One of the hardest tasks every online seller faces is making smart buying decisions. It’s fairly easy to find wholesale sources (I list dozens here in my blog), but how do you decide specifically what to buy?
What are some of the factors that go into making a buying decision? I used to sell on both eBay and Amazon, but today I only use Amazon, yet I find that information learned about a product on one site will often translate to the other site. That is not 100% reliable, but works about 90% of the time. Here are some of the things I consider when I am evaluating products:
- Sales Rank on Amazon
- Sell through rate on eBay (For eBay sellers)
- Average Selling Price
- Amazon FBA Price
- Amazon Buy Box Price
- How much margin I will earn after fees
- Size and weight of the item – is it easy to ship – will it incur oversize charges
Let’s look at each one of these:
Sales Rank on Amazon – Remember – the lower the sales rank, the higher it ranks in the category. For example, a sales rank of 25,000 is much better than 100,000
Sales rank can be deceptive, but it is still worth looking at. Sales rank is more a function of recency than it is of where a product ranks overall. Getting just one sale will cause a product to jump very high in sales rank. If none of those products had sold in several months and then one sells today, the sales rank may jump from 300,000 to 40,000. When you see products without any sales rank that means none of them have sold yet. Nevertheless when you see a very high sales rank (i.e. low number) that is usually a good sign.
Sales rank can be vastly different by category. If a book has a sales rank of 250,000, that isn’t that bad considering there are millions of books on Amazon. But if you were selling sewing machines and your machine has a sales rank of 40,000 in arts, craft and sewing, that would not be that good as that category probably has less than 50,000 items.
Sell Through Rate (STR) on eBay – Another name for this is the conversion rate but both terms mean the same thing. STR is a much better indicator that a sales rank on Amazon. If you see something with a good sell through rate on eBay it will sell well on eBay and probably on Amazon as well.
STR is nothing more than the percentage of listings for an identical item that sell. For example, if you look at a 30-day period on eBay and see an item where there were 24 listings and 10 sales then the STR is 41%. It somewhat depends on the product and how many listing there are, but I consider an STR above 30% to be workable.
There are two ways to determine the STR for a product. One method is to do a completed items search on eBay. The other, and probably the better way is to use a research service like Terapeak. Terapeak not only tells you the STR, it will also show you the average and highest and lowest price for an item, the keywords people use to search for an item. Terapeak has an app that works with a smart phone, so you can use it while out shopping or at a trade show.
Average Selling Price – Average selling price is important as that is what you will usually receive. Yes, occasionally you will get higher prices for an item, and I try to do that with several selling strategies, but over time, most of us will probably realize the average price, so I want to know what that is. Again , Terapeak can help you find that price. Terapeak gives you eBay data, but I have found that 90% of the time that is pretty close to Amazon except for FBA items.
FBA Price – This is the price sellers realize who sell with the Amazon FBA program. FBA sellers realize higher prices than seller who merchant fulfill. Since I am an FBA seller, I want to know that price. The best pricing data for FBA is a free smart phone application called Amazon Seller App It not only tells you the price, it also shows you the competition and how much the item will net after Amazon fees.
Competition – this is possibly the most important criteria. The greater the competition the lower the prices. And if selling on Amazon, you want to know if Amazon itself is one of your competitors. I do sell a few things where I compete with Amazon, but in general I look for products where the competitors are other sellers. Since I am an FBA seller, the most attractive products are ones that all of the competitors are merchant fulfilled sellers.
How much margin I will earn after fees? – The nice thing about selling online is that you have a lot less overhead than a store does. This means you can operate on lower margins than brick and mortar retailers. Ideally I like to make 50% after fees, but that only happens on a few of my products. 20% is a more realistic goal to shoot for and probably closer to the norm for eBay and Amazon sellers.
Size and weight of the item – Is it easy to ship? Will it incur oversize shipping charges? Does it require special packaging materials? Does it exceed Amazon’s standards for a standard sized item, which incur higher handling fees? Those are the questions you want to ask yourself about shipping. Amazon has a box limit of 50 pounds to ship using their carriers. Personally I don’t like schlepping heavy boxes so I try and stick with 25 pounds.
This is by no means a complete list, but it does encompass the most important values to consider when selecting products to sell. Don’t worry; if this looks complicated its really not and with a little experience you will be able to make these determinations quickly, but you have to get that experience first. And yes, even though you are very careful, and examine all of these criteria, you will make mistakes. I have been doing this for over 16 years now and still make mistakes -just not as many as I did early on. In my early days, I bought a collection of Furbys about 6 months after the fad was over. That one hurt!