Should Profit or Stock Turnover be Prioritised with Amazon FBA?

Everyone selling through Amazon FBA is buying things they think will sell. I mean, that's the name of the game. They're looking for the kinds of products that someone somewhere would want to own, and are using Amazon as the platform to get it to them. But is it better to go for things that sell quickly, or for things that bring a higher profit?

The margins you aim for will depend on how far you are in your online arbitrage journey, what you're sourcing and whether this is your main income stream. Most Amazon FBA online arbitrage sellers will have an inventory with a mix of low and high margin products, while others may just stick to either end.

Let's deep dive and check the considerations at both ends:

Isn't all profit good? I used to think like that when I first started making money online, and wasted absolutely loads of time chasing pennies. Online arbitrage is for those trying to build businesses and you will struggle to build a healthy one without a growth strategy.

Low margins in Amazon FBA is anything in the 15-30% range. (Ignore the gross number for now). Anything below that is ridiculous. These margins don't sound fantastic, unless you couple it with crazy sales turnover.

Sellers aiming for these kinds of profit levels have to shift some serious units to see a worthwhile return on their activity. Once fees are deducted, packaging materials, any admin costs and returns are taken into account, what's left?

If you're making crumbs from your products, you absolutely must make sure the stock turnover is high. From the time the products are active in your inventory, they need to be flying out.

High profit margins are anything above 50% ROI. It's the ideal situation. You want as much money as possible, obviously, so you'll squeeze out every penny you can. The costs of using a VA to source, a prep service to get your shipments ready and cost of getting your items to Amazon can be swallowed by the massive returns you'll get.

The drawback of having high margins is the these kinds of products are – understandably – much more difficult to track down. Everyone in this game is trying to get maximal profit on their buys, so will do everything to make sure they're the only one that can make money from it. The competition can be more fierce, bringing me on to the next point.

High profit products often take a little longer to sell than the low profit ones. Having your money tied up in slow-selling stock isn't an ideal situation, as it means you won't have any cash to hand if any great opportunities come around. It's especially important to consider this when you're spending larger sums, as it can throttle your growth.

Put £100 in and get £110 back in a week, vs £100 in and £200 back in 10 weeks. What would you rather? The way to keep your inventory filled with things that will both sell quickly and will bring you a solid return is by having a real mix. It has to be kept varied, so you have a steady cash flow and to make sure the incoming money is actually substantial.

Some sellers have strict ratios of what they source based on Sales Rank. (e.g. 20% minimum ROI for a 1,000 ranked profit vs 50% minimum ROI for one at 20,000). Others base it on the cost price (e.g. anything under £2 with profit potential is a must-buy, while anything over that needs a little prior analysis).

A lot of new sellers jump in buying things with low margins, or very slow sales, just because they think they can eventually make a profit from it. I was like that and soon found that I'd struggle to keep things flowing if I continued like that. The minute I took an interest in balancing out my inventory, the profit and sales growth was a lot more consistent.

I know sellers that like to play at both sides of this. There are the busy ones that can't get enough of sending in shipments, and those that take it more easy, sending in fewer boxes because they know they don't have to do as much work to make money on their stock.