Amazon FBA – It’s all about inventory profitability, NOT ROI!!!

ROI is cool. It’s good to have a high ROI for the items that you sell. But ROI isn’t everything. It’s not even close to everything. Reason being … it doesn’t take into account the time you have to hold this inventory to get the stated ROI. In other words, if an item has a case quantity or minimum order quantity (MOQ) of 72 and you sell 12 per month, you have to purchase 6 months worth at at time. On average, assuming that you order right when you get to zero quantity you have 3 months worth of stock at all times. That is your investment. Your return is your monthly profit. Take your monthly profit and divide by your average inventory and you will get your monthly profitability.

As FBA sellers, we are investors. We invest our capital and get a return that is higher than what we could get investing in traditional investments. We should be measuring our returns as a percent per month. I shoot to get at least a 20% return per month on my invested capital.

February 15th, 2017 Ideas

1.  Start a consulting arm of the Amazon business.  Charge $100 per month and cap the number of clients at 10 or 15.  Run this as a pilot class with the intention of taking on more clients once the systems were up and running.

2.  Move forward helping Shawn start an Amazon business.

3.  Write to interesting people and give them ideas.

4.  Post lists of ideas on this website.

5.  Talk about title line in LinkedIn.

6.  Talk about credit card management in a blog post.  Talk about when to spend, how much to spend, and how to stagger due dates to optimize cash flow.

 

Amazon FBA Max Pricing

What does it mean when your repricer tells you that a certain number of your products are at your max price?  How do you set your max price?  Appeagle will tell you via the “All Available Fields” download what your current price is and what your max price is.  To find items that are at max price, create a new column and use the following formula:

=M2-N2 (where column M is your max price and column N is your current price)

Any items where the difference is zero are items that are currently priced at your max price.  You can easily do the same thing with other repricers and quite a few repricers will generate a spreadsheet of “items at max price” as a standard feature.

If an item is at max price, it means that either you set your max way too low OR that you do not have any competition on the product.  If it’s the later, then you could actually set your max price as high as you wanted and still be the lowest priced item.  However, if you’re too high, then nobody will buy your item.  Amazon customers are less price sensitive then other customers but there are certainly limits to how high you can price an item even if you are the only seller.

So what is the best way to set max prices?  Ideally it would be something like MSRP plus say 10%.  But Amazon doesn’t give suggested prices anymore.  Finding MSRP for one or two items is no problem but finding them for hundreds of pairs of shoes a week becomes way too much work.