March 26, 2013
When shopping portals run big promotions, it sometimes pays to buy things just for the shopping portal points. For example, early last year, the British Airways shopping portal briefly offered 36 points per dollar for first time users shopping at Nordstrom. I qualified, so I bought over $4000 worth of headphones and GPS watches and I earned over 144,000 points. The idea was to resell the merchandise in order to get most of my money back. Whatever money was not recovered would be my cost for “buying” 144,000 points. As it happened, I ended up making money on that deal, but that was due to a one time fluke (see “How Amazon paid me to collect miles“).
Next to credit card signups, buying and selling merchandise is probably the fastest way to rack up points quickly. It’s not for everyone though! It takes a big time commitment. It requires money up front that may not be recovered in time to pay your bills. It is risky in that whatever you buy may not sell well or may depreciate before you sell it. And, it is stressful. While you wait for items to sell and when you realize that your costs are higher than expected, your stress levels will rise. And, things can go wrong. To see some examples, please see this post that I wrote last August: “Frustration by Amazon.”
If you still want to buy and sell things despite the paragraph above, then one great option to consider is called Fulfillment by Amazon (FBA). With this service, you send merchandise to Amazon so that they can sell it on your behalf. You control the prices, but they handle all customer interactions, packaging and shipping, etc. In return, they charge seller fees and handling fees. The best thing about this service is that it requires far less work than selling each item individually on your own. The second best thing about this service is that items tend to sell quickly since they qualify for Amazon free shipping. This includes both Amazon’s policy of offering free shipping for orders over $25, and free two-day shipping for Amazon Prime members.
Fulfillment by Amazon Basics
- Sign up for FBA here.
- The first time you sell a particular product through FBA, you need to add it to your inventory. Click “Inventory… Add a Product”. Fill out the required fields.
- When you’re ready to send items to Amazon, you need to create an FBA shipment (Go to “Manage FBA Inventory” then click “Send/Replenish Inventory”). A wizard like UI makes this easy. Make sure to print out a packing slip for each box and include it at the top, inside, before sealing the box.
There are quite a few different fees that you may be subject to as a seller. The most important thing to understand is that there are fees for selling on Amazon regardless of whether you use their FBA service. These include Amazon referral fees and Variable closing fees. Details about these fees can be found here. Referral fees range from 6% of the sale price (for personal computers) to 25% for Kindle accessories. The fee for most electronics-related categories is 8% and the majority of other categories is 15%. Variable closing fees vary by item type, but are generally around $1 per item. You will also have a fixed closing fee of 99 cents per item unless you sign up to become a Pro Merchant.
In addition to the referral fees and closing fees, you will encounter FBA fees. These include Order Handling fees, Pick & Pack per unit fees, Weight Handling fees, and Oversize Item fees. There are two good ways to figure out what these fees will be. One option is to use the FBA Revenue Calculator. Another option is to add the item to your FBA inventory, then go to the “Manage FBA Inventory” page and look at the “Fee Preview” that shows up next to each item. Click on the fee shown to see fee details.
Tips for Saving Money
- Sell items with the lowest referral fees. Computers are 6%. Cameras, electronics, video game consoles, and unlocked cell phones are 8%. Other categories are more expensive.
- Amazon charges a fixed closing fee of 99 cents for each item sold unless you become a Pro Merchant for $39.99 per month. If you plan to sell 40 or more items in a month, sign up to be a Pro Merchant. You can downgrade to the free service at any time.
- Amazon charges some FBA fees per item (for most items), so you can reduce fees as a percentage of total by selling higher priced items.
- Amazon charges modest FBA fees for storage and weight handling (for most items). Sell items that are small and light to reduce these fees.
- Take advantage of Amazon’s Zero Fee Fulfillment. Amazon says “Standard-Size units that sell for $300 or more on Amazon.com are eligible for Zero Fee Fulfillment. You pay nothing for Order Fulfillment fees, which include Order Handling, Pick & Pack, and Weight Handling. Other fees such as Inventory Storage, optional services, and Selling on Amazon fees still apply.“
- When sending items to Amazon for fulfillment, select the “Amazon-Partnered Carrier (UPS)” option for deeply discounted shipping.
Tips for Selling Effectively
- Sell items that are high on Amazon’s Best Seller lists. When browsing Amazon.com within a department (“Camera, Photo & Video”, for example), you’ll see a small “Best Sellers” link. By clicking that link, you’ll see the top selling items in that category.
- Sell items with good reviews.
- Before buying items, make sure that Amazon lets you list the item as “New”. Some brands do not allow this. I’d recommend not even bothering with a product if you can’t sell it as new (assuming it is new). Even before you have the item, you can add it to your inventory awaiting shipment to Amazon. By doing so, you will be led to the page where you are asked to select the item’s condition. If “new” is not in the dropdown box, then abort.
- Price competitively, but not too competitively. If you’re selling a very popular item, you can simply match the best price that qualifies for Amazon free shipping. If you need your product to sell better, undercut that best price by a penny or a dollar or so. Don’t undercut too much because you’ll risk entering a price war with other sellers.
Miscellaneous Other Tips
- Buy items in manageable sets. For example, lets say you want to buy and sell 50 tablet computers and you’d guess that 5 can fit in a reasonably sized shipping box. Consider making 10 separate orders of 5 each so that the packages will arrive in boxes you can reuse. When they arrive, simply fill out the Amazon shipment order and slap the appropriate packing slip inside each box, and then tape the FBA label and shipping label to the outside.
- Watch out for returns. People will return things as “damaged” even if there is nothing wrong with them just so that they can do the return for free. Your only option at that point is to request the item to be returned to you. Then, if its in good condition, you can re-sell it. In my experience, cheap stuff (toys, etc.) are less likely to be returned than more expensive stuff (tablets, GPS devices, etc.)
Do you have your own tips for selling on Amazon? Please comment below!