Picking price point for eBay and Amazon Products
Picking the Perfect Price Point for eBay and Amazon Products

by Skip McGrath

Let’s define “price point” before we start. What I am referring to is deciding the range of selling prices you want to work with. Will you sell items in the $5 to $25 range, the $25 – $100 range or higher? And, why is that important?

My goal is to always be above $30, but I don’t always achieve that. Occasionally I will find an item that is so profitable that I will go down the scale a bit. When I look at my eBay and Amazon items, currently I have 2 products selling for over $300, 30 items selling for between $100-$200, about 300 items selling for between $25 – $100 and only a couple dozen or so things selling for under $25. In general, I am meeting my price point targets.

Low price sellers are high volume sellers

If you are like me, you hate math, but this math is important. If you sell at item for $10, once you subtract product cost and eBay and PayPal fees or Amazon fees (& FBA Fees) you are probably left with a profit of $2 or $3 unless you bought something incredibly cheap, such as when you find a book at a garage sale for 50¢ that you can sell for ten bucks.

If you averaged $2 profit on each sale, then you have to source, list, package and ship 500 of those items per month to make $1000. If you are a full-time seller making their living selling online and need to make, say $5000 a month, you would need to source, list, package and ship 2500 items to make your $5000.

That is probably more than one person or even couple can do working out of their home. But this is what low price, high volume sellers do. Most of them have a warehouse and employees and they are not doing 2500 items a month -it’s probably more like 25,000. And, if you are an FBA seller, Amazon is doing most of the work for you, but the FBA fees take a bigger bite so it’s still hard to realize enough margin on low-priced products.

It’s easier for a small scale business to make money at higher price points

Now let’s look at a $47 item (which is close to my average selling price across all of my items). If my product cost is 50% that is $23.5 Lets assume shipping is a break-even and my fees average 20%; that works out to $9.40 in fees. So when I do the math my profit is ($47 – 23.50 – 9.40) = $14.10. Now let’s look at how many sales you need to make to earn $5000 a month (5000 / 14.10) = 346 per month or 82 sales per week. (Approx. 12 sales per day)

You may find a fabulous item that you can mark up 200%, but if your net is only $2 or $3, then you may want to think about it twice.

That is a lot more reasonable for someone working from home or a small office. And if you do what we do, we keep 80% of our inventory in an Amazon FBA warehouse and the other 20% is drop-shipped.

We still have to create eBay & Amazon listings, pack and label items, but we ship them to Amazon in bulk which is a lot less work than shipping 346 items per month to customers. We use Amazon to fulfill our eBay orders, which dramatically cuts down our work.

The lesson here is to figure out what kind of seller you want to be and once you determine the price point you want to sell at, then use that information when you do your product sourcing.

You may find a fabulous item that you can mark up 200%, but if your net is only $2 or $3, then you may want to think about it twice.