Wednesday, March 28, 2012

Amazon Pricing - How to Swim With Sharks Without Being Eaten Alive Part 2

Welcome to part 2 of this series. This post will give you some ideas on pricing an item, both Merchant Filled and FBA for which there are no other offers. This is my strategy, ask other sellers you will get other answers. These are just some guidelines I give my clients.

If the item is being sold merchant filled, and there are no FBA sellers and Amazon does not have it, add the price of the item, the shipping cost, and $2. This is a starting point. If the item sells quickly, you can raise your price. If this is a repeatable item that you can source more of, you can continue to raise your price to find the threshold of what a customer will pay. If the amount is near $25, I always try the $25 price to make the item available to Super Saver Shipper customers. Even if the merchant filled + shipping + $2 price is around $20, I will try $25 to see what happens. You can always reduce the price later if the item isn't moving.

If the item is listed on Amazon, but shows the red message, "Currently unavailable, sign up to be notified when this item becomes available," this is a good sign!

This means that the item has sold on Amazon but is now out of stock. These items are usually hard to find, perhaps discontinued, and buyers really have signed up to be notified when the item is available (when you list it MF or it hits the FBA center), and you can set the price. In this case, you want to go to Google and search for the product to see what it sells for on other sites. (You may find some more to buy this way, too!) Or, view eBay completed listings to check for recent sales. Look closely at the Google results. You may find posts on message boards where people are discussing the product, how it is hard to find, and what they will pay. For example, on the product above, Tone's Steak Dust, I found this article posted recently:

The article does not mention how much the item cost on Amazon, but you certainly get the idea that consumers in search of this item are being directed to Amazon to find it. Rule of thumb is to price your item 3 times your cost, but in this situation with an unavailable item, you will want to go much higher. If the item doesn't sell within a reasonable amount of time (I allow 2 months), you can lower the price. If the item sells quickly, you can raise the price to find the threshold of what the customer will pay.

It is very important here to take your own preferences, opinions, buying habits, and budget out of the equation when pricing for Amazon. You must never think, "Nobody would pay that." How do you know what everybody would do? Just because YOU wouldn't pay that price, does not mean NOBODY will. Give it a chance, you will be surprised or even shocked at what consumers will pay for their favorite product. Cost is relative. Do people like Donald Trump, Bil Gates, Oprah, or Ted Turner really care what they pay for consumer products? You may not be one of them, but the world is full of rich people who don't know or care what they spend to buy their favorite products. Do you really see Martha Stewart, Julia Roberts, or Paula Deen walking around Walmart finding the best buy on everything they need?

We are often referred to as "price gougers" because are able to sell our products far above the MSRP. However, an item is worth what someone will pay for it. Unless the item is a life-saving medicine, medical device, or needed for human survival, I don't have regrets for selling items at what the market will bear. That is what this business is all about.

Stay tuned for the next installment about why I think sales rank really isn't all that important anymore.

Part 1 of this series

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