Part Two in a four-part series on how new FBA fees have changed the
In this article:
- Why
Amazon megasellers may be in serious trouble. - How the megaseller business model has been destroyed.
- Megasellers flee the cheap book game.
I’m getting very heavy in this one. So settle in.
In Part One of this series, I covered every way new FBA fees have affected the average
In Part Two, we’re covering a different angle: How these new fees may be plunging FBA megasellers (i.e. our biggest competition) into crisis.
What new FBA fees mean for lowball FBA sellers
Like I said, I’m getting heavy here. Nothing I’m going to talk about is anything short of existential for our
So here we go…
FBA megasellers now face a literal existential threat.
Consider these facts:
- FBA megasellers make up the better part of our lowball
Amazon competition in the book market. - Until last month, a majority of book on
Amazon were a penny + postage. - The entire
Amazon FBA megaseller business model is built around high turnover & low profit per book. (I.e. “selling books for pennies and making up for it in volume.”) - High book turnover is achieved by having the top spot in the
Amazon listings. - For the majority of all books on
Amazon , the top spot in the listings now results in a negative net profit.
The significance of the last point cannot be overstated. The entire business model of megasellers is now obsolete.
Take an average paperback book on
Now say you’re the average FBA megaseller. Your entire business hinges on high turnover, and having that top spot in the
Major problem here: For the average book, you’re not breaking even as an FBA seller below roughly $5.50. Your entire business was predicated upon getting that top spot, and now instead of making you 10 cents, you’re actually losing $1.
In one day, many sellers may have found that the majority of their inventory was suddenly selling at a loss.
I’m not an
It is virtually certain that FBA megaseller turnover is plummeting
Faced with a lose-lose scenario of either forfeiting the top spot (i.e. cheapest
Don’t take my word for it. If you’ve been selling books on
Go back and look at those same books on
The FBA megaseller business model has been destroyed.
I’m a militant proponent of manually repricing all medium-to-high demand inventory on
Fact: Third party software (including scanning and repricers) cannot “see” any FBA offer that’s not priced in the bottom twenty. You simply cannot tell a repricer to match the lowest FBA offer and have it do this with accuracy the majority of the time. It’s simply not possible.
A lot of sellers are in denial about this, but its not a conspiracy theory. It’s a limitation of
Now consider that you cannot claim the top spot (i.e. merchant fulfilled price + $3.99 shipping) for the majority of books on
Now consider that with the new fees, it is extremely rare for an FBA offer to be priced in the bottom 20.
What’s a megaseller to do?
Your only option (as I see it, not being a user of
- Price $3.99 higher than lowest MF price for all books that will return a positive net profit (i.e. any book with an MF offer of $1.50 or more, roughly).
- Price all books with a MF offer below $1.50 at $5.75 (or whatever, just to return a few pennies of profit).
Pricing rule #1 can be effective. With #2, its a different story.
Because now
Remember that before new FBA fees, megasellers could gleefully price a flat $3.99 above everything and return at least a few pennies of profit a majority of the time – even on penny books.
No more.
I chose two of the bigger FBA megasellers and did a little spying on their
Warning: What follows is not a thorough scientific look at new
A look at FBA megasellers RentU and Apex Media
Here’s how their pricing has changed since new FBA fees were implemented. And its extremely revealing.
RentU: They have jacked up their prices on all their sub-$10 books (that I looked at) to $35 and more.
Apex Media: They responded similarly, only more dramatic. Apex has surged prices on most of their sub-$10 books to $200, $300, and more.
Also noteworthy: Apex Media did not have the top spot for a single book I looked at (note I only look at a small sampling). It’s as if to say: “We give up.”
Yes, all of this is extremely weird. So what’s going on here?
When you raise your
- They have no intention of selling their books selling on
Amazon . Instead, they’re deliberately making their prices not competitive, and instead are selling these books on other channels and usingAmazon to fulfill the order. - They raised prices to effectively hit the “pause” button on the cheap book side of their business, stop the hemorrhaging, and buy time while they take stock of what to do to cope with new FBA fees.
Ultimately, it appears many FBA megasellers are effectively out of the of the sub-$10 book game. Very good news for us.
What’s to come
In the next article (posted Monday), I will use hard data I’ve obtained to prove that new FBA fees have caused a massive number of
Get ready for an FBA Mastery exclusive.
-Peter Valley
Also, claim your free book:
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They’re fine and even thriving with the changes. Most “mega sellers” are/were doing their own fulfillment. This includes a lot of so-called “FBA” offers that are actually “seller fulfilled Prime”. Books that were $4 are now generally $5.99 MF with free shipping. That is about the break even point for someone shipping via media mail and paying for a mailer and about $0.25 or so for the book, but for volume sellers who get massive shipping discounts, it could be $1.50 or even more profit per book.
Look at it this way: On March 1, the MF fees went up by $1.05. This is because of the $0.45 increase in VCF and $0.60 because the 15% commission now applies to the shipping costs which used to be fixed at $3.99. Now that MF sellers can set their own shipping rates, I have seen many sellers switch to free shipping and the standard MF “Floor” price currently seems to be $5.99.
I said all this to point out that this is a market increase of $2 per book, but the fees only increased by $1.05. They are making $0.95 MORE profit per book on the low end stuff than they were before. That’s hardly a failed business model!
1. What you’re saying is accurate however only applies to FBA megasellers doing seller fulfilled Prime, which as I understand we’re seeing very little of.
Interested to get a list going of megasellers who actually use this model. Amazon is very stringent about who they grant this permission to, and most megasellers don’t make the cut with their 92% positive feedback.
2. Even doing seller-fulfilled Prime and enjoying reduced commissions still doesn’t get them the top spot in the listings anymore, which is necessary for turnover and central to their business model. For the few sellers doing seller-fulfilled Prime, I don’t see the extra $1 offsetting the plummeting turnover.
Most Megasellers have 94-96% from by experience in almost 2 years OA book buying on Zen. And you ONLY have to sell 50+ books a month to qualify for seller prime, hardly out of reach for ALL megasellers.
Apex Media has 98%. RentU is currently 91%.
The crap bookjackers who dropship off amazon like amjit normally have crap feedback, but even amjit i noticed got their feedback up to 95-96% with normal asking for feedback, etc. They live in my area and I left them 2 neg’s after shipping me beyond acceptable books. But they are a small time bookjacker. FYI – they are still making a killing on amazon doing this pulling in 100k+ a month in revenue = anyone know a good programmer they can refer me? lol.
You also fail to understand the BIG picture of the megaseller or dropshipper. They make their money on avg. ASP NOT penny books or $6 books. Their average ASP is most likely $8-10+ overall. They are still making money as most MF everything.
Everything I describe is predicated on the assumption that the majority of megasellers inventory is (was) in the penny book realm. Purely observationally, that’s where most books on Amazon are – a penny before Feb 22nd, 25 cents to 50 cents now.
There is still big business in selling books above the $5.99 floor, but for the penny book megasellers, the better part of their business has been beneath that. Until now.
the comments here should be epic…
I don’t really care about whether or not the mega sellers are doing better or worse now than before. What I care about is whether or not very small individual sellers like myself can be successful in this new environment. My weekly sales are now not much more than my sales for a couple of days were before. I’m refusing to drop my prices on everything, and in fact have raised my prices on a lot of my small (500+) inventory. I’m not sourcing as much now, because I have to wait for enough books to sell so that the income can “catch up” with the outgo. I definitely don’t want to panic and just exit the business, but I’m hoping that that “delayed gratification” you talk about a lot in your Pricing Mastery course doesn’t morph into “starvation,” lol. I gotta keep having faith that at sometime my books are going to sell, and at a profit level that makes the entire business worth fooling with in the first place.
I feel your pain Terry! My price competitiveness % on my seller account went from an average of 96-98%
to 63-65 % almost overnight. Upon conducting an extensive inventory review, I see a ton of books selling at a few pennies above the Amazon fee to selling at a loss. We all know that due to ltsf many sellers dropped their pants to unload inventory…but they never re-adjusted the pricing on the books still in their inventory. Couple that with many sellers not reflecting new fees in their selling prices and I’m seeing selling prices at an all time low. It wont be long before sellers start un-loading inventory again due to next round of ltsf. It appears to me that the profitable selling windows are getting narrower and narrower.
Any thoughts?
lol..i just checked my price competitiveness…29.8%…and i manually reprice two pages every other day..i just refuse to lower prices..i can wait..shifted from 90% books to 40% books..and damn selective about those.
I don’t think I’ve ever checked my price competitiveness before, but just did in response to your post. Mine’s at 77% right. I try to manually reprice about 75 books per day on a rotating basis. With a current inventory of less than 600, I can go through all of them in about eight days. Today, I have zero sales again; perhaps because it’s Easter, I don’t know. Anyway, I raised the price on several, but also had to lower the price on several because of Amazon’s lowering of their price. I’m 100% books, except for the occasional new board game or puzzle; just don’t have any interest in anything else. I, too, refuse to lower my prices to the point of a sale meaning almost nothing. Why even be in the business if that’s all you can hope for?
Lol, I meant to say “Mine’s at 77% right now.”
Is it just me or is Amazon undercutting us more and more? I still don’t get all the FBA sellers at 7.99 or less. That’s break even at best. 9.99 is my minimum unless it just went in, then it’s 11.99 for 90 days. Have many books dead in the water because of that but am waiting it out for now.
I also don’t get: no competition and 8.99 FBA. That’s as crazy as the person putting it at $2,000 because they are the only one. Makes no sense at all. If I have no competition, I go to $24-34. $15-22 on a paperback. Higher on vintage is great shape.
It’s not just the megasellers pricing below cost. It’s the newbies, thinking the sales will lead to quick feedbacks. There are no quick feedbacks and that sort of sloppiness leads to mistakes, which leads to bad feedbacks, which can wipe out a newbie with one stroke.
My payout numbers are not matching yours. My payout for a $10.50 book is only around $2.20. This is a problem because in my area books cost $1-$3. So my minimum has become $12.00. For what I’m seeing, this is where a lot of other sellers are as well. Now we just have to convince the buyers to pay $12 for a book that they used to get for $9.
Weight is a big factor. The 9.25 / $3 payout figure is for a small-ish paperback, like Power of Now.
Weight for sure can make it 4.50 or 2.25 payout on $10 book. Frustrating. . After a month of not paying more that .25, we bought some at $1 again recently. Staying away from most $1 or more library sales. I think they need to start offering quantity discounts.
So, with all this, I am curious about how to interpret my scanning app. I use FBASCAN, same as Peter, and the last article mentioned the FBA column now being essentially useless.
What do you recommend when making a sourcing decision, from locations that generally charge $1-$2 per book? What should the new parameters be?
Look for this in Part IV, next week.
Peter, you’re the only one who really speaks our language. Whether all agree with you or not, your columns are must-reads.
Thanks Dana. It’s a lot more interesting when people don’t agree.
Sorry Peter, you missed the mark on this one. Robert is spot on, $5.99 is the new $4.00 book.
Your sample of only those two sellers was an odd choice, here’s a short list of megas still riding the lowest rung and killing it.
Better World Books
plumcircle
Green_Earth_Books
HPB (there are many)
Goodwill (again many)
Second City Books
Silver Arch Books
Yankee Clipper Books
Sierra Nevada Books
New Chapter Recycling
BooksByThePoundUSA
Jenson Books
Thanks for this list. I pulled those two arbitrarily because RentU is the most consistently annoying for Zen Arbitrage members (hear complaints about them daily) and Apex is among the longest running FBA megasellers.
Point stands that $5.99 will not get them the top spot anymore, turnover must be plummeting, and they must be freaking out.
Any time your business has only one outlet to sell through you are at high risk.
The one outlet owns you.
At one time I owned junkyards and that was one of those situations. When the price of steel crashed in the late nineties due to some evil federal political shenanigans I had to just park the trucks and lock the doors on a really going business.
I will NEVER again have a main source of income that relies on one source to get paid. Side gig or add-on income? Yeah, I’ll go for that, but not for the basic survival income.
Side note: Years ago, when Amazon was just getting started, my sister and Jeff Bezos ran in the same social circles. Mr. Jeff has zero or less interest in your, or any other human’s welfare, as his company policies demonstrate.
Dave—Thanks for your comments–Interesting!
Peter — Thanks to you as always.
All the sellers you mention are non-fba sellers with the exception of Jenson Book (who fulfill both ways). They just all changed their shipping prices to $0.00 and raised the prices of the book price. What was once $2 is now $5.99+free shipping. However, they are not Prime sellers and aren’t really our direct “megaseller” competition.
The sellers Peter samples are both FBA sellers and two of the most prolific. (seemed decent choices to me).
And an fyi for those that don’t know. All these (and more) are the same megaseller (thriftbooks)
Green_Earth_Books
Second City Books
Silver Arch Books
Yankee Clipper Books
Sierra Nevada Books
Good catch. How did I miss that point.
And thanks for that list.
Textbook seller here.
The mega-seller every used book seller should be most worried about (that won’t be hurt a bit by the new fees) is Amazon warehouse deals. They compete on a majority of FBA textbooks published in the last 5 year (and if they aren’t currently competing on a listing, just wait until August/January rolls around. When the lowest FBA price is $30, the habit is to drop 100+ copies on the listing for something like $15-17 and instantly make any given title unprofitable (for those of us who pay for our inventory at non-thrift-store prices).
I have a serious theory that Amazon’s plan is to control both the new and used book market within the next 5 years. Amazon warehouse deals already gets access to huge amounts of inventory through your “lost and damaged” books, for which Amazon reimburses you much less than the actual FBA value. Additionally they get the books from the “trade-in” for Amazon credit program. They also have all the formerly “new” books sold by amazon that were returned to Amazon. Amazon has aggregated all the data they need to know everything about every book title out there that actually sells. They know every average sale price, they know how many copies sell per hour/day/week/year. With this knowledge collected on the back of their 3rd party sellers, they will begin to push out 3rd part sellers with ever-increasing fees of which this is the first BIG step they’ve taken.
Feel free to correct me if you think I’m misinformed on any points.
With all of the changes that have been made, I have yet to see anyone talk about the buy box. I am seeing more and more MF offers with free shipping taking the buy box from FBA offers. This is an attempt from Amazon to reduce the number of people sending in FBA books.
My price competitiveness was hovering around 95 percent and now it’s around 75. My sales have taken hit and yes I realise Q2 is a slow quarter compared to the others. Right now I’m waiting this out. I have 4800-5000 items in inventory at all times and was selling 500-700 items a month.
Peter I would really like your take on this.
Greg wrote: “With all of the changes that have been made, I have yet to see anyone talk about the buy box. I am seeing more and more MF offers with free shipping taking the buy box from FBA offers.”
Thank you for your comment. That is what I see also and why I listed those MF sellers. We can no longer price by what is the going rate FBA. Now we have to compete with MF sellers prices, problem is, we have the higher fees to contend with.
Not sure I’m seeing the point re: how new fees mean we’re now competing with merchant fulfilled. All the same benefits to Prime still apply, all the same drivers for getting Prime sales over MF still apply.
I think most people are looking at everything strictly in relation to numbers, and not considering all the points related to “the psychology of the Prime subscriber” that you talk about in your PM course. I’m not a Prime subscriber, and would still not order anything off Amazon from a merchant seller, no matter how much lower the cost than the FBA or Amazon’s new offers are. Unfortunately, this is also the reason that I don’t do book OA.
Before the new changes, and I may be wrong, it seemed that the majority of the time prime offers were taking the buy box. Now MF with free shipping is taking the buy box.
While I realize some may contend that this is irrelevant as prime and MF are not the same, how will the average consumer respond going forward? Does this deteriorate the perceived value of prime 2 day shipping when the price differs 20-50 percent? Free is a powerful consumer motivator…
Whether or not people are willing to admit it, the buy box is important. If the buy box is going to a book that is 14.95 with free shipping and the lowest prime offer is 34.95, which one is more likely to be bought?
As I said before I am waiting this out as I have spent entirely way too much time, money, and energy on building my business. I hope I am wrong, but I would be willing to make a reasonable bet that in a year you will see the value of prime inventory go down and MF inventory with free shipping go up strictly on a cash flow basis….
Peter said, “Not sure I’m seeing the point re: how new fees mean we’re now competing with merchant fulfilled. All the same benefits to Prime still apply, all the same drivers for getting Prime sales over MF still apply.”
I think people are misspeaking a little because several things changed on Amazon around the same time. Merchant fulfilled offers are now taking the new and used buy boxes with increasing frequency due to Amazon policy changes, AND we FBA sellers can’t lower our prices enough to compete with them and still maintain any profitability.
I would imagine the loss of the buy box will affect us greatly. I wonder how many buyers look carefully at how long shipping will take and whether or not the offer is Prime. As long as it’s in the buy box and has free shipping, I bet this will tip things in favor of MFN sellers.
I would love to be proven wrong, but I’m not feeling great about all of this right now.
I don’t know about the “average buyer”, but a percentage of buyers will defect to the new free shipping offers. Some buyers are sheep and can be led. When I list FBA books. I price them to sell, according to BSR over time, price and condition. lately I have had buyers purchase my books during FC transfer. These books were clearly marked as being on Back Order and unavailable for shipping for 7-10 days. They bought the books and also purchased next day shipping. Duh! Their negative feedback destroyed my 100% positive rating. I contacted them with an explanation but didn’t even get a reply. Took a 20 minute live chat with seller support to get it fixed. It changed immediately on Seller Central, but took weeks to show up on product listing pages for some reason. This brings up another interesting point as well. Why does Amazon see the need to take a $15 book, that sold as soon as it went active, and take it on a 7-10 day FC to FC excursion around the country at the expense of my customers satisfaction and my reputation as a seller? How do I beat that?
Peter wrote: “Not sure I’m seeing the point re: how new fees mean we’re now competing with merchant fulfilled. All the same benefits to Prime still apply, all the same drivers for getting Prime sales over MF still apply.”
Not sure the same drivers for Prime are still present with the perception of free shipping in MF offers. We know the shipping is built in, but psychologically free shipping means the same as that portion of the Prime benefits.
That is why I think the following has occurred with my sales. If the FBA pricing model is followed, my sales are way down. That used to work before the new fees kicked in, but no more. Now, to keep inventory turning at the same rate (pre-fees) I find that I have to have my prices competitive with MF offers.
The difference now, as previously stated, my fees are higher, but I have to compete with the lower rung to keep sales flowing. That is my experience anyway, would love to know if others are seeing this too.
Jay, I completely agree with you and I really appreciate your reply. On Amazon forums and some blogs they are only discussing the fee increases without the fact the game has completely changed. In order to drive sales prime offers are going to have lower prices to compete with MF free shipping…which hurts because of the fee increases.
What we may have just witnessed was the FBA bubble burst, but only time will tell. Amazon has made it loud and clear that they are willing to reward MF offers over FBA…which also means less crap in their warehouses and higher costs to those who continue down the FBA path.
Hi Peter, Interesting article and comments from others. On a different tack, I tried clicking on your links down the right side of the article to download the various reports you offer but they all go to a page that has nothing to download. Are the links out of date?
Thanks for your help
Just fixed it, thanks.
can someone explain this to me? the buy box is $7.75 PLUS $3.99 shipping….my price is $13.89 FBA..so they can charge shipping and still get the buy box?
Finding the Sacred Self: A Shamanic Workbook [Jun 08, 1997] Gregg, Susan …
1567183344
762,746
Books
–
$
13.89
+ $0.00
$ 7.26
+ $0.00
Match price
$ 7.75
+ $3.99
The $7.75 + shipping offer is new; yours is used. Wouldn’t that be the reason?
that could be the reason Terry..but, still new with shipping in the buy box?
What I’m seeing is $7.75+shipping has the Buy Box (that’s only given to New, never used, offers). There are no New FBA offers, so there’s no FBA competition for the current buy box offer.
The “Buy Used” box (which you’re competing for), shows the lowest FBA used offer: $7.26.
(btw, depending on your location, every person may not see the same offer in the buy/buy used box)
Whether the megasellers are in crisis or not, they sure are making my small scale book-selling hobby-business on Amazon fairly pointless. In fact, I am so fed up, I am even undercutting JensonBooks & co wherever I can, just to move some inventory. I think it is mainly the changes to LTSF that these megasellers are pricing even more aggressively than before. So now due to the changes to the fee structure there is no point acquaring anything that has a sale value below 12 (in some cases 15). This has seriously limited the number of books to be acquired that are profitable. Also, now there is every possibility that a week after listing a book for 15 a megaseller comes along and lists it for 8 with a host of others to follow – goodbye profits. And due to the LTSF in media, sending long-tail books in to Amazon might not be worth it (especially with the aggressive pricing on behalf of the megasellers).
I guess for you and some others this is not such a big deal, because income is streaming also from other activities related to selling books on Amazon. However, as for myself (and I can only speak for myself), recent changes have made me look elsewhere for additional income beside my main activity.
I don’t mean to offend anyone, but I am seeing a sense of entitlement in some posts here. What Amazon has done is to level things between the BMVD categories and the rest of the catalog. There is no magical reason why an FBA offer should own the buy box over an FBM offer. Many guess as to the secret formula used, but Amazon simply says that the box reflects value to the buyer. If that means MF, so be it. As a buyer, I couldn’t care less how the order is fulfilled.
Sure, this means some of the Prime premium will decline. The one constant is change and sellers adapt or perish.
I just purchased 2 pallets of of NEW books. Almost all of them are ranked better than 80,000. I got about 1500 books for $350 from a local liquidator. I thought it was a good buy. All kinds of titles, all kinds of genres.
I was wondering almost NO FBA Sellers were competing against Amazon. I thought it was a good sign and I had a shot. I’m realizing now while I sit here with 2 pallets of books in my garage, and processing tons, that I may be SCREWED and these will never sell.
Please someone, tell me I’m wrong. Please tell me I have a chance.
How does the fees affect online trade arbitrage?
Is it even viable any more?
Ans Is selling on amazon even worth while.
With all the changes on amazon, does trade-in arbitrage still work?
It’s reduced the number of profitable books overall and eaten into profits, however online book arbitrage was hit less severely simply because the selling prices tend to be higher.