Category Archives: ROI

How to Use Inventory Lab to Track Supplier Profitability

Inventory Lab, Track, Supplier, Profitability

Let’s talk profitability, shall we?

You’ve likely heard us mention that we use the Inventory Lab software package to streamline our process of listing inventory on Amazon FBA and for sourcing inventory through the Scoutify app. Today we want to share with you another feature of Inventory Lab that we’ve come to depend on: the ability to track supplier profitability through Inventory Lab reports.

175_InventoryLabSometimes it’s easy as a reseller to get caught up in the rush of sourcing for inventory, sending it in to the FBA warehouse, and seeing the pending sales in Seller Central. Honestly, isn’t the thrill of the hunt and the excitement of the sales one reason we all do this business?

But if we stop and dig a little deeper into those sales, would we still be as excited about the raw numbers? Sales numbers can be deceiving at times, and if we don’t take the time to look at and think about our actual profit, then we don’t really know if our business is as successful as we want it to be.

Inventory Lab allows you to enter the total cost of an item when you list it on Amazon. Inventory Lab then takes that cost, your sales price, and associated fees to calculate profit and return on investment (ROI). You can see the projected profit and ROI for a batch when you’re listing through Inventory Lab, but you can also run reports to show you the actual profit and ROI based on payments from Amazon for your inventory items.

Supplier Profits

The circled area is where you input the data to help Inventory Lab calculate supplier profitability. Some areas of the screen shot have been blurred out for business privacy.

Prices may change from the time you enter a batch to when the item actually sells – it’s fun to think about a batch having 150% ROI when you send it to the warehouse, but it’s more useful to look at the ROI when you are actually paid for the sale of those items. From time to time we need to stop and analyze our numbers and ask ourselves, “Am I making the ROI I want/need on my inventory? How do I need to tweak my business to get the ROI I want?”

You can take the profitability question a step further by entering not just your total cost for each inventory item, but also the supplier. Then the question becomes, “How do I need to tweak my sourcing from each supplier to get the ROI I want?”

We currently use the supplier profitability report in several ways:

  1. To track how much commission on sales we need to pay our helper who sources for us
  2. To track the profitability of our online arbitrage subscription services
  3. To track the profitability of our wholesale sources

Enter Supplier ProfitsIn order to run the supplier profitability report, you will first need to enter a supplier at the time of listing an item. Inventory Lab comes with many retail sources already listed as options for supplier, but you can easily add your own. For instance, we use our helper’s initials as the supplier when we’re listing items she has sourced for us. We use other abbreviations for tracking each of the OA subscription services we use (e.g. Cyber Monkey Deals is CMD, Gated List is GL, Your Sourced Inventory is YSI, OAXray is OAX, etc).

After this info is entered and enough time has passed to have generated some sales, you can run the supplier profitability report by following these steps:

  • Go to the top menu on Inventory Lab.
  • Click on Reports.
  • Choose Supplier Profitability.

(Note: You will see there are several other useful reports you can run to analyze your inventory’s profitability.)

The default selection will be for the last month, but you can click Advanced Search to choose more date range options. You can choose within the last 1, 3, or 6 months or the entire date range since you started tracking. You can also choose a specific date range from a drop down calendar.

Reports menu

Once you’ve pulled up your report, you can sort by supplier, units sold, revenue, % of revenue, profit, ROI %, and on hand (number of units currently on hand in your inventory).

Suppliers all dates

Depending on the circumstances, each of the fields might carry a different weight for you as a seller in your decisions for how to adapt your business to improve those numbers. Some sellers like to have 100% ROI on everything they sell; others have a business model that supports 50% or even 30% ROI. The point of running these reports isn’t to compare your numbers to someone else, but to look at your own results and see if they meet your own business model’s criteria.

Let’s look now at two practical ways that we use our supplier profitability report.

  1. To track how much commission on sales we need to pay our helper who sources for us

At the beginning of each month, we run the supplier profitability report and look at the line with our helper as the supplier. We look at the dollar amount for the previous month under the Profit column, and we pay her commission out of that amount.

  1. To track the profitability of our online arbitrage subscription services

We also look once a month at the lines for each of our subscription services as the supplier. First, I look at the profit and make sure it’s more than the amount we’re paying for the subscription. This is an easy way to put solid numbers together to show yourself whether or not it’s worth it to pay for that particular subscription.

roiI also will look at trends as far as profit and ROI go. I don’t rush to cancel a long-standing subscription if I randomly have an off month, but I do look at whether a service seems to be deteriorating for me over time and make my decision whether to keep subscribing or not.

I also don’t rush to cancel a subscription if I think that I’m the problem rather than the service. For example, a while back I saw in my monthly report that my units sold and ROI for OAXray were not what I would prefer. A quick look back over my schedule for the previous weeks reminded me that I hadn’t been spending the same amount of time using OAXray each day as I had in the past. Of course those numbers are going to go down! If I’m not prioritizing my time to use the product as often as I should and actually send in items I sourced with it, the problem is me, not the product. So I made some adjustments to my schedule, made more time each day to use OAXray, and the numbers the following month were back up where I wanted them.

We’ve also started using Inventory Lab to track supplier profitability for wholesale sources, and many people use it to track their retail arbitrage sources. Are there other ways you use the supplier profitability report in Inventory Lab? We would love to hear your ideas and experiences in the comments!

Why I’m Not Worried About the Post-Christmas Amazon Price Drops

price-drop-alert-resizedA quick question: Did you sell out of your entire inventory before Christmas? Neither did I. During Q4, many Amazon sellers get used to the abundance of  sales that come with the Christmas season. Actually, we get spoiled with so many sales per day that when January arrives, we get scared. All of a sudden the sales seem to stop, and for some sellers panic sets in. Some sellers think that the answer is to lower their prices ASAP in hopes of getting more sales, but is that really the answer?

One of the things I always try to remind people is patience brings profit. It’s true that sales in January are usually not as good as December, but they still can be outstanding. The question I want to ask you is this: What is your business model when it comes to selling on Amazon? If you have a model that is focused on fast turns (items that sell very quickly once they arrive at a FBA warehouse) then you will price items much differently than if you have a business model based on patience.

I sometimes hear about Amazon sellers stating they lost money on an item they purchased in the fall and were hoping to sell during the Christmas selling season. The items didn’t sell out and now the price has tanked. Sometimes the price has fallen so far that the current price on Amazon is lower than the price they paid for it back in the fall. This can be frustrating for any seller. So what is the answer?

If your business model is based on fast turns, then you might want to lower your price (even if you lose most of your money) so that you can get some of that capital back to reinvest in items that you think will bring a better and faster return. On the other hand, if you are patient, you might just see the price you want return to equilibrium and wind up making a profit. Since monthly FBA storage fees are usually around a few pennies per month per item, it would seem to me that patience could possibly pay off in the end.

CCC Q4I’ve seen it happen often: An item is selling for a great price in December, but then falls drastically in January. A few months later, the price begins to rise again, and in December the price is back up where the profit margins are the best. Does this happen 100% of the time? No, but it happens enough that the few cents per month to pay for the item to sit in an Amazon FBA warehouse might be worth the gamble. Look at the image above. Almost all year long, the prices are low, but when Q4 approaches, the prices shoot up.

ROISometimes, it’s better to have $50 five months from now than $5 today. Why? Because I adhere to the balanced business model. I try to stock my inventory with slow dimes, fast nickels, and super slow quarters. What does this mean? It means that my inventory is loaded with items that will sell fast, sell slow, and sell super slow. I’m ok with making a 30-50% ROI (Return On Investment) on the items that sell fast. On items that sell slower, I want to get at least 100% ROI, and for the items that sell super slowly (think long tail items), I want the ROI to be well above 200%. The waiting game isn’t always fun, but in this balanced business model, patience brings profit. 

I don’t want to wait 11 months if the ROI isn’t high enough. It all comes down to opportunity costs. The longer I have to wait to sell an item at a higher price, the higher the potential ROI needs to be.

20465.picIf I hold my higher price, I could sell it later and get more for my item… but if I lower the price and sell sooner, I could reinvest that capital into items that will sell much faster. Each item is different and will require a different pricing strategy. Sometimes it’s good to hold at your higher price, because you’ve seen on CamelCamelCamel that in a few months, that item will probably be selling at the higher price you have it listed at. On the other hand, if you’ve seen the CamelCamelCamel data and it looks like the price will not recover soon enough, then it’s a better idea to lower your price so you can get that capital back to invest in better inventory.

Bonus Tip: If you have multiple quantities of a particular product that hasn’t been selling and suddenly begins to sell, check to see if you need to raise the price. You don’t want to raise it so high that it won’t sell again, but raise it up enough to match everyone else’s price. If the items stop selling, you can always lower the price back to where it was.

So what about you? What works best for your business? Would you rather get your capital back to reinvest, or do you wait for the prices to return to what you’d like them to be?

*This article was originally written in 2014 but has been updated for January 2016

How to Find the Number of Items in Each Amazon Category (plus a freebie!)

it_photo_107887One of the most frequent questions I get in my inbox from Amazon sellers like you is this one:

How can I find out how many items are in an Amazon category?

Before I show you my quick and easy process that I use to find out how many items are in a particular Amazon category, I want to talk about why it’s important to know this information.

IMG_2322When you’re out sourcing for profitable products to sell on Amazon, you’re probably looking at two main pieces of information: the item’s ROI and its sales rank. Sure, there are other factors that go into whether or not you decide to buy something to sell on Amazon, but those are usually the main two numbers you consider.

The first number we usually look at is the potential ROI of the product. We want to make sure we are going to make money selling this item on Amazon. Not only do we want to make a profit, but we also want to make sure we have some wiggle room in case the price of the item goes down.

The second number we usually look at is the sales rank. This is the number that gives us a glimpse into the potential speed of the item selling. The lower the sales rank number is, the faster it should sell. There are so many different things to think about when looking at sales rank, but most people agree that an item with a sales rank consistently in the top 5% of its category is a potential fast flip. This is not always the case, but for most items and categories, it is.

So, one really smart sourcing tip is to learn the sales ranks of each category and what sales rank numbers are in the top 5% of said category. How do we do this? With simple math.

Number of items in category x .05 = Top 5% of that category.

Ok, here is the simple way I find out how many products Amazon has in their individual categories:

1. Go to Amazon.com and choose the category you want to know about. 
2. Type the minus or dash symbol immediately followed by a few random letters (yes, really). 
3. Click on “Go” or just do a hard return on your keyboard. 
4. The results will show you how many items are in that category currently. 

Screen Shot 2014-12-10 at 10.09.37 AM

Using this method, I’ll show you how I found out how many items are in the Toys and Games category.

1. I went to Amazon and chose the Toys and Games category
2. I typed in “-flksjhdflkjsh” (without quotes) in the search bar.  
3. I clicked on “Go.”
4. The results showed me that there are currently 2,609,918 items in the Toys and Games category. 
 

Keep reading, because I have a free download that will save you tons of time… But first, a few more thoughts about Amazon product pages and sales rank.

Screen Shot 2014-12-11 at 9.20.56 AM The little trick above will only show you the number of items in a particular category that Amazon currently has in stock. If you wanted to include the out of stock items in this equation, you would simply need to scroll down and check “Include Out of Stock” and you will then get the numbers of every item in the Amazon catalog for that category. I don’t suggest this because some of the items that are “out of stock” have been out of stock for years and don’t need to be included in your overall search. In fact, if you include the out of stock items when looking at the Toys & Games category, the number of items in the catalog jumps from 2.6 million to over 5.1 million.

Amazon both adds and subtracts items to their catalog daily, so it’s probably a good idea to check back from time to time to make sure your numbers are up to date. You don’t need to check back daily, but I would suggest looking at the numbers about once a quarter.

The trick above also works with some of the sub categories. Say you want to find out how many games there are in the toy category. All you’d need to do is the “-jgojfojf” search for Toys, and then click on the sub category of Games on the left side column. By searching today, you would find that there are currently 329,630 games. This might be some good information to know, but if you’re using a scouting app like Profit Bandit, the app usually only returns the sale rank for the main categories.

Different categories have their own personalities. From my experience, in some categories, the top 5% is a good number to aim for, while in other categories, an item near the 5% mark might still take a long time to sell. Other categories I think it’s ok to expand to the top 10%… but you only begin to know this over time as you see what sells quickly and what takes a longer time than expected. And don’t be afraid of long tail items (items that take a long time to sell, but bring back a return well worth the wait).

salesrank-camelchart-locale-usasin-b0011457neforce-1zero-0w-725h-440legend-1ilt-1tp-allfo-0lang-en2014-12-0903_37_29Sales ranks are fluid… they change many times a day. When you see a sales rank, you’re seeing a snapshot of the popularity at that moment. A book might have a sales rank of 4 million one day, and then the day after it sells, the rank could jump all the way to 600,000. That’s a huge leap, but one that happens daily. For more of my tips on sales ranks, be sure to check out these blog posts.

FREEBIE!!

Screen Shot 2014-12-11 at 11.20.05 AMOk, so now that you know how to find out how many items are in each of Amazon’s product categories, and you know the formula for finding which items are in the top 5%, what if I just gave you a free download that gives you all this info for free? Sound good? I’ll go a step even further… if you click the image to the right, you can have a FREE PDF emailed to you that contains every main Amazon category broken up into the top 10%, 5%, and top 1%. The data on the PDF is updated every 2 months, so it’s the most accurate data around. All you need to do is click the button below and in a few minutes, you’ll get your PDF download for free.

Click To Get Your FREE Amazon Sales Rank PDF

After you grab your free PDF, then it’s your turn… Go to Amazon, pick a random category, and use my little trick above.  I’d love if you’d comment below how many products are currently in that category. Ready? Set… Go!

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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Sales rank is easily the most misunderstood aspect of selling on Amazon. What is a good sales rank? What does a sales rank of zero mean? What do I do with sales rank for sub-categories?

Why does sales rank have to be so confusing so much of the time?

I’m here to tell you it doesn’t have to be that way! You can finally get the clarity you need on the issue of understanding Amazon sales rank numbers. We at Full-Time FBA have launched a mini-course called The Reseller’s Guide to Sales Rank: Understanding Amazon Best Sellers Rank for Maximum Profits. The mini-course is a combination ebook (30+ pages) and video course (almost 2 hours). 

Check out The Reseller’s Guide to Sales Rank mini-course to see how you can master the concept of best sellers rank and be on your way toward smarter sourcing decisions for your Amazon FBA business!