Case Study – Electronics Sales Ranks and Competing Against Amazon

In a blog post a few weeks ago, I asked you, according to your own sourcing strategies, if you would buy a particular Electronic item or not. Here’s the item we looked at:

Product: Adonit Jot Pro Fine Point Stylus – Silver
ASIN: B00931DHKM
Clearance price at Target: $3.94
Total available for sale: 20

 Screen Shot 2014-07-28 at 4.50.23 PM

 

I asked you to do the research yourself, check out CamelCamelCamel, the product reviews, and anything else you might think would help, and see if this is an item you would like to purchase for resale. Many of you tried this little exercise and 17 of you even commented with what you would do. It was so interesting to read everyone’s opinions of what they would do. Some said they would pass completely, while others said they would buy them all. Each of you had your own fascinating reasons why you decided to pass, buy all, or buy some.

I’ll let you in on what my step-by-step thought process was on this item, and then I’ll tell you what I’d do if I found 20 of these little stylus pens on clearance at Target for $3.94.

profit-bandit1. Scouting App – Scan the item with your preferred scouting app (I use Profit Bandit). Look at the FBA competition and the current rank.

2. Check Amazon – Since most scouting apps return incomplete information, click through to the Amazon sales page to check out the possible competition you may be facing (Profit Bandit provides a quick link to the item’s product page). On Amazon, you can see the full picture.

camelcamelcamel_amazon_price_tracker3. CamelCamelCamel – Research the item’s CamelCamelCamel page. For those of you who don’t know about CCC, it’s a very useful website that attempts to track both prices and sales ranks for millions of items on Amazon. CCC is not perfect, but they usually do a great job of giving us a good picture of how often an item sells and what the lowest sales prices are at any given moment in the past.

4. Look at the Rank – A rank under 1000 is usually amazing, except that many times, when scouting apps return a Consumer Electronic sales rank, it is actually returning a sub-sales rank (click here for more on that). Be sure you know if the rank you are seeing is the rank for the full category or the sub-category.

Screen Shot 2014-08-21 at 1.51.56 PM5. Check Customer Reviews – To get a better idea about how often an Electronics item sells on Amazon you can always look at the customer reviews. Customers rarely leave a review of an item they bought on Amazon, so when an Electronics item has many reviews, then it means that it’s sold rather often.

6. Check Recent Customer Reviews – Be sure to check how recent the reviews are. Just because a DVD player has 1000 reviews, doesn’t mean that it’s a good idea to buy that DVD player for the purposed of resale. 99% of the reviews could have come before 2007, with only a few reviews here and there since then. You want to find frequent, recent reviews.

7. But What About Bad Reviews? – I never look at how many one star reviews an item gets when making a buying decision. Am I just asking for a refund? Maybe… but from my experience, people are more prone to leave negative reviews than positive ones. Even if I see a lot of negative reviews, I’m not scared.

Screen Shot 2014-08-21 at 1.59.07 PM8. Compete with Amazon? – This is often a difficult decision. If Amazon is a seller of an item I’m sourcing, then I need to ask myself, “Do I match Amazon’s sales price or price the item lower? If I price to match Amazon’s price, then I’ll have to wait for them to sell out before I get the sales (or maybe they’ll share the buy box with me from time to time). Amazon could have only 5 in stock… or they could have thousands. If I price lower than Amazon, then I’d be getting a lower ROI.

9. Possible Future Competition – When doing retail arbitrage, it’s a good thing to consider that other resellers may be finding the exact same thing you are. Retail chains often clearance out the same items, so it’s possible that if you find 5 of an item, 100 other people also might be finding 5 at their local store, too.

To some, this may seem like an overwhelming process that might not be worth the time. For me, the fact that there are 20 of these stylus pens on clearance at Target make it worth the time. And honestly, once you do this process enough times, it becomes second nature and really only takes a minute or two.

Analysis-Paralysis3Getting as much information as you can on a possible product to resell is a good thing, but don’t let all the information paralyze you. There will rarely be an item you find that will pass 100% of your buying criteria. This process takes time, but the more you do this, the more you will understand what works best for you, and what aspects to give less weight to when it comes to your buying decisions.

Ok, back to the stylus. For some, this is a no-brainer… buy them all! For others, this is a no-brainer… pass! How can that be possible? Well, we all have different criteria for what works best with our business model. Some of us are at a stage in our business where we can handle the risk a little better better than others, while others might not be ready to risk $80.00 on buying all of these styluses. This is why I’m never worried about scouting in the same store as another reseller. What he would pass on might be what I’d buy.

Ok, so I’ll finally get to sharing with you what I’d do with this possible retail flip.

photo1. Scouting App – I scanned the item with Profit Bandit. The item is ranked 31, and the lowest FBA seller is Amazon selling it at $29.96. The app does the math for me, and states that if I match the lowest FBA price, then I’d make a profit of over $18 per item.

2. Check Amazon – I clicked through to the Amazon sales page to check out the possible competition. The lowest FBA price is indeed Amazon at $29.96. I also confirm that there is only one other current FBA seller, selling it at $29.99.

3. CamelCamelCamel – CCC does not have any current sales rank history, and they showed that both Amazon and other 3rd party sellers have priced this item as new somewhere between $20-30 on a consistent basis.Screen Shot 2014-08-21 at 12.42.52 PM

4. Look at the Rank – To find out exactly what this “31 sales rank” meant, I went to Amazon.com on my smartphone’s internet browser. From there, I learn that the 31 sales rank is in the subcategory of Electronics -> Accessories & Supplies -> Computer Accessories -> Input Devices -> Graphic Tablet Styluses. That means there are 30 other graphic tablet styluses with a better sales rank. Something to consider.

5. Check Customer Reviews – Currently, this Stylus Pen has 799 reviews. If almost 800 people left a review for this item, then it’s safe to say that it’s at least sold 800 times, and most likely more.

photo-26. Check Recent Customer Reviews – It looks like there were 12 reviews in the last week alone. As I continue to search, I find 11 reviews the week before, and 9 reviews the week before that. This is a HUGE sign that this item sells, and sells very often.

7. But What About Bad Reviews? – There are occasional bad reviews, but plenty of positive reviews. If I sell all 20 of this item, then maybe (maaaaaaaaaybe) one will be returned. I’m ok with that one return while possibly making almost $18 per stylus.

8. Compete with Amazon? – I did a little digging and found out that Amazon has over 999 of these stylus pens on stock. How did I find that out? Click here for a quick tutorial on how to find out how many of an item a seller (even Amazon) has currently in stock.

9. Possible Future Competition – There are 20 of these stylus pens on clearance at Target. The good news is that it might be possible that you could go to more Targets and find even more. The bad news is that if this item is clearanced at every Target, then many other resellers will also find these and join you in selling. More competition and the possibility of that competition lowering prices are something to consider.

So what would I decide to do? Personally, I would take the risk and buy them all.

keep-calm-and-buy-it-now1) The ROI is incredible.
2) There are plenty of very recent reviews to suggest that this item sells often.
3) With the Target Red Card, I can get an additional 5% off and an extended return period of 120 days.
4) With the amount of reviews this item gets, I would not be too concerned with additional competition coming into the picture. If they lower the price where it’s not profitable for me, then I’m ok with waiting to get my price. Often, patience brings profits.
5) Amazon is really my only main concern, but I could still price below Amazon to get sales and hope that Amazon doesn’t lower their price.

So there you have it. Remember, there is no right or wrong answer. I’m not telling all of you who wanted to pass on this item that you are wrong. We all have different business models and risk tolerance for sourcing. Continue to do what works best for you, and occasionally try something different.

 So what would you do? Buy? Pass? Would you match Amazon’s price, or price the stylus lower? How much lower would you price it at? I’d love to hear your thoughts. Share below.

 

14 responses to “Case Study – Electronics Sales Ranks and Competing Against Amazon

  1. Pingback: Decoding the Electronics Amazon Sales Rank Code | Full-Time FBA

  2. No doubt, the information given in your step-by-step method to determine whether or not to make a purchase using all or many of the tools you suggest are valuable, it appears to be very time consuming and not practical while sourcing in the field. In addition do you not run the risk of the product or products being sold by the time you complete your searching?

  3. Awesome article! i’ve been searching and searching for someone to walk through their “do i or don’t i” thought process. I’m new to this, been researching it for about 2 weeks and signed up with FBA 2 days ago. Finding products hurts my head but i know the more i look, the more i do the easier it will get and this article helped a ton!! Theres a lot of information to take in and at my most recent stop at walgreens i must look suspicious scanning items and trying to figure out in my head whether its worth it or not lol. I find good items but the profit is only a few $$$. I try not to think negatively that FBA Is pretty out there now so the competition makes it a lot harder, but as with anything you gotta find your thing that works and run with it. Anyway, thanks for this explanation, it’s helped a ton and i hope in the next week or 2 i can find something that makes me do the happy dance.

    Lisa

    • Thanks for your kind words, Lisa! Keep looking and you’ll find stuff with amazing ROI. You’ll be doing the happy dance multiple times a week in no time! I wish you nothing but success!

  4. I have been doing retail arbitrage for the past 4 months…. I hit up all the big box stores, and even try my hand at obtaining a few wholesale accounts.

    At first, I was just using the Android Amazon app for scouting (which completely ignores the rank factor). I bought over $2,000 worth of toys which had great returns (at least 3x buying price compared to selling price on Amazon). So, then after my first two weeks payment was $638 I got real excited. But then after all of the initial sales, my popular products were depleting and prices had started to drop for EVERYTHING I WAS SELLING. I don’t mean by a penny either. I would see a product consistently selling at $29.95, and then after a couple of weeks, the product would be at $19.95, then $17, then down close to the $10 mark. The $10 mark is my purchase price and that doesn’t account for the money it cost to source, then ship to amazon, gas money, etc. This is starting to become routine as sales have consistently slowed down, while prices have also gone down….. and even clearance items starting to very fastly disappear…. yes even entering the 4th quarter that everyone talks about. After my initial investment of $2,000 I decided that I would have to justify paying the Profit Bandit App ($15 + $10 Monthly Fee) + Amazon Pro Merchant Account ($40 monthly also).

    This is where it gets depressing 🙂
    So now that I have a legit app to scan with, now I’m finding nothing worth my time anymore. What do I do??? How can someone research every single item that they scan with Amazon and CCC>? I mean it’s not worth it…. normally the Target Clearance, never has 20 of an item, only one or two of an item, or maybe 5 are available….. And if you’re trying to think about Walmart Clearance…..just give up your life. There clearance is normally marked down anywhere from 0% to maybe 5% or 25% at the most. And the product packaging is always damaged and looks 5 years old.

    SO WHAT DO I DO NOW>? I’m sitting around waiting for money to roll in, but it’s not coming in fast enough and I need to do something big to get my CHRISTMAS income this year and I don’t know what or where to buy anymore….. hELP

    • Brandon,
      You started to big. You need to go slower at first to gain experience, and not drop so much cash. Switch your strategy to higher margin items like books for a while to build a bankroll,

    • Brandon, I know it’s hard when this happens… and for some it happens more than for others. The best thing to do when first starting out is to go slow. You’ll want to learn slowly the personalities of each sales category.. and yes, they have personalities. Some move faster, some slower, some move well up to 10% of the sales rank, and some move only the top 1%. It takes time, but you begin to know how to better source. I hope this makes sense. Feel free to ask more questions, if you want to.

  5. Stephen,
    Simply awesome description of the best method of research. I was shocked how much like the method I use it is. And contrary to what a comentor here said, it is not time consuming, because all the sites you mentioned can be reached within the apps (like Profit Bandit) themselves. Even CCC can be clicked through to.

    I even use this method for book scouting on probably half the books I scout where I will click through to the FBA offers, on about a quarter of the books I will look at CCC. With the bad data from the Amazon API, these methods are 100% critical, something the scouting apps dont tell you.

  6. Hi Stephen,

    How do I know that “how often an item sells at any given time in the past” from CCC? Thank you in advance!

    • Jack,

      Usually, when you see a big “uptick” in the sales rank chart, it means that there was a sale. So, if you see a chart with 5 “upticks,” then there is a high probability that there were 5 sales. I’ll do another post about how I read camel camel camel sometime soon.

  7. It is fascinating reading your analysis .
    Could you please explain why do you consider the lower FBA price rather than any lower price ( not fulfilled by amazon?

    • There are millions of people who subscribe to Amazon Prime and many of them will ONLY buy an item that is offered with Prime shipping. Most of the time, I’m one of those people. I really don’t like ordering from a non-Prime seller. I don’t want to wait possibly a week or two for an item to arrive. Amazon Prime has me spoiled. I expect the item I order from Amazon to arrive at my door in a few days, guaranteed. That being said, there are millions of other out there who, like me, only want to order via Amazon Prime. This allows us FBA sellers to ignore any MF (merchant fulfilled) sellers and their prices. We only really compete against other FBA sellers.

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