The way that you source for stock to sell on Amazon will determine how well you do in online arbitrage. The act of buying from one online retailer and selling on Amazon seems simple enough, but there’s a whole host of traps people often fall for in the pursuit of making quick profit.
Make enough of the following mistakes and you’ll soon blow your stock-buying budget. Lucky for you, I’m here to help you avoid any of those mistakes before you even get the chance to. Among the many things I wish I knew before I started selling through Amazon FBA, the sourcing ones have to be the most important.
Here are the most common ones and how you can make sure they don’t cause issues for your business:
1. Seeing a Price Difference and Assuming It’s Profitable
Problem: There are thousands of products that can be found in the wild for cheaper than they are on Amazon. That doesn’t mean it’s going to be profitable to sell them. The price, size, weight and length of time it spends at an Amazon fulfilment centre are all going to shave money off your profit – even before a competitor comes in and undercuts your price.
Solution: Aim for a high ROI on your products – an return on investment that is able to withstand pressure if other sellers reduce the price, if you have any returns, or if the item doesn’t sell at all. For new sellers, it’s good to go for things with at least 40% profit in them. Over time, you’ll figure out a lower, safe minimum ROI.
2. Buying Slow-Moving Stock
Problem: Just because there’s a listing for something on Amazon doesn’t mean that there’s someone out there that wants it right now. There are plenty of things that are too niche, too expensive or just too lame for anyone to want to part with cash for them. Don’t send more of these things to Amazon warehouses.
Solution: Keepa is the key to finding out how much demand a product has. By checking past Sales Rank data, it’s possible to make predictions on how quickly your item is likely to sell, based on how the sales have performed in the past. Price tracking is just as important for the same reasons.
3. Buying in High Quantities
Problem: More units = more profit? Well, yes, but it comes with a big asterix attached to it. A product that sells well might shift one unit a day. Sensible to buy 30? Well it looks that way now, but it’s easy for another seller to find the same item, drop the price and take the sales you would have had. You’re now got a load of stock tied up in one product, and won’t get it back until the sales get to you.
Solution: Test products out with a low quantity of units before you go wild. I will rarely buy more than x2 units of something I haven’t sold before. Once it’s proved itself, I might up that to 10, and go back for more. Testing prevents you from going big prematurely. It’s far safer to ‘spread your bets’ across a wider array of products. When some stop selling, the others can make up for it.
4. Sourcing too little
Problem: Are you hear to make a little money or a lot? In that case, step things up. In this game, it’s all about volume. If you’re not sending enough in to the fulfilment centres, the sales will dry up.
Solution: Be on the lookout for products constantly. If you can’t be there doing it, get someone else on the job for you. There are loads of different ways to hunt for things to sell, so there’s no reason to get bored of it. The more you source, the better you get at it.
5. Sourcing at Random
Problem: How do you know what works and what doesn’t, if you’re not tracking it? If every hunt is random, you’ll go over the same ground multiple times, neglect areas, and generally do things in an inefficient manner.
Solution: You’ll source best when you have a process in place and you stick to it. Experienced sellers will have a handful of different ways to find products, and they will have probably taught others how to follow them on their behalf. Do the same and reap the rewards.
::::::::::::: - Chiino I don't do comments around here, so let's keep the conversation going on Twitter. If Twitter's not your thing, give us an email.