Making money with penny books, and a formula for spotting hidden FBA offers your app won’t show.
What follows is my secret formula for knowing if Fulfillment by Amazon (FBA) offers exist – even when your app won’t show you.
And a statistical analysis to prove it.
This is a long one, so let’s break down the contents:
- The principles of spotting invisible FBA data
- The Penny Book Profits Project: A statistical study of Amazon offers, FBA prices, and how to spot them
- Live webinar: “Introduction to Online Book Arbitrage” webinar (sign up here)
How to know when there are high-value FBA offers your app wont show… Without clicking through to Amazon
What follows will allow you to extract profit from sources that have been picked over by other Fulfillment by Amazon sellers – even ones who know what they’re doing.
This took me a long time to research. I call this study The Penny Book Profits Project. (And because it took me 8 hours to compile, I consider it worthy of this lofty and pretentious title.)
Here’s the basic idea…
There is a predictable ratio of FBA offers to merchant fulfilled offers at various sales rank’s. When you know these ratios, you can “read between the lines” of your scanning app data, and determine the likely volume of FBA competition – even though your scanning app won’t show it to you.
(And again, if you didn’t know your scanning app isn’t showing you most FBA offers anymore, you must read this article from last month.)
Prepare to be temporarily confused
This will be among the most misunderstood articles I’ve written, but also among the most important. I believe that the few who take the time to really understand this material will make significant money for the effort.
Most will dismiss it as “too complicated,” and move on. Be thankful for those people. It gives those of us who do understand this formula a massively greater advantage over other sellers.
Here are two hypothetical examples:
Type of item: Book
Amazon sales rank: 30,000
Number of used offers: 30
Price of lowest used offer: 1 cent.
Used FBA offers: None shown.
Amazon’s price: $14.95
My cost: $2
What would I do? Buy, buy, buy.
What I can read into this data: Even though we can’t trust our apps to show us FBA offers anymore, I can tell from the data there is high likelihood there are no FBA offers for this book. I expect to price all the way up to within pennies of Amazon’s offer and still get a quick sale (I’d price at $14.75).
How can I be so sure? That’s what this article is about.
Second example:
Type of item: Book
Amazon sales rank: 30,000
Number of used offers: 200
Price of lowest used offer: 1 cent.
Used FBA offers: None shown.
Amazon’s price: $24.95
My cost: 25 cents
What would I do? Put it down and walk away. No – run away.
The stats on this are mostly identical – Same rank, same used price. And there is an even higher Amazon price (higher price ceiling), and my cost is 25 cents – 1/8 of the previous example. So why am I rejecting this one so ruthlessly?
It’s the number of used offers. 200 used offers virtually guarantees there is a large number of FBA offers, probably bunched up around the $4.50 to $5 range. Just out of sight of our scanning apps (they’ll only show us the bottom 20).
It’s all about the total number of used offers. Since our scanning apps still show us this, we can use the statistical data (revealed below) to determine the likelihood of high-value FBA offers.
If this all sounds complicated, I’m about to make it very simple below…
How is it possible to see “invisible” FBA offers? Here’s the rough formula
Before we get into my statistical study of hundreds of Amazon listings, here are the basic ideas:
1) The better the sales rank, the fewer the FBA offers – and the higher priced those FBA offers are.
2) The greater the number of merchant fulfilled offers, the greater the number of Prime / FBA offers, and consequently the lower the FBA prices.
3) There is a strong relationship between merchant fulfilled offers, sales rank, and the price of FBA offers.
All of this is data we can currently see on our scanning apps.
The days of FBA sellers profiting off penny books are NOT over
I didn’t get in at the ground floor of FBA, but even when I got in four years ago you could pick up most well-ranked penny books and expect to not have any FBA competition below $7. Those were the glory days.
Today, a lot of new sellers are on board. And a lot of them price desperately and irresponsibly (Read: Low). And it has forced FBA prices down.
But as I have shown with my research below, there is still plenty of opportunity to profit off penny books. And because you can’t click over to Amazon every time you scan a book, the secret to profiting off penny books is knowing how to read the data.
More specifically: What we can read into the column that shows the number of used offers.
The goal: To dramatically reduce clicking through from your app to Amazon.
If you’re a savvy Fulfillment by Amazon seller, you spend a lot of time on your scanning app clicking through to view FBA offers. Now that scanning apps no longer show this data, you don’t have a choice. It takes time, and it’s really annoying.
The point of the study that follows is to dramatically reduce how often you click through to Amazon by giving you X-ray goggles that reveal when there are probably too many lowball offers for it to be worth your time.
If you made it this far, you’ve cleared the important but boring stuff. Now let’s get into the study I keep talking about. I call it The Penny Book Profits Project.
I did an excruciating survey of hundreds of books on Amazon to bring you the following formula.
Seriously, this was painful.
I set out to conclusively answer the questions:
1) Can we look at the number of merchant fulfilled offers and sales rank and predict the value of the FBA competition among penny books, even though our app won’t show it to us?
(Clicking through to Amazon from our scanning apps is really annoying.)
2) If so, can we look at scanning app data and know when there is a 50% or greater chance a penny book has an FBA offer priced $7 or above?
(I wanted to get some hard numbers and not waste time clicking over to Amazon to research FBA offers unless there’s a greater than 50% chance there will be some that are $7 or up)
Sidebar: Why $7?
Because that’s my threshold. I don’t acquire books unless I think I can sell them for at least $7. Yours may be higher or lower.
So here’s my study: The Penny Book Profits Project
For each example, I sampled 10 books – enough to be statistically significant, small enough to not drive me crazy.
All of these were penny books: That is, had many used offers at a penny (+ 3.99 postage).
There was no easy way to do this. I just had to comb Amazon for hours and hours to get you this data.
Sample #1: Extremely low rank, medium number of used offers.
Sample set: 10 books.
Sales rank: 1,000 to 5,000
Used offers: More than 100, less than 150.
Used price: One penny.
Number with lowest FBA offer more than $7: Seven
Number with lowest FBA offer less than $7: Three
Results: Despite being penny books, 70% had FBA offers above $7 as long as the number of used offers didn’t exceed 150.
What the scanning app shows.
Same offer on Amazon.
Sample #2: Extremely low rank, high number of used offers.
Sample size: 10 books
Sales rank: 1,000 to 5,000
Used offers: More than 250, less than 500
Used price: One penny.
Number with lowest FBA offer more than $7: Three
Number with lowest FBA offer less than $7: Seven
Results: The numbers completely flip when the used offers exceeds 250. 30% of these had FBA offers over $7. We’re sampling the most well-ranked books on all of Amazon here, and even with this high demand there tends to be a glut of lowball FBA offers when the number of total offers exceeds 250.
Sample #3: Low rank, high number of used offers.
Sample size: 10 books
Sales rank: 5,000 to 10,000
Used offers: 250 to 500
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Two
Number with lowest FBA offer less than $7: Eight
Results: With the drop in sales rank, the numbers didn’t move much. Only 20% had offers in the $7+ range when the number of used offers exceeded 250. Even among high-demand books, when there are 250+ used copies, the glut of FBA offers is just too much to consistently see FBA opportunity.
Sample #4: Low rank, medium number of used offers.
Sample size: 10 books.
Sales rank: 5,000 to 10,000
Used offers: 100 to 150
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Six
Number with lowest FBA offer less than $7: Four
Results: 60% had $7+ FBA offers in this range. From this, we can learn that penny books start to have $7+ FBA offers less than 50% of the time when the rank gets worse than 10,000 and the number of used offers is more than 100. While we’re still in better-than-10,000 territory, we still see the majority having $7+ FBA offers.
Sample #5: Low sales rank, medium number of used offers.
Sample size: 10 books
Sales rank: 20,000 to 30,000
Used offers: 100 to 150
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Four
Number with lowest FBA offer less than $7: Six
Results: 40% had offers over $7. Also worth noting: Most of the offers in the sub-$7 range were single, lowball offers, and the next FBA offer in line was over $7. Now we’re getting into territory where it’s still worth clicking over to Amazon. Even if there’s one lowball offer, when books are in high-demand I will price above the lowest offer and wait for them to sell out.
Sample #6: Low sales rank, high number of used offers.
Sample size: 10 books
Sales rank: 20,000 to 30,000
Used offers: More than 250, less than 500
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Zero
Number with lowest FBA offer less than $7: Ten
Results: 100% of offers with more than 250 MF offers have FBA offers below $7.
Sample #7: Medium-to-low rank, medium number of used offers.
Sample size: 10 books
Sales rank: 70,000 to 100,000
Used offers: 100 to 150
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Two
Number with lowest FBA offer less than $7: Eight
Results: Only 20% had offers over $7.
Sample #8: Low-to-medium rank, low-medium number of used offers.
Sample size: 10 books
Sales rank: 70,000 to 100,000
Used offers: 50 to 100
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Five
Number with lowest FBA offer less than $7: Five
Results: 50% have FBA offers over $7. Getting the MF offers under 100 causes a huge jump in FBA value (a jump from 20% to 50%).
Sample #9: Medium rank, medium-high number of used offers.
Sample size: 10 books
Sales rank: 300,000 to 500,000
Used offers: 100 to 150
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Zero
Number with lowest FBA offer less than $7: Ten
Results: None of the books sampled had offers over $7. In fact, none had offers over $4.50
Scenario #10: Medium rank, medium-low number of used offers.
Sample size: 10 books
Sales rank: 300,000 to 500,000
Used offers: 50 to 100
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Three
Number with lowest FBA offer less than $7: Seven
Results: 30% of the books sampled had offers over $7.
Sample #11: Medium rank, low number of used offers.
Sample size: 10 books
Sales rank: 300,000 to 500,000
Used offers: Under 50
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Seven
Number with lowest FBA offer less than $7: Three
Results: Huge jump here: 70% of the books sampled had offers over $7 when the number of MF offers drops below 50.
Sample #12: Medium-poor rank, low number of used offers.
Sample size: 10 books
Sales rank: 750,000 to 1 million
Used offers: 30 to 50
Used non-FBA price: One penny.
Number with lowest FBA offer more than $7: Six
Number with lowest FBA offer less than $7: Four
Results: Even at these not-very-good sales ranks, 60% have offers over $7 when the number of used offers is under 50.
What about books ranked worse than 1 million?
This is the strata where I get less interested in pricing penny books at $7 and up. It doesn’t mean I won’t do it, I’m just not going to spend time clicking through and determining my FBA competition with these more poorly ranked books. Generally, I’m looking for books where I can hold the top spot at a price of $7 or up.
Examining The Penny Book Profits Project: What have we learned?
A lot.
The data samples here are at least within range of most of the scenarios you’ll encounter in the field, and give us some extremely useful (and profitable) insights.
I’ll sum it up as concisely as I can,
When you scan a book, if you see…
More than 250 used copies: These rarely have $7+ FBA offers. The peak percentage is 30%, for books ranked better than 5,000.
100 to 150 used copies: Have $7+ offers over 50% of the time up to a sales rank of 10,000. Worse than that, the percentage drops dramatically.
50 to 100 copies: Have $7+ FBA offers 50% or more of the time up to a sales rank of 100,000.
Fewer than 50 copies: Has $7+ FBA offers over 50% of the time up to a rank of 1 million (the worst rank studied).
And that’s it: The magic formula for knowing when a penny book is worth clicking over to Amazon for – or when the odds are so good you don’t have to.
The takeaway of which is: There is still money in penny books. If you know what to look for. The secrets lie in the data.
Endnote: I’ll admit it. I’ve been doing a ton of online book arbitrage (i.e. buying books on Amazon and reselling them back on Amazon with FBA). In fact, its the main reason I haven’t posted any stories of sourcing in a while – I’ve been sourcing so many books online, I haven’t had to.
Good news is there’s enough to go around, so I can talk about what I know. There’s no magic bullet here, but there’s a ton of opportunity.
So in 10 days, I’m doing my first live, solo webinar: “Introduction to Online Book Arbitrage.”
And it’s free. No strings.
Grab your spot here.
The post Did I crack the scanning app code? The “penny book profit formula” appeared first on FBA (Fulfillment by Amazon) Mastery.