Friday, April 18, 2008

Beating the Penny Sellers on Amazon!

I've written about this before, but I figured I would look at this more in-depth because many of you are frustrated with Amazon Sellers that list their items for 1 penny.
I buy quite a few media items at in the 5 to 10 cent range. Mostly because I know I will be able to move them on Amazon even though there is a lot of competition selling them at a penny. Here is what I've found after selling via Amazon FBA for the past 7 months:
  • I sell my penny type items for $2.98 and will always show up at the top of the list. The only ones who can beat me are other FBA sellers and right now there just isn't much competition on FBA -- of course if I keep writing about it that may change.

  • When I sell the item at $2.98 with a COG of 15 cents, I still get a GP of $0.90 on each item that I sell. If it took 12 months to sell it through FBA my GP would be $0.78 for a CD and $0.66 for a DVD -- Books are a different animal all together, though if you do the numbers you might be able to make it work.

    If I fulfilled the item myself and listed it for 1 penny I would only make about $0.40 cents on the sale. and still have to store it and ship it myself.
  • Buyers are wary of items priced at one penny because the perception is, it has no value, so why would I buy it. Many consumers also think they are getting taken advantage of somehow.

  • News Flash - Prime customers actually buy these items one at a time and get free 2 day shipping -- it is quite amazing. Most of my $2.98 items are purchased by Prime customers.

Remember that "perception is reality" for most consumers (just look at all of the problems eBay is having) if your item appears to have no value when listed at one penny, most consumers will move on to other options. Besides, I can actually make more money with less hassle selling the same item at $2.97 via FBA.

I'm sure at some point that the competition among FBA sellers will put pressure on this strategy, but I think it will be awhile. I only do it with DVD's and some CD's depending on sales rank so I think it will be awhile before there are many competitors for the same SKU's.

Just click on the image to enlarge.