Category Archives: Case Studies

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.

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