How to Make Make Money Online with Amazon FBA or EBay
Online Arbitrage and how to spot an item you should buy.
What is a good media item?
A good media item is an item with a strong demand that has a big gap between the cheapest copy overall, and the cheapest FBA price.
A good profit margin to brick and mortar stores is generally 40-70%. A good profit margin for online sales is 100-300%+ profit margin.
Establish your business model and profit margin strategy, prior to sourcing, because there will be a range of items that are viable. We want items that meet are specific requirements.
When sourcing items, were looking for three things:
1. Demand (what does the sales history about how fast this item will sell) We use sales rank to determine an estimated window we can project the item to sell within. This helps also to establish a sell through rate consistency.
How quickly are we looking to sell an item?
Most times you will always be looking to sell an item as soon as possible. One thing to keep in mind is that the higher demand an item has, the more competition you will face selling the same or similar item.
Items that sell often will also have a higher cost. Demand does mean that prices will rise as the consumer wants more.
Average sales rank is paramount in sourcing items. Average sales rank takes the items sales history over the past 12 months (or more) and shows you the rate at which it sold. This is the most reliable source of data on an items expected sales performance.
The sales rank cheat sheet below acts as a guide towards how we’ve narrowed down the sales rank data into sales history we can use to select high ranking items that are in high demand.
Using the data below, we can set the parameter that keeps all of our media items, within a 5-7 day turnover rate, if we source items that have a sales rank of 800k or less.
Sales rank's of media items selling multiple units per day:
Sales rank of 1: 10,000 units per day.
Sales rank 10: 400 units per day.
Sales rank of 100: 70 units per day.
Sales rank of 1,000: 30 units per day.
Sales rank of 5,000: 15 units a day.
Sales rank of 10,000: 10 units a day.
Sales rank of 100,000: 1.5 units a day.
Approximate time since a items last sold:
Sales rank of 300,000: 1 day ago.
Sales rank of 500,000: 3 days ago. (2 to 5 days)
Sales rank of 650,000: 5 days ago. (3 to 7 days)
Sales rank of 800,000 7 days ago. (5 to 9 days ago)
Sales rank of 1,000,000: 10 days ago. (5 to 15 days ago)
Sales rank of 1.2 million: 15 days ago. (8 to 20 days ago)
Sales rank of 1.5 million: 25 days ago. (12 to 35 days ago)
Sales rank of 2.5 million: 40 days ago. (20 to 60 days)
Sales Rank: Top 1%, 5%, and 15% (Updated Spring 2016)
*These figures are based on the total number of items that have a sales rank (i.e. the items that have sold one ore more units) - not the total number of items on Amazon. Using the number of items with a sales rank provides a more accurate look at demand.
2. Cost of Goods to be Sold
This is based on capital resources you have to spend on inventory. The format that I’ve used to mentally wrap my head around the numbers is this:
10 x $100
20 x $50
25 x $40
50 x $20
The cost of goods will only become a factor if we’re spending a good amount of money for small returns. Following our profit margin guideline will prevent that from happening. We’re looking to make well over $40, $50, $60 per item.
An example of a bad item would be sourcing a $50 item to get $10 profit.
This is with the goal of $1,000 a month. And then 1,000 a week, after that.
Things to note:
Amazon fees tend to impact lower priced items. Source items that have a reasonable return and moderate fees. Find a happy medium between low costing items and high costing items, items with too much amazon fulfillment or putting too much money in one item that could have equaled multiple units).
Profits: Source items that have a 100% to 300% return on investment. Being that we are sourcing higher end items, we have the luxury of picking the cream of the crop. We use a online software that allows us to calculate all fees that amazon will be charging us to fulfill our orders.
1. 200% return on investment, tripling your initial investment.
Source a $15 item, list it for $60, ROI $45
2. 100% returns (doubling your initial investment.
Source $9 items, list it for $26, ROI $18
3. 50% returns ( which is considered good for most businesses)
Source $5 item, list it for $15, ROI $7.60
Questions to ask yourself when starting your online retail business:
1. How much are you willing to spend to source inventory?
2. How much time are you going to spend sourcing inventory? The higher the returns, the longer it will take to find items. The lower the returns, the more options you will have.
3. What do you want your sale through or turnover rate to be?
Action Steps and Notes:
Demand: Keep your average sales rank under 1M
Cost: You decide on cost of items you source for inventory and profit.
Profits: 50%, 100% 200% all based on your own factors of:
How much your willing to spend to source inventory?
How long your going to spend to find the items that meet your parameters?
And how quickly do you want to have repeat and continued sales, knowing that the higher demand items will have much more competition?
Let me know in the comments below what your thoughts are. re you having any challenges we can work through together? Drop me a comment below or fill out the form at the bottom of this page.