Step-by-step formula for intelligently pricing used books on Amazon.
Video: The Amazon book pricing formula
Sourcing and (re)pricing are the only two things that really matter in any Amazon business. But pricing is the most delicate of the two.
Pricing involves so many variables, it’s a lot easier to get it wrong than it is to get it right.
In this article, I’m going through the whole pricing process, and how to analyze a book to set the best possible price.
What is the “best price” for a used book?
I would define the “best” price as follows:
“Getting a sale at the highest possible price, within your desired time frame.”
Most Amazon sellers emphasize one side of this equation too much, at the expense of the other
Mistake #1 is the seller who prices their inventory too high. The result is that while they might have a higher “average selling price” (ASP) than most sellers, they also have a lower “sell through rate” (turning their inventory over slower).
(Note: Mistake #1 isn’t ideal, but this is a much better problem to have than the next one)…
Mistake #2 is the opposite: sellers who desperate price all their inventory to sell as quickly as possible, matching (or underpricing) the lowest price on everything, and frantically dropping the price daily (or multiple times daily) until an item sells.
Don’t be either of these sellers.
How to price a book in eight steps
You have a book. You’re ready to list it for sale on Amazon. You know blindly underpricing the lowest offer is a road to ruin. You see dozens of competing offers. How do you set a price?
Let’s go through the whole process.
Step #1: Know your outcome
Yes, this matters.
You need to establish a pricing strategy upfront.
- Are you a volume seller?
- Are you a margin seller?
- Are you in the middle?
One way to decide is to answer this question:
“In regards to sourcing, which do you run out of first – money or inventory?”
If you have more potential inventory than you do money to buy it with, then lean towards pricing for volume selling. This will mean a higher sell-through rate, but lower average selling price (ASP).
If you have more money to spend than you do inventory, then lean towards pricing for higher margins. This will mean a lower sell-through rate, but higher average selling price.
Or, play it safe and aim for the middle.
Just choose a pricing strategy first. It will make the next 7 steps massively simpler.
Step #2: Is the book profitable by any measure?
Look at the book you’re ready to price. The first questions to ask here are:
- Is this book profitable if I matched the lowest Merchant Fulfilled (MF) price?
- Is this book profitable if I matched the lowest Fulfillment by Amazon (FBA) price?
- Is this book profitable if I priced it anywhere in the lowest five MF or FBA prices?
The answer might be “yes,” but that doesn’t mean you’re in the clear yet. A book can be profitable for one fulfillment type or time horizon, but still not profitable for you (more on this in a second).
If the answer is “no” to all of these, in most (but not all) instances, you can stop here. This is usually a book you shouldn’t be selling.
If the answer to any of these is “yes,” continue…
Step #3: Is the book profitable for your fulfillment channel?
“Fulfillment channel” is just a flamboyant way of saying: “Merchant Fulfilled or FBA”?
Whichever way you sell, look at the lowest 5 offers for your channel. If you priced anywhere in the lowest five offers for your fulfillment channel, is it profitable?
(Note: If you’re an FBA seller, you cannot rely on your scanning app or listing software to show you the lowest five FBA offers. All apps have blindspots that they don’t tell you about. Very often the FBA column will be blank, or only have one offer – then you click over to Amazon and learn your app was lying. It is very important to double-check the data in your scanning app or listing tool).
Now hold that thought. To determine how we can set our price, we need to look at the Amazon Sales Rank…
Step #4: What is the Amazon Sales Rank (aka “BSR”) of the book?
The Amazon Sales Rank will settle two questions:
- Which price we want to compete against – Merchant Fulfilled or FBA? (relevant to FBA sellers only)
- How much higher above the lowest priced competitor can we price our book (if at all)?
The higher the demand for a book, the more you can price above the lowest-priced offer, and still get a sale.
However you analyze books (whether a scanning app, listing software, or directly on Amazon) – look at the Amazon Sales Rank figure.
(I guess I’m old school, but I still call it “Sales Rank” when newer sellers seem to prefer “Best Seller’s Rank.” Whichever you prefer.)
The concepts for the decision you’re about to make are important to understand, so read this next section several times if you don’t get it at first…
FBA sellers: why Amazon sales rank matters when setting a price
This number will determine whether you set a price that competes with ALL competing offers, or just other FBA offers.
There is a level of demand below which a book is not selling often enough to justify pricing to compete with FBA offers only. When the demand for a book (or any product) is low enough, may want to price to compete with ALL offers – or risk never getting a sale.
The best way to explain is as follows: Consider a hypothetical scenario where a book has an average Amazon Sales Rank of 3 million, and gets one sale a month.
And let’s say the lowest MF offer is $15, and the lowest FBA offer is $25.
Now let’s just make up a number, and assume that only 1 in 10 Amazon customers is willing to pay $10 more for a Prime-eligible (FBA) offer.
In this theoretical scenario, if you match the lowest Merchant Fulfilled price, you’ll get a sale in less than 30 days. If you match the lowest FBA price, you’ll get a sale in less than 10 months (10% of customers being willing to pay your FBA premium price).
You’re still making some profit at the $15 sales price, and you’re getting a sale (theoretically) 90% faster. So with a book ranked 3 million, you probably want to price to compete with all offers (not just FBA). Which in this case would mean listing it for sale for $15.
Note that all of this is debatable, and many FBA sellers will price in an “FBA premium” for all their inventory, no matter the Amazon sales rank.
Merchant Fulfilled sellers: why Amazon sales rank matters when setting a price
This is similar to the previous concept, but easier to understand.
Amazon Sales Rank will inform your decision to price your offer at or close to the lowest price offer, or price higher and wait for a sale.
The higher the demand, the higher you can price the book and expect to get a sale – eventually.
When we get to Step #7, Sales Rank is going to be the biggest factor in which of the 7 pricing options you choose (more on that in a minute).
How to use Amazon sales rank to set a price
What is the Sales Rank above which an FBA seller should plan on ignoring competing FBA offers, and matching the lowest Merchant Fulfilled?
I’m going to answer specifically, but I have to make clear that there is no “right” answer. No matter what number I give, TONS of Amazon sellers are going to disagree that it’s either too high or too low. It’s impossible to win here, so I’m going to give a nice round number.
If the Amazon Sales Rank is worse than 1 million, match the lowest overall price.
It was painful to type that sentence, because it’s not that simple. But if you want a nice round number that doesn’t consider any other variables, that’s the one I would give.
Step #5: What type of book is it?
If you’re a brand new Amazon seller, skip this step. I’m concerned about over-complicating things for you while you’re already overwhelmed with learning other aspects of pricing (not to mention everything else there is to learn about running an Amazon business).
If you have at least a little pricing and Amazon selling experience accumulated, then proceed…
There are types of books that you can price more boldly than others. And there are types of books you should price more conservatively than others.
In the books category, the simplest delineation you can make here (if you’re an FBA seller) is:
- Everything else
Textbooks can command a larger FBA premium, and textbooks should be priced differently than non-textbooks.
I don’t want this to get too complicated, but here are 6 book categories you might consider when setting a price:
- New books.
- Books slated to become obsolete quickly
- Everything else
Each of these can slightly influence how you set a price, when you’re reviewing competing offers and trying to decide the best pricing move.
Time-out to recap
So far in this process, you’ve decided:
- What competing offers you’re pricing against.
- Roughly how aggressively to set your price (based on the type of book)
These two things make what comes next much easier.
Now it’s time to look at competing offers and set a price.
Step #6: What is the Keepa pricing history of this book?
You might assume this is the most important factor in pricing books. But it is actually the least. Why is pricing history only moderately relevant to setting a price?
Because the past is usually irrelevant to the present. You set a price based on the current competitive landscape, not what has happened historically.
This is even more true if you’re an FBA seller and only competing against other FBA sellers. Keepa’s FBA and Buy Box data is spotty, and you won’t ever have the full picture.
For these reasons, I only look at pricing history in the exotic scenario of a low demand book that has a VERY small number of competing offers (a few at most). In these instance, I will investigate whether a book has historically sold for much more than it’s listed for now. Then I’ll price accordingly and expect to wait awhile for a sale.
For most books, I’m not even looking at price history charts.
Step #7: Choosing a price for your book
You have 7 options when setting a price. Which of these you choose is primarily influenced by the Amazon Sales Rank. Beyond this, the type of book and price history can be additional (but less important) factors.
Here are your seven pricing options:
- Match lowest price
- Price against 2nd lowest
- Price against 3rd lowest or beyond
- Pricing against the Buy Box
- Setting your own price (below all competition)
- Setting your own price (rare – when there’s no competing offers)
- Pricing against Amazon’s offer only
Notes about each pricing move
Match lowest price: Most inventory that has medium-demand and is selling steadily but not multiple times a day.
Price against 2nd lowest: Most inventory that has medium–to-strong demand (i.e. 1 to 0.5 sales a day).
Price 3rd or beyond: Apply to high-demand items.
Buy Box: Anchoring your price to the Buy Box is a personal choice, that has pitfalls. The Buy Box is very fickle and probably over-emphasized (at least with books).
Setting your own price (below all competition): When the lowest price is “unreasonably high.” This is a subjective assessment. Note that this is usually justified only in rare scenarios.
Setting your own price (rare – when there’s no competing offers): This is an opportunity to price an offer very high, since you are the only available option. I will books like this at a minimum of $25 and a maximum of $499, based on how urgently I feel the buyer will need the book.
Pricing against Amazon’s offer only: When Amazon is the only competitor. Amazon’s price is the ceiling. Usually price a dollar lower (or more).
Step #8: Commit to a price, list it, and move on
There’s no such thing as the “perfect price.” Despite the most diligent analysis, at the end, pricing is always a guessing game.
Set your price with no regrets and move on to the next book.
Why small pricing decisions have big impacts
Small tweaks to pricing strategy have compounding impacts on your revenue.
One small adjustment to pricing strategy that makes you an extra $50 a month, will mean thousands of dollars over your Amazon selling career.
Ten such tweaks can have a massive impact on your business.
Take note if your books are selling too slow (you may be pricing too high), and if books are selling too fast (also a problem, indicating you’re pricing too low).
Learn from what you observe, adjust your strategy, and reap the profits.