The incredible power of “pricing leverage”: Why FBA sellers can price higher and still get sales on Amazon
One of my early motivations for launching FBA Mastery was to reverse the tide of Fulfillment by Amazon sellers pricing their inventory way too low.
Specifically, I wanted to educate FBA sellers who are using a conservative pricing strategy where they everything to match the lowest Merchant Fulfilled price, in a desperate attempt to grab the top spot.
This is shortsighted, and will cost any Amazon seller lot of money. A lot.
As FBA sellers, we are bestowed with the ability to price our inventory higher than everyone else, and still get sales.
What FBA sellers must understand about pricing
It still blows my mind that many Fulfillment by Amazon sellers have not figured out two things:
- FBA sellers are pricing their inventory for Amazon Prime subscribers ONLY – NO ONE ELSE.
- Amazon Prime subscribers will pay WAY WAY more for an FBA offer. Way more.
Here’s a hypothetical scenario: An average paperback ranked 150,000, major publisher, non-textbook, selling for a $5 merchant fulfilled, no FBA competition. What do you do?
The short sighted Amazon seller would match that $5 price (+ shipping cost) to get the top spot. And they’d be happy with a payout of 5 cents (or whatever it is).
The Fulfillment by Amazon seller who sort of gets it might price the book at $9, having a superficial understanding of Prime subscribers being willing to spend “a little” more for an FBA (Fulfillment by Amazon) offer.
The ability to price higher as an FBA seller is what I call “pricing leverage.”
How I price my FBA offers
How would I price in the above scenario?
I’d sell that book for $15, every time. Maybe more.
And if it was a textbook – even more.
I probably have close to 1,000 books in the $3 to $4 Merchant Fulfilled range, listed at $11.95 and up FBA.
And I sell a dozen or more of these, every day.
These are the prices Amazon Prime members are willing to pay – if you let them.
-Peter Valley
PS: My Pricing Mastery course
I have to mention I have an extensive video course on maximizing your profits through superior pricing: Pricing Mastery.
Hi Peter,
Great information on this site; I’ve really enjoyed it, and learned a lot.
Question for you, regarding this particular post – I already sell FBA, and one thing I run up against is books that are priced very low FBA. How do you compete against this?
If you had a book that was priced at 3.99 (or less) by another FBA seller, would you still list it for 9.95? What if there are multiple sellers? Your opinion on this would be greatly valued!
Best,
Avery
Avery
There’s not much you can do about lowball FBA sellers. If an item is ranked very well (roughly 30,000 or better), depending on my mood I may acquire it, price high, and wait for the lowball seller to sell out. Othewise, I don’t try to compete and move on.
Hello Peter,
You have great information. You are very tough on us new FBA sellers. I have priced low and left money on the table out of ignorance of not understanding FBA not because i am trying to make this another job. I buy your ebooks to get help not to be bashed for trying to get a sale. With your information i will get the sale with a larger price.
All the Best
Misty
Peter, I started part-time about 2 months ago & have built a FBA inventory of about 1000, mostly books. I am averaging about only 1 sale a day and about $10 profit per sale. I have probably too much long tail stuff, so I am trying to focus from here out on rank under 1 mil and quicker turnover. I pretty much price stuff as you talk about here in this article, every once in awhile putting something at $6 – $7 when there are a bunch of FBA sellers. My questions are: 1) almost every listing has lowball FBA’s, sometimes many – do you have a criteria for listings you might avoid if there are a certain number range of lowball FBA offers? 2) If Amazon has listed, do you even bother? 3) What % would you prefer or recommend to have in long tail vs shorter turnover? 4) Based on your article on doubling your business (even though I am only 2.5 months in) I am aiming for inventory of 5000 by end of year, estimating 200 sales per month (4% of inventory per mo.) at say $8 profit per sale, would give me the additional income I need for now. Any comments or recommendations would be great. I am buying your new book today, and I have really appreciated all your articles and have been inspired by many of them. Just last week I dropped in on a small local library, that had a whole room of books for sale, after reading your article about the same. Thanks again,
Ed
Like Ed, I wonder how many FBA lowballers are too many? For example, if a book is ranked 500K or less, is 5 6.99 FBAs too many? 10? Do you still list at 9.99? Or pass….
It all comes down to the sales rank. If a book was ranked 1,000, that’s not too many. In most instances, it is. Demand is what determines how many is too many.
If you have 5,000 items listed you should be selling a lot more than 200 per month. More like 20 – 30 per day.
I would disagree with this, because it depends so heavily on your FBA pricing strategy.
I’m assuming you mean selling the same title, but not that you would buy the penny book to do it. Just that the book you’re selling is going for a penny. Just clarifying since I saw another FBAer advocate buying Amazon books for resale (while admitting we’re not supposed to).
Buying penny books to resell FBA is a great practice and in no way is it against Amazon’s rules.
Peter, I purchased a bulk lot of books, most of which are in good shape. They ended up costing about 5 or 10 cents each. Since I got them so cheap, would you list the ones with high (bad) rankings anyway and see what happens, or cut it off at a certain rank? What would be your cut off point? Watching your DVDs, there’re great. Thanks.
Sounds like a great deal Russ.
Personally, I don’t price more than a flat $3.99 higher than the lowest merchant fulfilled offer for any book ranked worse than 1.5 million, and keep the price to $7.25 or more. That’s my formula. It’s a time cost/benefit equation for me. Make sense?
Hi Peter, How many merchant fulfilled penny offers would make you hold off from listing a book FBA? For example if the book is ranked 200k and there are 30 used merchant offers at a penny and 10 new merchant offers at $7 but no FBA offers, would you send it in to FBA and list used at $9.95?
Absolutely. Since you’re targeting Prime subscribers only, the # of MF offers is totally irrelevant.
Your articles and videos have always been inspiring, but I’m angry that you always, without fail, overstate profit margins. It’s incredibly misleading. There is no way you can profit 60 cents FBA from a 3.99 book sale. That may only be true if your book was free and your book weighs less than 6oz. Did you forget inbound shipping costs and fees? I just had to point this out because I am very unhappy about the DVDs I’ve purchased from you that kept overstating margins. I bought it to expand my existing business, but right away, I knew what was happening when you kept mentioning you could profit $2-3 from a $7 book sale that you had bought $1 for. Incredibly overstated even if it was made in 2015, the fees still wouldn’t have allowed you to profit $3. This makes a huge difference in what is available when I go out sourcing. Misinformation makes me so angry.
Dude, relax. This article was written in 2013. Fees have clearly gone up in the last 3 years.
And payout is NOT net profit. Big difference. So chill out.
I have been selling books on Azon since 2013, converting to all FBA in November of 2014. In that time I note that there are many more FBA offers than 18 months ago. Ok, so be it. What I don’t understand is how so many of these sellers are willing to price at EXACTLY the same price as MFN orders – on some cases, as mentioned, even at $3.99 – there is NO payout in selling a book FBA at $3.99…
These clowns are destroying any seller benefits to FBA if this trend continues – and I see no reason that it won’t. Peter, what are your thoughts about this sad state of affairs?
Maybe a lttle off topic for this post but I need to know…
I am currently not an FBA seller. A friend of mine was an FBA seller and eventually went back to MF because he did not like his inventory split to severl warehouses and the requirement to comply with each state regarding sales (including collecting taxes for the state that warehoused his inventory). Is this accurate, if so how do you minimize all the red tape?
The split warehouse issue is a small price to pay for all the FBA benefits. As for the taxes issue, defer to genuine tax experts, not people trying to drum up a problem and then sell you the solution. Make sense?
The main problem I’m encountering is the number of FBA penny sellers (or close to that) that show up, between the time I list a book and the time it gets to Amazon and goes live. I use FBA Scan and don’t even buy books that have an MF landed price of less than $10. I double check the results with the Amazon Seller App after I’ve collected all the books I intend to purchase. So, there are no MF listings with a landed price of under $10 when I buy the book, but by the time it gets to Amazon, gets checked in, and goes live, sometimes a half dozen or more FBA penny sellers (plus whatever number of MF penny sellers) have had their listings go live before mine, and have already tanked the price. I don’t see any way to work around this depressing scenario.
Just as new books show up at Amazon, they sell as well. Competition goes down just as much as it goes up.
Peter just bought pricing mastery it’s great! Also I know this is an older article you linked to in todays email but I just wanted to know what are the general guidelines on buying penny books to keep from checking every single penny book with a low rank that shows on scanning app because alot of the ones as you know when you go into see fba offers it’s only $4. Just looking to save time thanks.