Complete guide to surviving new Amazon FBA fees

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A guide for protecting yourself against new Amazon FBA fees, and a bulletproof buying formula that guarantees you can’t lose money selling books.

Why new Amazon FBA fees don’t matter (much)

Despite the choir to the contrary, the numbers don’t lie: Increased FBA fees do not put us out of business. Yet they do remove our wiggle room (aka our “luxury of being lazy.”)

Today, Amazon sellers have to know our numbers and have a formula that guarantees we won’t lose money. Once you have a formula down, the profit goes on autopilot.

Remember: You don’t have to be smart if you have a formula that makes failure impossible.

Prior to increased Amazon FBA fees, we could feed endless amounts of books into the mouth of the Amazon monster, with extremely loose regard for sales rank, book weight, and with only a loose grasp of the numbers. And it was pretty hard to lose money.

Yes, it used to be hard even for amateurs to lose money selling books on Amazon. Now it is very easy for amateurs to lose money selling books on Amazon.

What separates the amateurs from the pros when it comes to surviving new Amazon FBA fees? It’s how you understand these four things…

Surviving new fees with the four corners of buying criteria

Here are the four rules Amazon sellers have to set for themselves to profit despite new Amazon FBA fees:

1. Selling price criteria
2. Weight criteria
3. Sales rank criteria
4. Risk criteria

This article is about how all four of these factor into buying inventory in the current FBA landscape.

Protecting Against FBA Fees With “The Rule of Threes”

Before we establish buying criteria for you, let’s assume you want to maintain the timeless “rule of threes” buying formula:

1. At least tripling the cost of your book or item.
2. Maintaining a minimum payout of $3.

This is the “3x” formula I’ve taught Amazon sellers for years. Either take the “Rule of Threes” as gospel, or set your own rules, but everything I’m taking about here will be based around this tried-and-tested standard.

Let’s look at each of the four criteria (listed above) one-by-one, inform what inventory you should buy, and how they will save you from new Amazon FBA fees…

1. Selling price criteria

Simply put: This means having a minimum price you won’t sell a book for less than.

 

Despite everyone shouting that new Amazon FBA fees represent “the end of the $10 book,” the numbers don’t bear this out. What the numbers do bear out goes more like this:

“It depends…”

Let’s take a book I used in a recent article that I think represents the “typical paperback book”:

• The Tipping Point (ISBN 0316346624).
• Typical book size (5.5″ x 8.5″).
• Typical book length (300 pages).
• Typical book weight (<1 lb).

With this book, at a $10 sale, you still get a $3.49 payout. Anyone can say whatever they want about the end of the $10 FBA sale, but the numbers don’t lie.

2. Weight criteria

This means knowing the weight of your book when you buy.

Wait, didn’t I forget to finish my point on “selling price criteria”? No. Because weight is the biggest factor in Amazon FBA fees, and selling price & book weight are inseparable. So we have to merge the two.

Because the new FBA fees demands new precision, there’s an added advantage now to adding one new layer to buying criteria: Weight.

Estimating weight before you buy

Yes, your scanning app does this, but as covered exhaustively elsewhere on this site, your app isn’t showing you every FBA offer. So that net profit figure your scanning app shows you might not be accurate.

No matter what my app shows me, I want to be able to assess a book’s weight in a split second, and answer the question:

“Is this a book I need to sell for $10, or a book I need to sell for $12 (or more)?” (I’ll explain these numbers in a moment)

Then I check FBA offers, and I’m on to the next book. I don’t want to be forced into adding another step by visually confirming the weight of the book in my app. The more you can get done in the “pre-scanning” phase, the better. That’s always been the case, but it’s even more so today.

Estimating weight is pretty easy. To get a feel for it, just pick up a few books ,then look up their weight on Amazon or your scanning app. It gets pretty simple pretty fast to learn what a <1 pound book feels like vs a >1 pound book.

My price-weight buying criteria

Based on what we just covered, my criteria has become:

• <1 pound: $10 minimum FBA price.
• >1 pound: $12 minimum FBA price.
• “Big heavy book” (e.g. textbooks): $13 minimum FBA price.

If the weight is uncertain, I err on the side of “greater than 1 pound.”

Remember, this is assuming I’m still tripling my investment (i.e. books that are $1 or less). Based on the cost of goods, I adjust the pricing floor accordingly.

Like everything with sourcing books, this becomes second nature very quickly.

Recap on the impact of weight on Amazon FBA fees

To recap, here’s how I used to buy:

“My minimum selling price is $7.50.”

Here’s how I buy now:

“My minimum price for a book I instantly assess as being under 1 pound is $10, over 1 pound is $12, and “big and heavy” is $13.”

New Amazon FBA fees demand new precision.

3. Sales rank criteria

Knowing the demand for your book. This one is pretty simple.

(I’ll cover this at length in the next article.)

4. Risk criteria

In other words, reducing price volatility and depreciation in your purchasing decisions.

Yes these are big words. But the concept is simple: Strategically limiting the purchasing of books that have a high possibility of plummeting prices. The science to this is extremely inexact, but there are tricks to tilt the odds in our favor.

This is the least important of your buying criteria, and you can avoid learning this altogether and still do fine. But this gives you a slight edge.

Risk mitigation is a level beyond simply knowing the numbers on the price you expect to sell your book at. It’s employing an added layer of scrutiny to avoid buying books whose prices are volatile and likely to fall.

This is designed to address one of the biggest grievances of Amazon sellers: You buy a book, ship it in, and the price plummets – never to rise again.

This is probably an entire article in and of itself, but here are three ways (not an exhaustive list) to detect books whose prices are likely to drop:

Risk mitigation move #1: Avoid highly competitive books

Of the three, this is by far the most impactful.

Simple fact: The more sellers there are for a product, the more competitive it is, the more sellers there are to underprice you, and the higher the likelihood of the price dropping.

You can still find plenty of books with 100+ sellers that have $10+ FBA prices. But those are also the offers whose prices are most likely to drop.

As a formula, what would this look like? It’s impossible to impose rigid rules, since this hinges upon sales rank (e.g. the better the sales rank, the more competitive a book can be and still maintain a profitable price).

That said, a conservative seller might begin to avoid all books with more than 50 or 75 offers.

Risk mitigation move #2: Avoid books for which you lose money if Amazon drops their price

Let’s say you have a book. Amazon is your only competitor. You underprice them by 50 cents and barely hit your desired profits.

What happens if Amazon drops their price? You take a loss.

The problem is that Amazon’s prices fluctuate wildly, and you can (almost) never price higher than Amazon and get a sale. So they are the one competitor you don’t want to mess with. If they drop their price, you’re out of business for that book.

Don’t go up against Amazon whenever you don’t have wiggle room.

Risk mitigation move #3: Avoid books that are “on their way out”

It happens all the time: You buy a book. Your qualitative alarms go off and tell you: “This is worth money now, but it won’t be for long.” You buy it anyway, because before new Amazon FBA fees, we had the luxury of being wrong a lot of the time.

Here’s a common example: Travel guides for which new editions come out every year. You can watch these go from a rank of 80,000 to 800,000 in a span of six months, because the demand plummets when the new edition comes out.

Prior to new Amazon FBA fees, you could throw money at books like this and reasonably expect to usually come out ahead. (I once bought close to 100 retired travel guides from a library book sale in Vail, Colorado without a second thought. Today, I might be more conservative.)

In practice this is always inexact. Kind of like predicting stocks, but a good formula might go something like this: Any book in a high risk category (list below), that has an Amazon sales rank inching close to 1 million, and has an Amazon payout that is within 50% of being unprofitable, then avoid or proceed with caution.

Be careful not to take this as gospel. I’m giving you the concepts. Create your own criteria to fit your needs and risk-tolerance.

Examples of high-risk books that tend to fade quickly include:

• Super-volatile categories of textbooks like law books.
• Any book with a year in the title [e.g. 2016 Guide To Casino Conventions].
• Computer books.

The takeaways

1. We have not seen the end of the $10 FBA book.
2. Amazon FBA fees definitely do not mean the end of bookselling.
3. Have firm minimums and maintain them ruthlessly.
4. Higher FBA fees enforce new precision.

That’s it.

-Peter Valley

Endnote: FBA Mastery gets its 15 minutes of fame

Finally I can make my mom proud.

Last week Woman’s World Magazine, with a circulation of 1.6 million, ran the below article on “turning used books into cash.” And FBA Mastery got a shout out.

(If you’re finding FBA Mastery after reading Woman’s World, welcome and sorry for this site’s lack of fudge recipes and Doctor Oz quotes).

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