Part Two in a four-part series on how new FBA fees have changed the
In this article:
Amazonmegasellers 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
Amazoncompetition in the book market.
- Until last month, a majority of book on
Amazonwere a penny + postage.
- The entire
AmazonFBA 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
- 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.
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.
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 using Amazonto 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.