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:
- Selling price criteria
- Weight criteria
- Sales rank criteria
- 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:
- At least tripling the cost of your book or item.
- 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:
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.
- We have not seen the end of the $10 FBA book.
- Amazon FBA fees definitely do not mean the end of bookselling.
- Have firm minimums and maintain them ruthlessly.
- Higher FBA fees enforce new precision.
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).
“Before we go through each of these, let’s assume you want to maintain this timeless “rule of threes” buying formula:
At least tripling the cost of your book or item.
Maintaining a minimum selling price of $3.”
I’m sure that here you meant a $3 payout, not a $3 selling price. Of course, there are sellers who will sell at $3 even if the Amazon fees are $10, lol.
Peter Valley says
Good catch. Edited.
José Noulez de Miguel says
For me as a Belgium reseller of used books, Amazon made it very difficult for me to sell books. All the English books I can find here are mainly university books written in English by Dutch professors. from time to time I could find some gems that were selling for good prices on Amazon UK. So I fed the beast till beginning of February. Then I decided to do Merchant fulfilment as I have my own warehouse but now my biggest problem are the shipping fees. I I have to ship to the UK I have a shipping price (track & trace) of $11. No option to ship it by stamps as I will surely get claims of “non-received” books. Fortunately I sell 85% on another marketplace which is bigger then Amazon in Belgium and Netherlands and which is selling 90% Dutch books, which is the language we speak in Belgium and Netherlands. So now I sell my English books merchant fulfilled on that marketplace because of the shipping fees being less then shipping to UK. So as long as Amazon doesn’t open warehouses in Belgium and/or Netherlands, Jeff Bezoss is not going to have a cut of my money.
Rebecca Johnson says
Thanks for continually offering excellent posts, to keep your tribe updated.
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).
This made me laugh out loud. Great way to start the day. 🙂
The “Risk Mitigation” scenario is a MUCH bigger problem than are fees & storage costs. A person can have buying parameters that will offset much of the latter, but there’s nothing that can be done about the former, regarding the constant erosion of prices by the mega sellers/idiot sellers. For example, I have a book listed that has an average rank of about 200K. There is only one page of Prime offers, all at $55 and more. But now Flipping Pages has come on with an offer of about $19. I know the answer is to let them sell out; true. But, when this same scenario repeats on hundreds of your listings, then I don’t see any workaround. If you “Have firm minimums and maintain them ruthlessly,” then your books are going to sit forever, to the point where “delayed gratification” becomes “the onset of starvation” due to books not moving, the reason being that the low ballers are going to keep coming in as fast as they go out, each one underpricing you while you “ruthlessly maintain” your minimum. I think FBA has already–not going to–become the “wasteland of worthless books” that you said it would become if sellers kept trying to chase pennies as the dominant selling strategy, which it seems to be.
Thank you for the great info in this article. Your title states that this article is part 4 of a series. I didn’t see any links to parts 1, 2 or 3. I did a search on your website without any success. Also what is the date of this article? I see that the comments are recent so I assume the article is new but if an article doesn’t have multiple comments how is one to assume the date your content was posted. Am I missing something? Please help, I find you website a valuable resource. Thank again
Peter Valley says
The first 3 are directly below this one.
Jordan Malik says
Peter – Ensure you thank Bob W. for getting your mention into Women’s World (He has a direct line, you know, being a key influencer. You thankless soul, you. 🙂
Peter Valley says
I believe most of Bob Wiley’s contacts are actually inside Curmudgeon Quarterly.
Jordan, I was a member of the FB group that he and that Guuchie woman administrate. I referenced Peter somehow in one of my posts (don’t remember now exactly what it was) and Bob instantly informed me that I was not allowed to post anything by or about Peter Valley in their group. What’s up with all that?
Peter Valley says
He hates everyone. But no one more than himself. And his group has tumbleweeds blowing through it.
Del Sipes says
Peter, First, I will say that I have learned much from your free articles about FBA book sales. However, I fear that the ugly truth cannot be changed. $10-$12 is a break-even price for FBA. I do not see the other unchangeable business expenses that should be included in the breakdown, FBA Pro Seller fees, shipping cost, placement services and taxes, to name a few! Other expense might include scanning software, unavoidable customer returns, return shipping and disposal fees. All of us re-donate a few books due to condition slip. Oops, didn’t see that torn page, that water damage, that sloppy green highlighting on page 388! If I presume to earn $10/hr. for my time spent loving on these books, I find that $15 is the bare, naked bottom price.