Why You Should Consider Raising Your ASP (Average Selling Price)

Did you see that we recently released a PDF of Amazon acronyms you can print out and refer to in your FBA business? If not, you can grab a copy of the acronym list here as a handy reference.

One of the acronyms at the top of that list is ASP: average selling price. Over the next couple of blog posts, we’re going to discuss ASP and how it impacts your business.

Your ASP is the average amount of money you make in sales per item you sell on Amazon. ASP is calculated by dividing the dollar amount of sales by the number of items sold. To find your ASP, follow these steps:

  • Log in to Seller Central.
  • Hover over Reports.
  • Click on Business Reports.
  • Check out your Sales Snapshot – your ASP is the amount listed for “Avg. sales/order item.”

Why is it important for you to know your ASP and why is it important to increase your ASP?

I really believe that an Amazon FBA business needs a higher ASP in order to make it long-term in this business. If selling on Amazon is a business for you and not a hobby, you want to make sure you’re getting paid like a business would pay you. One way to increase your ability to pay yourself out of your business is to increase your ASP.

Sure, there are plenty of people who are able to make good money on Amazon with a lower ASP, for example book sellers or sellers in other categories that depend on high volume at low prices. Depending on your business model, you can really make a lot of money at high volume and low prices. But along with that type of business model also comes more work because you’re having to find and sell more items in order to make that volume. That type of business model also might require more outsourcing if you want to scale even larger, more sourcers to find your inventory, more listers and preppers, etc. I’m not saying this isn’t a viable business model; I’m saying that selling at a low ASP comes with a price.

In my experience, my business has seen more growth when I have focused on finding items to resell at a higher ASP, rather than trying to increase my volume on low ASP items. I’ll share with you a few reasons why I believe this has been the case:

1. You can save a lot of money on FBA fees when you raise your ASP.

Let’s think about an example using two FBA sellers, Bob and Sally. Bob typically sells lower priced items on Amazon. Today so far he has sold 10 items at $10 each, so he’s made $100 in sales. Sally, on the other hand, has sold one item today, but it was priced at $100. Both sellers have the same dollar amount in sales, but their FBA fees are taken out of those sales differently. Sally only has the one sale, so she only has to take care of the referral and FBA pick & pack fees for just the one item ordered. Meanwhile, Bob has to pay the referral and FBA pick & pack fees 10 times for 10 items. All those fees on low priced items add up over time.

In the end, Sally’s $100 of sales allows her to take home about $80 of profit. Bob’s $100 of sales leads to closer to $60 of profit. If you increase your ASP, you reduce your fees and increase your profit.

2. You can save a lot of time, money, and effort on prepping and shipping items when you raise your ASP.

Think about Bob and Sally again. With Sally’s one $100 item, she only had to expend the time, money, and effort to put one FBA label on her item, put one poly bag on her item, and pack that one item in her FBA shipment. But Bob with his $10 items…he (or someone he has hired) has to put on 10 FBA labels, seal 10 poly bags, and pack 10 items for shipment to get that $100 in sales. All of those costs add up over time, and you can save money and increase profits by reducing the amount of prep work required in your business. Increasing your ASP is a great way to reduce your necessary prep work.

3. You can give yourself more wiggle room for price fluctuations when you raise your ASP.

Back to Bob and Sally…

For sellers like Bob who have items priced mostly in the $10-$15 range, if the going price of their items begins to drop, they don’t have much room to lower their price and stay competitive without losing all their profit. If they lower the price even a couple of dollars, it drastically changes their return on investment (ROI). But if Sally’s $100 item lowers in price by $1, $2, or even $5-$10, she still has wiggle room to lower her price and stay competitive, without sacrificing her ROI.

Note: In general I don’t recommend always lowering your price whenever your competition does, which can start a race to the bottom. But in those instances where for some reason you need to keep your price competitive, having that wiggle room to lower your price without sacrificing profit and ROI is a nice feature of increasing your ASP.

4. You can increase your Amazon disbursements if you raise your ASP.

When you have fewer fees removed from your FBA sales and you sell more items with higher ASP, the natural result will be higher disbursements from Amazon. More profits, more money to reinvest in your business, and more money to take out of your business in the form of income for yourself and your family. That’s the progress we personally have seen over the past few years – the number of items we have sold via FBA has decreased each year, but our ASP has increased, and as a result our Amazon disbursements have increased.

Like I said earlier, some business models work very well by selling a high volume of items at a lower ASP. But for the amount of time, effort, and money that I want to invest in my business, I have found that sourcing and selling higher ASP items has given my business tremendous growth. My goal is to continue making a full-time income with only part-time hours through Amazon FBA, and increasing my ASP has been a vital component of achieving that goal each year.

Here’s one strategy I suggest for anyone who might struggle with having enough money in their sourcing budget to make it from one Amazon disbursement to the next: Start setting aside a portion of your budget solely dedicated to higher ASP items. Make sure you are gradually working at finding items that will increase your sales without increasing your work. In my next blog post, I’ll go into more detail about how to raise your ASP and start getting more bang for your buck with your sourcing budget, time, efforts, and energy.

Keep an eye out for that next blog post soon, but in the meantime we would love to hear from you in the comments. Have you had success increasing your ASP over time? Are you actively trying to increase your ASP? Or is your business model built on lower ASP items?

32 responses to “Why You Should Consider Raising Your ASP (Average Selling Price)

  1. I will try this strategy. Till now I always by items with pricing about 5-10$ to be competitive with dropshippers. Maybe you have some guide how to buy profitable items on walmart online? Thanks

  2. I sell quite a bit of groceries. Often single items have a better sales rank than multi-packs. With your ASP point in mind, I’ll need to consider the trade off single pack that will sell fast or multi-pack that will probably eventually sell and get that higher ASP/disbursement. Expiration dates would also be a factor. Thanks for shining light on this important concept.

    • Rebecca Smotherman Rebecca Smotherman

      Those are very good points about groceries and multi-packs, Jan. Thanks for pointing that out. There definitely are trade-offs when you consider one business model over another, and each person just has to work it out for themselves which one they prefer in the long run. Thanks again for adding this point to the conversation!

    • While we don’t sell groceries, we’ve found that multi-packs are the way to go. Listings for single items with a low rank usually have a lot of sellers and low prices/low return. We found that a listing for ‘Set of 4’ has less competition, meet our return limits, and gives the customer a deal. So, if a single plate is selling for $10 ($40 for 4), we’ll price our Set of 4 at say, $39.

      The only time we’ve found this to be a problem is when the single listing is priced too low, below our ‘Set of 4’ price limits. But we’ve found it’s a temporary set back because if the item has low rank, it’ll most likely sell fast, and reclaim normal prices.

  3. I have thought about higher ASP because of your previous statements about it. I focus my business solely on wholesale currently and don’t find but a couple items that have these qualities. Is this possible on wholesale or should I try shoes or something?

    • Rebecca Smotherman Rebecca Smotherman

      I think this would be possible to do wholesale if you find the right product in the right category. Shoes aren’t the only category with high ASP. It’s just a matter of digging around and finding that wholesale treasure!

    • Robert Hamilton

      Dwight,

      I previously started out as many do, in used books. Now I am focusing on wholesaling as you are. The issue I am finding is that there is many competitors for the same products. I am strictly selling FBA, #1 because I liked the model, and #2 I am finding most of my competitors merchant fulfill, which can allow me to win the buy box. One other issue I am focusing on is creating bundles with my wholesale products, because as I said earlier, there is a lot of competitors for single products in the niches I am working in. I am using software to evaluate monthly sales of each product, then possibly bundling them together to differentiate me from them. In this way, I can increase my ASP.

      • What software do you use to evaluate demand? Is it Keywords Inspector? If there was no tool and only Camel and Keepa, would you rely on data from these tools for gauging demand for bundles?

        • Robert Hamilton

          Right now I am using both the Jungle Scout Pro Chrome extension (paid) along with the Scope Chrome extension (free from Seller Labs) to evaluate demand. The show ranking along with monthly estimated sales revenue and unit sales. I also use CCC and Keepa. The Jungle Scout training is focusing on finding niche markets to go private label. Since I am selling readily available wholesale products, I use JS to find products with good monthly sales numbers with lower number of sellers. I don’t use Keyword Inspector yet, but there is good training inside the Proven Amazon Course, which I know Stephen is familiar with, called Proven Performance Inventory, which utilizes Keyword Inspector. This training basically goes into finding markets without the use of software tools to evaluate demand. Sorry Stephen for going away from the base topic.

  4. We’d just like to encourage others not to be afraid of spending money to make money! We’ve been doing this for only 3 months – books and Online Arbitrage mostly. Our ASP is about $32 this month. We have learned quickly not to be afraid to spend $45 for a textbook that will sell for $100 for example. We do our research and buy. Thank you Stephen and Rebecca for all the great information you put out.

    • Rebecca Smotherman Rebecca Smotherman

      So glad you’re finding success, Jamie! Sounds like you’re off to a great start in this 3 months. If you have the capital to spend and a good foundation in the basics of online selling, you’re right, there’s no reason to be afraid of spending a bit more on inventory items to get those high ASPs. But like you said, it definitely takes research to make sure you’re getting a good buy. Thanks for your comment!

  5. Thank you for sharing this aspect of your business. Being a used books seller I shall re think my entire business concept..
    Stay awesome..

  6. A critically flawed example. You will not get $80 of profit from the sale of a $100 item. A $100 item would carry a fee of 15% from Amazon. So $100 is now $85. Cost to ship it to Amazon, lets say $5 to be generous. Cost of Good sold? Wait, was this product free? How do you have an $80 profit on a $100 profit. If this truly existed we would all be looking for that magic bean. On average a $100 product would yield a $10-12 profit. (10-12%). Then factor in one return/damaged good and you have to sell 10 items to make up that loss. It is important to have a diversified portfolio of products that allows you to slowly increase your ASP. What is truly important is profit margin. Dollars will come if the margin is stable. Know when to capture profit dollars and ALSO know when to blow out inventory to reuse capital. Don’t let your inventory become stale.

    • It was gross sales he was talking about. $10-12 on a gross $100 product? Sounds like a wholesale margin…

    • Rebecca Smotherman Rebecca Smotherman

      The example you are referring to is talking about the dollar amount left after Amazon takes their fees out of your sales amount. The name of that point is “1. You can save a lot of money on FBA fees when you raise your ASP.” We’re not talking about COGS, shipping, or anything else in that point. And even with taking out COGS, inbound shipping, prep fees, etc, our business model makes much more than $10-12 profit on a $100 item sold. We buy items that we know will have a higher ROI and profit margin than what you are mentioning. Everyone has a different model, so it’s not possible to say “on average a $100 product would yield a $10-12 profit.”

    • Sally only has the one sale, so she only has to take care of the referral and FBA pick & pack fees for just the one item ordered.

      $100 sale
      $15.00 Amazon Referral Fee
      $2.99 Pick and Pack Fee
      $17.99 Total fees with the assumption there are no weight and order handling fees.
      $82.01 before cost of product.

      So how does Sally take home $80 of profit. Please help me understand. Do you have an example?

      • Rebecca Smotherman Rebecca Smotherman

        We’re not saying that the $80 of profit includes subtracting the buy cost etc of the product. That was not the intent of the original point in the blog post. The intent was to say “You can save a lot of money on FBA fees when you raise your ASP.” The example you just listed out illustrates exactly the point we are trying to make in the blog post. We are ONLY talking about taking out the Amazon fees. This example is NOT about the buy cost of the product, the inbound shipping, the prep costs, etc. I don’t know how else to explain it. Yes, I see what you mean about the total profit on the item not being $80 — but that’s not what we’re talking about, as I explained in my comment above. We did not intend for anyone to think that Sally’s item didn’t have a buy cost or inbound shipping or prep fees, etc, and as I’m rereading the blog post now, I still don’t think that’s what the point conveys. I’m sorry if there is confusion over that.

        • Thanks Rebecca. All of the information I have read here over the years has been so helpful and clear. I completely understand your point and it seems I am reading it literally. I understand the point of the blog post. It makes sense. Thanks for the knowledge you and your husband always share.

  7. I think repricers can help with improving ASP too if set right. Do you use repricer Stephen?

  8. Thank you for a great post. I have been thinking about this lately, since I am still working at a job 30 hours a week and have limited time to source, list, etc. I’m into my second month now and higher ASP for all the reasons you state apply to my situation. Keep ’em coming!

  9. Thanks for the (normally) excellent post. Although I was aware of the advantages that a higher ASP would bring, your cogent presentation amplified its importance for me. And although some might nitpick using the word “profit,” the points you made were logical and thought-provoking. Thanks again, I really appreciate your work!

  10. I completely agree with you on this! This is what my husband and I have tried to do since starting our Amazon business this past September. It is less work, yet more profit. I am still learning how to source, but find that we overall make more money by doing it this way. Thanks for sharing!

  11. Yes, a repricer helps greatly. Has kept our asp high each year.

    • Which repricer do you use? Do you define a range of acceptable pricing and then it slowly goes down in order to catch the Buy Box? My main concern is catching the Buy Box whenever possible while at price I am willing to sell because it takes to much time for me to reprice every day entire inventory.

  12. Feedvisor. Very high end and not cheap BUT MORE THAN pays for itself.
    Also has built-in inventory control replen, etc. tools which is a HUGE plus.

  13. Pingback: How to Increase Your Amazon FBA ASP (Average Selling Price) - Full-Time FBA

  14. Bethanne Schrecengost

    Jeff, here’s a real life example of this principle (which I didn’t really start applying until October of last year, and I’ve been an FBA seller for over four years): We sell an item that we purchase at WalMart for $79.99. It sells on Amazon for $238.99. Our Amazon fees for this item (including shipping) are $55.12. We net $103.88 ($238.99 – $85.84 – $55.12 = $103.88)

    In addition, you mentioned that you can’t get inventory for at no cost. We do, quite often! Everyone we know is aware that we sell things on Amazon. They often give us their used books or other items, rather than giving them to GoodWill. We go through them, sell what we can, and donate the rest. We LOVE free inventory, and highly recommend letting your friends and family know that you’ll gladly take their “junk” if/when they do a clean out!

    Finally, we would never buy a $100 item that would only yield a 10-12% profit. Our rule when we are scanning is that the item must be selling for three-to-four times what we pay for it. Yes, that means it takes a bit longer to find items, but in the long run, we have found this formula to be the most profitable.

  15. Bethanne Schrecengost

    Sorry, in my “math portion” of my example I subtracted $85.84 for the cost of the item, rather than $79.99. It should read: ($238.99-$79.99-$55.12=$103.88.)

  16. I am constantly debating with my Dad on this issue. He thinks, “if an item is selling, why mess with it.” On the other hand, I have been trying to get rid of our lower priced items because simply, it’s not the best use of our time.

    I’ve tried the “less prep – good” approach but he thinks it’s just part of the business. I agree that prep is part of the business but it is difficult to quantify unless we stop selling lower priced items. So, I can’t really “prove” to him that it’s the better approach.

    I’m going to try the “higher fees – bad” approach because that can be shown with clear numbers.

    Thank you for this article, you’ve given me a few more talking points to convince my Dad to use his time more wisely (go hit the links).

  17. Stephen, I said I will buy The bundle up book. I couldn’t do it that Thursday, because I had to go. Looking for it now, cannot see it due to Lg volume gmail. could you please send the link back so I could pay Now. There was another one I cannot remember.

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