One of the questions that I see asked the most on Facebook groups for Amazon-selling is whether or not a person should buy a particular product. Usually this question is based on the following scenario:
A new FBA seller ventures into her local discount store. She is ready to embark on the hunt of a lifetime. Store clerks slowly back away; children hide behind their parents’ carts. This seller does not yet know if she is intimidating because of the determination in her eyes, or because of the war paint she recently applied underneath them. She wants people to know that she means business.
As she saunters through the littered aisles of the store, she stumbles over an item — let’s say a gold-plated spatula. This gold-plated spatula looks to be in great condition, and it’s deeply discounted according to the flashy red clearance sticker. She pulls out her trusty device to check on its online value. After checking up on its vitals, the confident and unstoppable FBA newbie suddenly freezes in her own uncertainty. Not yet trusting herself to make what we here at Superhero Sellers call a buying decision, she turns to her sense of security, those helpful new friends in her FBA-related Facebook group. “Hey I’m in a store and there’s this product or book,” she writes in the Facebook group quickly. “I can buy it for this price. Should I buy it?!” And her heart pounds as she waits for a response. This lioness has spotted a gazelle, but instead of going in for the throat, she’s batting it around the floor like it’s a toy mouse with tiny bells.
As we all know by now, this business is based on buying things to sell on Amazon. So Should I buy this? really is the fundamental question. It’s something I ask myself probably a hundred times a day. I want to talk a little bit about the steps that I personally go through when I make what I like to call a buying decision.
- Can I, or do I even want to sell this product?
One of the first questions that you may face when starting your FBA business is whether you’d like to strictly sell via Fulfillment by Amazon (FBA) or if you want to do some Merchant Fulfillment (MF). Let’s have a quick refresher on the difference between FBA and MF. FBA is the option in which Amazon ships all of your inventory for you. You’re just responsible for getting the inventory to Amazon and making sure all the right stuff shows up in your inventory. On the other hand, MF is fulfilling it yourself. That means you purchase the item, list it in your inventory, wait for it to sell, and then you ship it to the customer in a timely manner. That means that all you MFers have gotta stay on your MFing toes! (Remember, in this blog post MF stands for Merchant Fulfill. Now, read that sentence again, filling in the appropriate words this time. Ugh, you guys…)
Keeping this in mind, there could certainly be products that you are unable to sell. There are certain products that are considered hazardous materials (hazmat) that you simply can’t have Amazon fulfill for you. Let’s put this into real-life terms. If you are in a beauty store and you see an entire aisle of hairspray in aerosol containers, and you only do FBA, you can just skip over that whole aisle. When you start to gain an understanding of the products that can and cannot be FBA-ed, you no longer need to pick up those kinds of products to see whether or not they’re good product to buy — you can’t sell them to begin with. This alone can save you a ton of time. A few other kinds of products that are almost always considered hazmat or otherwise unable to be FBA-ed include chemicals such as minoxidil (Rogaine) or formaldehyde (nail polish), any type of poison (such as some insect killers or rat poison), or items in large glass containers. Remember that if you are not able to sell an item via FBA, you can usually still sell it. You’ll just need to sell it MF. It all depends on your decision to sell strictly FBA or to also sell MF.
Another thing to watch out for is whether or not you are approved to sell in that item’s particular category. For instance, if you are not approved to sell in the category of clothing, don’t bother looking at discounted clothing. If you are not approved to sell shoes, you probably should not be sourcing in a shoe store. Keep in mind what you are approved to sell when you go out shopping. This may seem like some good ol’ common sense advice. It is. The moral of the story here is that it could really pay off for you to take just a few moments familiarizing yourself with different Amazon categories and realize that you’re not approved to sell in all of them right away. When you can look at an item and have a good idea of its category, you’ll be able to know whether or not it’s even worth your time to search the item.
- Will it make any money if I sell the product?
After I have determined that I can in fact sell a product, the next question I need to ask is whether I will make any money selling the product. I find this to be the easiest question to answer because it is simply numbers. At this point, I assume that you know how to use the Amazon Seller app, or that you are using a similar app such as Profit Bandit or Scoutify. Have your app of choice at the ready for when you go sourcing.
I also find it very helpful before you ever go sourcing to have a basic understanding of return on investment (ROI). You’ll want to know how much profit you’d like to make selling each item, and the minimum amount you’re willing to make on each item. Often, I see that people have a lot of confusion about this concept. The idea that many people have is that any profit is good profit, but that’s a misconception. You need to keep these things in mind when you’re trying to determine whether or not something is a good buy:
- You need to ship this item to an Amazon warehouse. If an item has a small amount of profit but it’s very heavy, the cost to ship the heavy item can quickly erode your profit. The same is true if the item is big. If you can only put one or two in a box, you’ll need to pay the cost of the box plus the minimum cost to ship the box to Amazon. Ouch. This can end up costing you a lot of your profit, especially when you have a large quantity of large items. A common example of this for me is lawn chemicals. If they are not hazmat (and therefore FBA-able), they can be very profitable. Sometimes though, they are very heavy and bulky. For me to put 3 in a box and ship it Amazon will probably cost me around $10. That means on each item I am paying $3.33 just to ship it to the Amazon warehouse. That can quickly eat into my profit, so I always tread carefully.
- Some items may have a seasonally inflated price. Toys are a good example of this. Around Christmastime, the price on toys can really skyrocket. That means that sometimes you can sell a toy for two to five times as much as the retail value if you sell it at the right time. A certain toy that retails for $6 normally can become very popular and go for $30 leading up to Christmas. If you are able to get in on the deal early enough, this can be very profitable for you. However, keep in mind that the price for the toy will very likely crash after Christmas, ruining your ROI. Determine if you’ll be able to have the item prepped, shipped to Amazon, and sold before the price crashes. The same concept applies to other seasonal items like backpacks, calculators, books, holiday decorations, certain food items, and so on.
- Will the product sell fast enough?
I think that this can be the hardest question to answer. It’s one that I still struggle with, and I sometimes get it wrong. Of course, I always want my products to sell as soon as they hit the warehouse. Alas, that’s not possible. So I need to determine whether I’m willing to hold on to a product long enough for it to sell. Usually, I want my money back within about 6 to 8 weeks on a product. That’s a number you’ll need to determine for yourself.
A couple tips to help you out:
- Avoid items with no sales rank.
- Remember that seasonal items, like lawn mower blades, swim accessories, and summer weight clothes, are not really seasonal. The US is a large country. It might be cold up north, but Texas could be in a heat wave.
- Read this post, Why I hate Sales Rank charts.
Trusting yourself to make buying decisions is an early challenge that virtually every seller faces when they start selling products. However, this is an area in which you absolutely need to have confidence. Your entire business model hinges on buying items, then selling those items. Making sound buying decisions can make or break your success, but it’s something that you absolutely can tackle. With a combination of doing some reading and research (look at you — you’re already doing it!), a healthy dose of practice (get out there and go shopping!), and some level of trial and error (of course everyone experiences a learning curve), you’re well on your way to having some buying decision expertise. Or at the very least, you’ll have enough confidence to go out, go shopping, and make a killing — all without needing to reach out to others for the majority of your purchases.