Sourcing Rules: Research Steps for New Stock

Sourcing rules

 

 

 

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%
Appliances103935951967
Arts, crafts and sewing 3283616164180
Automotive6662077333103
Baby153143676571
Beauty & personal care2042286102114
Books579926622899633
CD's7493173374658
Cell phones810340004051700
Clothing, shoes, jewelry 355232381776161
Computers18389377919468
Electronics1040938895204694
Grocery108881554440
Health, household, babycare5750750287537
Home & kitchen662206803311034
Industrial & scientific9352437467621
Luggage & travel78025039012
Musical instruments77785938892
Office products7405000370250
Patio, lawn & garden2961230148061
Pet supplies107133353566
Sports & outdoors249099781245498
Tools & home improvement11800828590041
Toys & games5983627299181
Video games44319822159

 

Other Critical Research steps

  1. 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.
  2. 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.
  3. 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.
  4. 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

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.

2 Comments

  1. JoAnn Holland

    I can get profit bandit to download on my android phone. It keeps telling me there’s an error. Any suggestions?

    • Maria

      Hi JoAnn,

      Sorry to hear about this problem.
      I’ve just opened a ticket with our support team, they’ll get back to you soon. I’m sure we’ll find a solution to this problem.

      Cheers,
      Maria

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