We’ve written before about finding the right products to sell on Amazon, but we’ve mostly touched on size and weight. Price is another important factor, so RepricerExpress has created this handy checklist for you to see if low price goods (less than $20) are right for you.
Do You Use FBA?
Yes: You might want to re-think this strategy. There are fees associated with Fulfillment by Amazon (FBA) that can cut into your profit margin, despite the ease and freedom that FBA offers. A general rule of thumb is you should be doubling your money after expenses, so figure out at which price point that stops happening. Remember, you also have to work in the cost of getting your item to the Amazon distribution centre.
No: You’re definitely saving yourself money and increasing your profit margin. Although you have to pay Amazon seller’s fees, you’re in charge of how much it costs to package and ship the product. Some items just won’t return enough of a profit if paired with FBA.
Do You Have a Large Inventory?
Yes: Selling low price goods can be a good option, as quantity can often more than make up for price. Especially if you deal with high turnover. As an example, look at Walmart. They’ve mastered the art of low-cost, high-turnover items. While they might not be making as much on each individual sale as a car or jewelry seller might, they’re selling enough items that the money still rolls in handsomely.
No: Sellers who price their products above the $20 mark tend to bring in more revenue on a monthly basis than those who don’t. If you don’t have the bulk of items to make up for thinner profit margins, then your revenue won’t be as high.
Do You Have a High Overhead?
Yes: If your overhead is more than 30%, then selling low price goods on Amazon is not a good idea. Your profit margin will be razor thin and you’ll have to be one of Amazon’s most very top sellers to get a decent amount of money coming back to you.
No: If you’ve managed to keep your business on a small scale where you don’t have to budget a ton for staff, marketing, advertising, orders and more, then low cost goods can be a good idea for you. Just make sure to try and stay under that 30% benchmark.
Are Your Products Readily Available Offline?
Yes: When you sell items in a brick-and-mortar shop, you don’t have to pay for picking, packing and shipping. And if those low price goods aren’t bringing in a ton of profit, you can balance it out with items that do. But make that jump to also selling them online and you could be facing a steep price hike when you factor in all of Amazon’s fees. If people are used to paying a low price for a certain item, they probably won’t feel very inclined to pay more online.
No: If you don’t face competition with offline availability, then you don’t have to worry as much about price. You can still price the product cheaply, but the concern over it being available for less in a brick-and-mortar shop isn’t there. You might even be able to get away with upping the cost a teeny bit as a trade-off for ease of purchase and home delivery. And if that’s not an option, then bundling or cross/up-selling is also an option to increase your profit margin.