Amazon Vs Ebay

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Image representing eBay as depicted in CrunchBase

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In these posts I’ve focused primarily on selling with Amazon, but there are several venues through which to list your goods, especially if you are starting off with books. http://www.alibris.com , http://www.abebooks.com, and http://www.half.com (Ebay related) are other venues I’ve listed with in the past. There is no doubt, however that Amazon is the Big Boy on the block. Amazon sales far outweighed the other two venues combined to the point that I felt my membership fees, and customer hassles from other venues weren’t worth the little I was bringing in from these other sites. Ebay on the other hand, is a completely different animal.

Amazon hef

Amazon hef (Photo credit: Wikipedia)

The main difference between Ebay and Amazon is clientele.  Ebay customers are looking for the deal, while Amazon customers don’t care as much about price as much as customer service. Amazon customers know what they want, they want it now and they are willing to pay for that convenience.  Amazon takes the Disney philosophy when it comes to customer service and Amazon customers expectations reflect that philosophy. Occasionally this works  against an Amazon seller as granted there are those few difficult customers that will never be happy no matter how far you bend backwards. In general however, if a seller is honest, fast, and genuinely wants to solve problems, most customers are willing to forgive the occasional mistake.

Ebay attracts those looking for a deal and sometimes even sellers looking for deals so they can turn around and list their Ebay finds on Amazon! E bay doesn’t have the same trusted name, you take your chances and you get what you get. Customers can leave feedback of course but there are no guarantees like there are with the Amazon A -Z guarantee where a customer can get money back without even needing to cite a reason.

I have tried E bay selling and left it as again I had more problems than I felt it was worth. As my business evolves however, and I do want to try new things, I may come back to it and try again. One of the great things about being a Fulfillment by Amazon merchant is that all of my inventory is eligible for all the same perks as Amazon merchandise. That means if I sell an item on E bay, I can advertise free two day shipping or overnight shipping for 3.99. This gives me a leg up on other E bay merchants selling the same items. Once an E bay item is sold (or any item listed on any other venue) all you need to do is go into your Amazon seller account and fulfill the order manually.

I have heard rumors recently that Amazon is so pleased with their third-party Fulfillment program that they may not carry their own merchandise in the future. This is good news for Fufillment merchants who no longer would need to worry about purchasing inventory to suddenly find Amazon undercutting their prices. I’ve also heard that Google has plans to set up their own online stores. It will be interesting to see what kind of model they come up with and if they can compete with Amazon.

Below you will find articles citing increased fees for Amazon sellers. Yes there have been slight increases here and there, but there have also been slight decreases in a few areas as well.  I have found these fees seem to  balance out and if you are purchasing inventory with fees in mind there’s no problem. I’m suspecting that those who are complaining about the fees are following a model in which there is lots of cheap paperback penny books and little profit margin. Quoting one seller “It’s always a pleasure to read about sellers who are too stupid to survive, and even better when we learn they need to supplement their income by spreading their stupidity to others (for pay). And there is even more pleasure in seeing the press naively believing the losers.”

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Five Factors to Consider When Setting Up Your Retail Arbitrage Business Model

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Image representing Amazon as depicted in Crunc...

Image via CrunchBase

 

There are several factors to consider when setting up your  business model.

 

1. Always keep profit margin in mind. A good rule of thumb is to sell for at least three times what you paid for it. This should cover Venue fees, any shipping fees, and storage fees and still leave you a profit. This rule works whether you are merchant fulfilled or fulfillment by Amazon. Keep your expenses as low as possible. This is why I recommend wrapping your orders in cut up paper grocery  bags over bubble envelopes. Purchase tape in bulk etc. Common sense stuff.

 

2. Low Amazon sales rank. In general, the lower the Amazon sales rank, the faster the item will sell. Amazon sales rank are a bit of magic and mystery. Amazon doesn’t reveal the how behind the tricks but the rank is a good indication of how long ago that particular item had a sale. An item that is number 1 in sales rank means its selling several a day.  Sales rank also varies in “meaning” depending on the category the item belongs to as well. So for example, a sales rank of 500,000 in books means you can expect to sell that particular book in about 6 months. If that item is however a Kitchen item (of which there are A LOT fewer kitchen items in comparison to millions of books!) 500,000 may mean a year to sell.  Generally I don’t purchase an item unless it’s a sales rank of 500,000 or lower. I will give a little leeway to around the 600,000 mark though if the item can  sell for a really good price and I can make maybe 50.00 or more.

 

3. Average sale price. When first starting out selling your own items, I recommended that you don’t bother listing it unless you can sell it for at least 7 dollars. Once you get going however, I suggest you not list anything for less than 17.99. It takes the same amount of time to list a 5 dollar item as it does a 35 dollar item. It’s worth your time to leave those cheap things behind and stick with the higher priced items. Spend less time listing and shipping and more time scouting for the good stuff! The average item in my inventory is now up at 32.00. While that took time to accomplish, it means more money for less work.

 

To find this good stuff, get yourself a good scouting app. The free apps are good to start with, but there are much better out there more suited to someone who wants to take retail arbitrage more seriously. I subscribe to http://www.scanpower.com . They are the only people out there who have direct access to the Amazon database so that I can get real time prices on fulfillment by Amazon prices. Before I became a fulfillment by Amazon merchant I used http://www.scoutpal.com . They are good and they are inexpensive. You do have to purchase the handheld computer and scanner which you may be able to pick up for cheaper on Ebay. You download their database weekly, it’s not real time, but it’s fast if you want to hit book sales and beat out competition that way.

 

4. Vary your inventory within the Amazon ranking system. What I mean by this is carry some fast sellers, some medium sellers and some slower sellers. My general rule of thumb for choosing inventory is nothing under 17.99 and list for 3x what I purchased for. If however, it has a super low sales rank and I know it’ll sell within a couple of days I’ll sell cheaper stuff to make a quick 10 bucks.  Also if it’s something that I won’t make 3X on but I know I can make 50 bucks on it and it’s a reasonable Amazon sales rank then I’ll go for it. Sometimes it’s also worth it if you say pick up an obscure science book for 5 bucks that’s listed for 150.00 with a high sales rank. This is what’s called the “long tail” of sales. Someone out there is looking specifically for that item. You might hang onto it in your inventory for a  year or more,  but it’ll be worth it to your bottom line when it sells .For five bucks it’s a cheap risk to take.

 

5. Get set up on Fulfillment by Amazon. Seriously! Especially if you are a  one woman / man show! It’s the best thing I did. All that time I spent packaging, and mailing is now spent treasure hunting, which is the fun part of the game right? Being a Fulfillment by Amazon Merchant is like have employees without having to worry about all that comes with having employees. Amazon charges for the service, make no mistake, but it’s reasonable for what you get in return. Again, Amazon is the Big Boy on The Block. I read somewhere recently (sorry can’t remember where now) that most internet shoppers now go directly to  Amazon before they even use GOOGLE. Being a Fulfillment by Amazon Merchant means my inventory is eligible for all the same perks as Amazon inventory, such as Amazon Prime and Super Saver Shipping. It’s backed by Amazon guarantees and customer returns and complaints are dealt with by Amazon staff. On occasion, I do have customers still contact me and I do everything in my power to help in a courteous manner, and that keeps that feedback score up where it needs to be. Amazon keeps working 24 / 7. No closing your business down for a week while on Spring Break vacation, and you can take a day off to take your sick kid to the doctor and still make money.

 

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What is Retail Arbitrage Anyway?

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Image representing Amazon as depicted in Crunc...

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Simply put, retail arbitrage is the art of buying niche items that don’t sell in your local market then reselling them for a profit on the internet market. Local markets differ according to local population. You might  live in a cold climate where blow up swimming pools go on sale at your local Big Lots for 3.99. You can pick those up and sell those online to someone who lives in a warmer climate for 20 bucks! My best example of retail arbitrage is my purchase of a dark skinned baby doll on sale in a Walmart located in a primarily white community. I purchased the doll on sale for 7.99 and they were selling on Amazon for 29.99.

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Here’s a good example. I picked up this “Tech Deck Sk8 Park toy for sale 4.99 selling on Amazon for 24.99. This item has a sales rank of 420,583. This actually means it’s a fairly good seller. Amazon sales rank will factor seriously into your choice of inventory purchases, and development of your business model. That’s a topic for another post.

You might be wondering why I would bother sharing my “trade secrets” with possible competitors.  I feel comfortable doing so because there is such a broad scope of differences in business models coupled with differences in local markets, that competition is actually fairly light. For example, I  know from scouting library sales and visiting my local Friends of the Library shop for inventory that there are numerous other sellers in my area. However because my model differs from theirs,  I can sell and make a  profit on items that they wouldn’t bother with and visa versa. Much depends where they have set their profit margins,  what is their customer base, what venues they use to market their goods, and the biggest factor in my mind… are they self fulfilled or are they Fulfillment by Amazon merchants?

Book selling is a great way to get a feel for how it all works.Once you start with clearing out your own library, you can use those profits to go out and purchase more inventory, thus never even needing to dip into your personal bank account unless you really want to. You can build your business right from scratch by simply reinvesting your profits until you’ve built your desired inventory and then continue to maintain that inventory. There are strategies for doing this too which I will get into later.

For now, your next step is to get out there and scout for inventory sources in your neighborhood. If you want to simply stick with books at the beginning, hit your local library, watch for book sales, purchase from Craig’s list, let your friends know that you are willing to give them an offer on all their old books . Sometimes they are so glad that you will cart them away they will let you have them for free. ALL books are potential money makers. List what you can and trade the rest for books  that you know will sell.

Once you are set up and ready to move past books into other areas you will find that your local marketplace has a multitude of retail arbitrage opportunity. You can find arbitrage opportunities everywhere from your local brick and mortar bookstore to Walmart.

Once you have really decided that you want to get out there and do some serious scouting, you’ll need the proper equipment. Next post I will get into scouting apps and scanning hardware recommendations.

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Your First Amazon Listings Five Bits of Advice for New Amazon Sellers

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So you’ve gathered a few of your books and are ready to try your hand at online sales. Here are the five most important things to remember once you are ready to dive in:

1. LIST HONESTLY

I’m telling you right now at the get go… Amazon customers have high expectations. When you list your books, be COMPLETELY honest about their condition. You want that great feedback right from the beginning because poor feedback takes about a year to fall off the statistics. People prefer to purchase from a seller with 100 % feedback rating and they will pay a little extra for it.

2. LIST ONLY “GOOD” CONDITION AND ABOVE

I will very rarely list anything in the “acceptable” condition. You are begging for poor feedback no matter how many comments you put in there describing the condition. In fact error on the side of caution, so that your customers are more than pleased with your item. I can’t stress enough how important it is to do this FROM THE BEGINNING. You don’t want poor feedback within your first group of sales.

3. ANSWER FEEDBACK AND REPLY TO QUESTIONS IMMEDIATELY

Service with a smile is harder to give when selling online. Two ways to do this is to answer emails right away or as soon as you can. Certainly within the first 24 hours. Also, reply to feedback. Take the time to say thank you or reply politely to negative feedback. Some people actually do check feedback before they order from a merchant. Seeing that you give as much personal service as possible in a faceless venue makes a difference. If there is negative feedback answer it with an apology, then contact the customer and try to work things out. Mistakes do happen and most people understand this if they can see that you have dealt honestly in the past with others. Sometimes they will remove negative feedback after any mistakes have been corrected. If they choose NOT to remove negative feedback, then at least if you have answered feedback politely, potential customers can see that you do make an effort.

4. PACKAGE ITEMS WELL

You don’t actually need to spend a lot of money on bubble envelopes when packaging your books. Sometimes bubble envelopes aren’t even all that great. If they aren’t just the right size, the item can slide around and be damaged. Remember you want to keep your costs down so that you have a greater profit margin and envelopes can be expensive if you are selling a five dollar item and spending a dollar fifty on an envelope. While I started out with envelopes I quickly realized that it was cheaper for me to use brown paper bags. Ask for your groceries to be put into paper bags then reuse them by cutting the bags along the edge and the bottom. Use the bottom of the bag first then fold the corners up over the book and then wrap the rest with the sides of the bag. (I’ll do a video and post later on exactly how to do this.) If you feel you need extra cushioning  wrap the book first in a plastic bag.) I found my customers appreciated this type of “free” wrapping more than the bubble envelopes that I paid money for. Once you grow somewhat in size, you may actually want to upgrade to becoming a Fulfillment by Amazon merchant. Then you don’t need to worry about this step of the process at all. In the beginning however, wrapping carefully improves customer relations and it shows in your feedback.

5. LIST ONLY BOOKS YOU CAN MAKE MONEY ON

Don’t bother listing penny books. There are hundreds of sellers listing penny books they are usually sellers with thousands and thousands of books in the inventory.  Making money strictly off of the shipping cost isn’t worth your time. When you are listing those first few books I suggest listing only the books you can make $7.00 or more. Gradually this number will get higher, but this is your first attempt. I rarely list an item now unless I can list it for AT LEAST $17.99. If you have a bunch of penny paperbacks, you are better off trading them at your local bookstore either for cash or trade value. Using that trade value, you can trade up for books that sell higher on Amazon. This will be an important step in building your business which I will get into later.

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Getting Started

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So you’ve heard about this retail arbitrage business and wondered how to go about getting set up doing this yourself. There are loads of websites, books, and blogs out there now telling you how to go about doing it. If you think they sometimes have different and sometimes even contradictory advice on how to get started and maintain your small retail arbitrage business, you’d be right.

I started retail arbitrage out of my home as a homeschool project for my son. I thought it would teach him some lessons in running small business, as well as teach him that skills used in school really can be applicable to the outside world. On top of it, I thought it would be a good way to earn a few extra bucks to pay for little extra things like music lessons and scout events. I didn’t realize at the time that I would have so much fun with it, that I’d continue the “homeschool” project long after my son had returned to the public school system.

What I discovered is that retail arbitrage is fun, flexible and while it’s certainly not a get rich quick proposition, there is enough money in it that done correctly, it can become a viable business for a one woman / man operation.

Number one. Do your research. Check out all of those blogs, websites, online classes, books etc. Read as much as you can. As I said before, there are about as many models of retail arbitrage business as there are scouts. I tried several arbitrage business models and if there’s one thing I’ve discovered is that no one’s model can be just right for someone else.

Business Model Triangle

Business Model Triangle (Photo credit: Alex Osterwalder)

There are however, certain models that don’t work at all. Hopefully I can steer you away from those so that you aren’t wasting time and energy like I did. Also those that work will need to be tweaked to find just the right model that works for you. I’m also finding that a retail arbitrage business model is an ongoing process that grows and changes all the time. Finding new and different sources of inventory, changing parameters regarding profit margins, and discovering new forms of inventory, and seasonal items are a few examples ways your business will need to be flexible.

So where do you start? I suggest the easiest and quickest way to get started is to begin by selling your own items. I have no doubt that books are your best and easiest starting inventory. Get yourself an Amazon seller account and begin by listing some of your books that you are done with. Books are easy to package and ship and in the grand scheme of the seller world, sell pretty fast.

I’m not going to go into the details of how to set up an Amazon account or show video here of how you can do that. Amazon is very user friendly and they do a great job of taking you through that step by step. What I am going to tell you is some of the background stuff that comes with the  benefit of experience.

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