A high Profit Margin and a low Sales Rank doesn’t always lead to a winning ASIN on Amazon. Here is a basic run-down of some standard sourcing rules and things to check as you’re doing retail arbitrage.
If you’re new to selling on Amazon, the hope is that this provides some basic insight into the type of benchmark you can set when scouting for products. If you’re a seasoned AZ veteran, please let us know what your sourcing rules and sourcing check – list looks like!
ROI % and Profit
Of course the first thing to check would be the lowest price of the ASIN and the Sales Rank.
ROI % = 100 times (Profit / Total Cost).
Most people think it’s a good idea to aim for AT LEAST a 40% ROI. If you buy for example a light weight toy for 25 dollars and can sell it for 50 in FBA, you’ll have about a 15 dollar Profit which corresponds to an ROI of about 42%.
Buy Cost + Amazon referral and fulfillment fees = $25 (buy cost) + $10 (fees) = $35
This corresponds to a Profit of $15 and an ROI of 42%.
ROI % = Profit / Total Cost = $15/$35 = about 42%.
If you sold 4 items in FBA you’d make $60 just from this one ASIN!
Rank and Rank %
The ‘meaning’ of a given sales rank depends on category.
It’s often suggested to search for items in the top 5 or 10 percent (by category).
You can experiment with allowing yourself different maximum sales ranks, but the important part is to track your buying criteria, see what works, and then adjust your sourcing rules.
As an example: There are about 1 Million items in the appliances category. And since 5% of 1 Million is 50 thousand, any item with a rank of 50 thousand or less in this category would have a rank of less than 5%.
As the Amazon catalog grows, these figures will change, but here is a table that shows the Rank which corresponds to a 5% sales rank by category.
|Category||Total number of ASIN's in category||MAX rank to be within top 5%|
|Arts, crafts and sewing||3283616||164180|
|Beauty & personal care||2042286||102114|
|Clothing, shoes, jewelry||35523238||1776161|
|Health, household, babycare||5750750||287537|
|Home & kitchen||66220680||3311034|
|Industrial & scientific||9352437||467621|
|Luggage & travel||780250||39012|
|Patio, lawn & garden||2961230||148061|
|Sports & outdoors||24909978||1245498|
|Tools & home improvement||11800828||590041|
|Toys & games||5983627||299181|
Other Critical Research steps
- Use Keepa and CamelCamelCamel to make sure the price and rank are stable over the last 2 or 3 months and to see if Amazon has been selling the product recently. If so, they’ll probably be back. This is an important point because many people fail to use Keepa and assume because Amazon isn’t selling the item now, that they won’t be selling it soon. On the other hand, if they’re frequently running out of stock you may be able to sell the item quite easily.
- Double check restrictions: you can do this by attempting to list the item as non-fba, or by adding it to a shipment if it’s FBA just to see if any errors are displayed in your Seller Central account. Profit Bandit also has the ability to automatically tell you if the item cannot be sold on Amazon after you scan it.
- This one seems obvious, but for new sellers it can be confusing. Make sure that the item you’re sourcing is the same as the one on Amazon. Sometimes it may seem like a great profit margin until you realize you’re comparing a 2 pack to a 12 pack, or the item is bundled with another item.
- A separate but related issue is if someone created an extra product page for the same item and there are actually 2 catalog pages with different ASINs, displaying the same exact product. You may think you have a great margin on one, but there is another ASIN (for the same exact product) selling for much less on Amazon. You can check this by searching for the item title at this phase.
We hope this helps new sellers and people just starting out with Profit Bandit to get an idea of the type of things they should be looking out for! If you’re a more seasoned seller, again, please reply and add your thoughts on this!
Austin Fisher is the Product Owner of SellerEngine’s mobile app. As a Profit Bandit expert, his main focus is sourcing techniques and scouting procedures.