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Stop Making Bad Purchases!
Learn How to Source Quality Product to Sell on Amazon
An unavoidable aspect of online selling is that not all products you source are going to make
you money. It happens to the best of us; this is just the nature of online retail. This deadweight
inventory can never be completely eliminated because we lack perfect knowledge of the
market; however, there are ways to minimize the number of inefficient purchases that we
make.
Disclaimer
Some of the products and services I mention in this report are affiliates of FBAtoday.com. These
products, sites and services are the ones that I actually use.If you’d like proof,email me at
([email protected]).These products and services are merely recommendations. You can have
success in online selling without them, but they are a huge part of the success of my business. If
you do click through these links, thank you very much. So yeah, enjoy!
The Basics
Know your parameters.
If you have not set firm criteria for what you want to source, you should do so ASAP. Consider:
Sales rank for each category.Use FBAtoolkit.com to get a good idea of how many of one
item may sell per month at a certain sales rank, in a particular category. Remember,
Amazon charges a hefty fee for SKUs that have aged over one year. Keep this in mind
when buying/shipping.
Desired price points. Decide how much you are willing to spend per item under multiple
circumstances.
Risk tolerance. How deep are you willingto go (how many) and how much competition
are you willing to handle?
Minimum profit margin. How does it change with price? Set minimum margins (mentally
and on paper) for items in different categories that cost between ($0-$5), ($5-$15),($15-
$30),($30-$60), ($60-$100), ($100+) etc.… Also, consider how the expected sales
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velocity affects your desired margin. If an item costs $100 and makes $30, I may buy it if
I can assume it will sell quickly and has a low risk of return. If it has a high risk for return
(frivolous items like entertainment products or electronics) and may take awhile to sell, I
would need the gross profit to be much higher. More risk requires more reward (profit).
How much you want to make and, therefore, how much you will need to spend.A part of
this business that is difficult for many people is separating themselves from their
money. You have to spend money to make it in arbitrage. If you plan on making a net
profit of $100,000 and have an anticipated Profit Margin of 50%, you would have to
spend $200,000…. Come to terms with that. The best use of money (besides giving it to
charity, of course ) is to make more of it. Don’t feel guilty for sourcing product.
You should make adjustments to your sourcing parameters over time. Find out what is working
and what is not and adjust accordingly. Also, consider that Amazon’s marketplace is always
growing, so in the long term you should consider adjusting the tolerable max sales ranks for
each category.
Do a four-sided check of each item you scan.
Do your best to assess each item and its components (if it is possible to tell by looking at it;
obviously, with some items we cannot see everything inside because of the packaging). I prefer
to sell only new items because it minimizes my returns and lowers the risk of negative
feedback. Just make sure you know what you have on your hands before you try and sell it.
Look at the tape on the package; it is the easiest way to find out if an item has been opened.
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Press “sell it” before you decide to purchase an item to make sure that it is not
prohibited or in a category requiring approval.
This is still not a guarantee, but it is reliable most of the time. Amazon expects you to know
what can and cannot be sold. Keep track of brands and items that cannot be sold on Amazon.
Many products that are harmless cannot be sold because the manufacturer has restricted its
resale. Keep this in mind and check everything before purchasing.Stay up to date with changes
to the Amazon policy to make sure you don’t miss any important changes to the restricted and
prohibited categories.
Here is a list of the some of the current prohibited and restricted categories and here is a list of
possible restricted brands. It is in your best interest to commit these brands to memory to save
yourself time while sourcing.
Make sure that the description correctly describes the product.
Use yoopsie.com to do reverse UPC lookups and cross-reference items and their UPCs to make
sure that you haven’t overlooked any details. Even the tiniest details matter, even more so for
high-dollar items and collectibles. You can double-check with a different scouting app if you are
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in doubt. Amazon Flow works well in this case. You can take the ASIN from Flow and insert it
into your scouting app to be sure you have the right product.
Be apprehensive about the profitability of each item and don’t be afraid to put
something back if it doesn’t meet all of your criteria.
In any business, getting too attached to anything can hinder success and growth. There will be other
deals – don’t force them if they aren’t there.
Don’t buy somethingbecause you’re in a slump.
You shouldn’t buy anything that doesn’t meet your criteria. If you need more products, you need to
source longer or change your strategy. Buying product that is not up to your standards will not make
things any better. You want to spend money on the right products and if you tie it up in bad, long-term
inventory, your money can’t work for you.There will be highs and lows, so just be patient. The great
deals you will find will help offset the slow times.
Track as much data as you can.
There is no better way to learn than from your past mistakes and successes. My team and I use
Inventory Lab, a hybrid program that can be used for sourcing, listing, profit analysis and general
financial record keeping. There is no limit to the number of users that can use the same account, and
they have gone on record as saying this will not change.
Be aware of the quantity in the listing of the item you are checking.
You will run into a lot of bundles as you scout. This can be disheartening because they usually
show a huge margin that will get your hopes up.
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Be sure that you are basing your purchasing decision on a realistic, expected selling
price.
If there is only one seller, do more research. When a seller creates a new listing for an item,
they are most likely going to set the price higher than the market would normally dictate
because there is no other competition. If there is no sales history for this item, check
comparable listings and make an educated decision based on that. Use your best judgment
here. I tend to avoid buying too many of these items until they have more sales history.
Consider seasonal changes that may affect your product’s demand.
Remember, there are many reasons that items are on clearance and one of them may be
because it is going out of season. If you have the flexibility to do so, you can hold inventory until
the season comes back around (such as Halloween clearance items).
Check the expiration dates carefully.
Anything that has an expiration date should be given special attention before you purchase it. Check the
Amazon policy here for more information.
Check the prices on eBay and other selling mediums.
It is always great to have a back-out option. Worst-case scenario, if you cannot return an item,
you can sell it somewhere else if there is a market for it there.
Watch the checkout employee scan the items and make sure the correct prices are
rung up.
Many major retailers do not cover original UPCs when they put new clearance labels on items
and the original barcode gets scanned instead of the clearance one. This is a very quick way to
lose profit without even realizing it.
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Be sure to keep your receipts so that you can return an item(s) if all else fails.
Don’t make this a regular habit, but it is definitely an option. Make sure that you understand
the return policies of the store you are buying from.
I use shoeboxed.com for all of my receipts. You snap a photo, submit it, and the data is
extracted for you. The photo of the receipt is saved and given a URL so that you can view it
easily later. This will be great come tax time!
Consider the visibility of the product and anticipate the amount of competition you
may receive.
If a lot of people have access to the same deal, the market may become crowded and pull the
price downward. Don’t get into a “race to the bottom” on a product.If competition erodes your
anticipated margin, don’t panic, just plan your next course of action soon.
Don’t “go too deep” if a product is bought on a sale that is highly visible to other sellers or if the price
has been volatile.
The market is too unpredictable to expect that you can sell a lot of one item before the market
balances itself out.
Consider if the item is listed above or below the MSRP price.
If you plan on selling an item at or below MSRP, you can usually go deeper (purchase more), but
when selling over MSRP, you need to assume that Amazon will be cutting you on price sooner
rather than later.
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**Note: If you list an item above the MSRP, you won’t have a traditional buy box even if you are
the lowest price.
Employ the 3x rule to skim products better and scan fewer risky items.
As a rule of thumb, you should be able to have close to a 100% profit margin on any item that
you can buy for a third of the Amazon selling price. Higher-priced items will have higher profit
margins. This doesn’t apply for items that are selling below around $10 because of the fixed
fees that Amazon charges.
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Online Specific
Type in “(item/store) coupon” and/or “(item/store) free shipping” if you think you
might be able to get a better deal.
Chris Green recommends in his book Online Arbitrage that you download and use
Chrome for online sourcing and install multiple extensions (listed in the book) for
comparing prices.
Not that you need to know or don’t know already, but Google is the most amazing company
ever created.Just saying.
Make sure that the item is in retail packaging. Beware of refurbished, “no hassle
packaging” or “bulk packaging” items.
Contact the retailer if you have questions about an item. Don’t assume it is what you assume it
to be.
Don’t get scammed by wholesalers and drop shippers.
This is a huge problem right now on Alibaba (which is not a bad company, it’s just littered with
scams) and a few other wholesale sites. Never, under any circumstances, send someone a
Western Union money order. This is the biggest giveaway of a scam.
Check out this article for tips on avoiding getting scammed.
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For my own twisted pleasure, once I have realized that I am dealing with a scam artist, I don’t
end the conversation; I “increase” my order. My goal is to get them to actually send me money
…there would be nothing more righteous. I’m going to document the next time this happens
and post it toFBAtoday.com. FYI: I am not recommending you do this, as you never really know
who you are dealing with online.
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Deep Research
“Spy” on Amazon with Keepa.com.
See how and if Amazon is competing and how the price is changing based on whether or not they are in
stock (The yellow shaded regions indicate that Amazon was in stock then). Knowing if Amazon is
in the picture is a big deal if you plan to sell over MSRP. If it is merely a temporary shortage,
Amazon will come back at the MSRP and might leave you holding a lot of product. Also, if you
try and cut Amazon, they will follow you to the bottom. Don’t get into a war of attrition with
Amazon.
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Check Keepa.com or Camelcamelcamel.com (shown) and identify the historical
high and the low listing prices.
It is ideal that your item has the buy box and is listed at one of the lowest prices ever. You are
less likely to experience price erosion in this situation.
Find out if an item has sold in the past on eBay by clicking “Completed listings” on
the left sidebar on an item page.
Ebay is very transparent with past sales info. You can also see what people are currently
searching for on EBay by visiting EBay Pulse.
Research an item with Google Insights.
Find out how much an item is being searched for.
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Analyze sales rank sheet.
Consider if the item has a low sales rank because it has not been in stock, or if it is just not in
high demand. Even if there was a ton of demand for an item, if it wasn’t in stock, the sales rank
is going to drop. Those people who would buy it can’t, so it seems like the item isn’t selling
when in fact it was just not being sold.
The sales rank sheet that I reference is the one found on the Proven Amazon Course. I am a
member of this community and trust that it is updated as necessary. Check out my projected
max items per day sales sheet here.
Find out if an item is ranked in a sub-category.
This can be misleading because a high rank may actually only be high for a specific category, not
a larger, general one.
That #1 ranking looks amazing, until you see that it is in a deep subcategory. This particular
example is still a frequently sold item, but keep this in mind for other purchases that seem
unusually high.
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If you made a bad purchase, it’s not the end of the world.
Decide which of the following you will do:
Return it. If you shipped it, order it back (cheaper than you think, currently less than 50
cents) and return it. This is not a big deal, but you should not make this a regular habit.
Keep it! This business is intended to improve your utility, right? Maybe it was actually
something that you would have bought for you at this price but you had your “arbitrage
eyes” on and didn’t even realize it.
Cut your losses and sell it. List low and get your money back quickly. Some sales are
worse than no sale at all. Ask yourself if the cash you will receive is worth a potential
negative review or other hassle. There is no sense in making unnecessary transactions if
they are for nickels and dimes.
Stick to your guns (if possible), and list high and wait it out. It may sell eventually; you
never know.
List it on another medium like eBay. Even if you have already sent it for fulfillment, you
can list the item and have it shipped from Amazon to a buyer on the third-party site.
Sell it the old-fashioned way: in person. You can sell to someone you know or just to
someone on Craigslist. There are also many different Facebook groups where people list
deals and/or swap things.
Store your unsellable items safely and have a garage sale to liquidate them once you
have a good amount of product. Check out garage sale pointers here.
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BONUS TIPS!!
1. Are you getting a lot of items that have no sales rank? That doesn’t necessarily mean
that they have never sold. If an item’s lack of sales rank seems strange to you, check and
see if it has any recent reviews. If there are reviews, that means there have been sales.
This happens a lot in the electronics category.
2. Don’t underestimate the power of marketing. You will be amazed at how well
advertising a product works, even if it had never sold previously. Read more about
Amazon’s PPC program here and check out my article here.
Now, Go Forth and Prosper
There you go. I hope this helps you make better purchasing decisions and puts more cash in
your pockets! Be sure to bookmark FBAtoday.com and check in frequently for more free
content.
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Summary of Links
Amazon Flow
Amazon return costs
Amazon’s expiration policy
EBay Pulse
FBAtoolkit.com
Howazon blog post on restricted brands.
Inventory Lab
List of known restricted brands.
Max items per day
Proven Amazon Course
Shoeboxed.com
Tips on avoiding scams
Tips on having garage sales
Yoopsie reverse barcode lookup.
