, we will look at Low & High.
Price Low - There are sellers who fight for the low price, who are determined to dominate the buy box, and who start the race to the bottom on every product they touch. I'm totally convinced that many sellers who live in the low price model are losing money. The lowest I go on a price is $7.99, and this is for small, lightweight items that I sourced for a dollar or less. I only make a whopping $3 on this price point, but the investment is low, and the turn rate is reasonable.
Sometimes sellers need to move the product out and free up the investment dollars. Other times sellers have upcoming long term storage fees to avoid, or their product is closing in on expiration dates. If a product has been in your inventory for over three months, and you don't consider it a long tail item (something with a high ROI that is worth the wait), then you might bottom out the price as low as you can go to recoup your investment. But don't forget to calculate the fees! FBA fees can eat your lunch if you don't bother to figure them into your calculations.
I would caution against choosing to undercut the lowest price just to get the buy box. I have a product priced at $18.99. It was selling consistently at that price. Someone came in and undercut my price to $16.99. My cost is low enough that I could have engaged in a price war, but I decided to hold and let the seller sell out. Eventually they were gone and I had the buy box again at the higher price. That seller lost two dollars. We could have shared the buy box, and both of us would have been winners.
Price High - Personally, I try to price what the market can bear. I consider the rank, current prices (by both merchant fulfilled and FBA sellers), and my cost and fees. I always look to double my cost in profit at a minimum, but I've learned that I need some wiggle room as well in case other sellers come in and cause the price to drop. I've also studied the buy box, and I've noticed that it rotates every hour. The lowest 3 to 7 sellers tend to get their turn. I'm willing to wait it out for products that I believe can sell for a higher amount, but I try to price somewhere with the lowest ten sellers.
Sometimes sellers put an outrageous price tag on a item. There are reasons for this. Some reprice when their items reach the warehouse. Others discover a problem after they've shipped the item to Amazon, so they price it high to keep buyers from actually buying it. You have to watch out for this when you're scanning. If a price is off the charts, then make sure you look deeper before making a buying decision.
Keep in mind that as an FBA seller, you have access to Prime customers, as well as customers who fill their cart with purchases over $35 in order to receive free shipping. FBA sellers can generally sell their items at a premium price because Prime buyers want what they want and they want it now! As a Prime buyer, I can testify that I've paid a little more (over a merchant fulfilled offer + shipping) in order to use my Prime account to get the item in two days. Another thing to remember - if you have an item priced at $30-34.99, then you're missing out on a lot of Amazon customers. Bump your price to $35, so that buyers can take advantage of free shipping!
Everyone has their own formula for pricing, and many people tweak their prices on a daily basis. You can do this manually or use a repricing service. It's all a great experiment that requires flexible thinking.
In Part II, we will explore Long & Short.
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