Wednesday, July 30, 2014

Pricing Your Products for Amazon FBA

Keep your face to the sunshine and you cannot see a shadow.
~Helen Keller

The ultimate goal: double your money or better.

If you pay $3, then your goal should be to make a minimum of $3 profit.

When you're out sourcing and making buying decisions be sure to take a look at the 5 lowest FBA prices. If you can double your money by selling your product somewhere in the five lowest FBA prices, then you're good to go. Make sure you have a little wiggle room in case the price drops dramatically or the item simply doesn't sell after 90 days. Don't forget to consider fees, as well as shipping and handling (especially weight and size of the item) when figuring your total investment and profit margin.

If there isn't an FBA seller, then look at the average merchant fulfilled prices + shipping, and list your product  somewhere in the middle range of the five lowest sellers.

On the first of every month go to Manage Inventory to cull out products that are not moving. Let's say you have ten pages of inventory. The oldest inventory is on page 10. Start at the end and work backwards. Evaluate prices, rank, and your cost to determine whether you should hold, or cut your losses and knock your price down to cost. If the item is a seasonal item, you might want to hold out until the next season. You have to determine whether you consider the item a long tail item, or simply a dud. If it's long tail, you might tweak your price, and if it's a dud, you probably should cut your loses and price to break even (or to make a few dollars vs. 100% ROI).

A few unwritten rules (not Amazon's rules and not real rules, but common thinking among many sellers):
  • Don't undercut other FBA sellers unless the product is truly unreasonably priced, or not moving at the lowest FBA price after 60 days.
  • Don't play race to the bottom just to gain the buy box 100% of the time. Play nice. Share.
  • If Amazon comes in as a seller on your product, then price your product 20% above Amazon's price and hold out until Amazon sells out. Don't freak out. Just hold. You will get your turn at the buy box.
  • You don't always have to have the lowest price. It's okay. Really.
  • If you're the only seller, then price based on what you consider reasonable and fair. If the item isn't moving after 30 days, then lower the price a little bit. Keep tweaking until you find that sweet spot.
Pricing is not a science. There are no hard and fast rules. You just have to tweak and play until you get it right. It's a guessing game, but while you're guessing, don't forget to run your numbers to make sure you don't price yourself out of a fair profit.

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