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on March 29, 2017 by Whitebox in Marketplaces

How to Sell Low-Cost Products on Amazon (And Why It’s so Hard)

Collect all ten tag, multiple stacked toys in plastic bubbles being sold on Amazon

When we went to the Toy Fair in NYC, we encountered more low-cost item sellers than ever before. Though many of these products were super interesting, these days we just don’t take on clients who sell lower-cost items. 

Pretty often though, we get questions about how to sell low-cost items on Amazon or eBay. Is it lucrative? Is it worth my time and effort? What about those penny used books I see all the time?

Well, upfront, we’d say no, it probably isn’t worth it. And those books… well, they make up the money in other areas, which probably won’t work for you. Even so, don’t despair – after we go through WHY selling these items doesn’t work, we have some ideas and methods that might make it possible for your product.

Why It’s Pretty Darn Tough To Sell Low-Cost Items on Amazon

Let’s say you have an item that retails for $3 in stores. It’s popular, and you’ve built a lot of customer loyalty over the past few years. You feel ready to sell online and want to try to shoot for similar pricing on Amazon as in brick and mortar stores… But guess what: it won’t work. 

Here’s why: 

1/Minimum Amazon fees mean the math just doesn’t add up

Amazon has a lot of little fees that eat into your margins. Especially if you’re doing FBA or SFP (which you definitely should be… if you want to succeed).

At Whitebox, we often tell our clients that you need to assume a basic $3 fixed fee per product regardless of price. And that’s just the start. It doesn’t include the 12-15% commission that Amazon tacks on, depending on the type of product you sell. And, if you’re selling across channels – you also have to factor in weight fees, per item fees and per order fees.

2/Packing materials & kitting labor adds up

Obviously, this varies depending on the size and weight of your product, but it can be especially difficult for bulkier cheap items or fragile ones. And depending on the complexity of kitting your items, you may end up paying a “kitting fee.” Whitebox, for instance, occasionally charges a kitting fee to items that fall under $20 and have significant kitting procedures.

3/Returns become even more of a nightmare

Returns are always a pain. When you’re working with super slim margins that come with low-cost items, returns can make or break your budget… and every return can be a real drain on your overall success.

4/Setting a price point can be a big challenge

Pricing is one of the first challenges you’ll face with low-cost items. Even if you’ve got an established customer base, will they make the leap to buying your product online? If you sell your product for $5 in stores but have to up the cost to $12 online, it might not attract many buyers. It’s worth thinking about your brand, and how you want your customers to see it.  Here are 6 tips for pricing your products on Amazon.

5/The add-on item route

If less than $10, it’s possible your product may be shifted to “add on” status. While you might be able to hold the price point your consumers will want, this can really eat into your sales, since customers face the inconvenience of the $25 threshold to get your item delivered.

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But What if I Really, Really Want to Sell my Item Online?

We know that sometimes, getting your product out there is one of the most important parts of succeeding as a brand. After all, brand loyalty to a product sold solely in brick and mortar stores only takes you so far. We’ve got a few strategies to pushing past the razor-thin margins of selling low-cost online.

1/Consider upping the price

Sometimes, people are willing to pay twice as much or more for the convenience of home delivery. This is really down to your item and the brand image you’re aiming for. Listing Optimization helps you find the right prices for your products.

2/Multi-packs

While selling the product individually online may not be viable, multi-packs can really work out for some products. Especially if you’re selling something consumable, selling in batches of three or more might make your margins much better. And, it brings in the “Costco” type of customer that is shopping online to get deals on bulk buys. *Here is a blog post we wrote that goes into more details about multipacks.

3/Variety packs

It may make sense to bundle multiple low-cost items together in order to increase your price points and margins.

4/Go the add-on route, anyway

An item might fall into the “add on” category, which while a pain to customers and not helpful to you, is effective in offering your consumers low low prices that lend itself to brand loyalty.

5/Let someone else sell it for you

Whether you let this item go through Vendor Central (assuming Amazon is willing) or you take the risk of working with resellers, sometimes it can be worth it to get your item out there… and not deal with the losses of low-cost ecommerce fulfillment on your own.

6/Lose money

Sometimes you want to sell something at a loss, and consider it an investment. Consider this like giving out free samples… Obviously you don’t make money off it right away, but people may return to buy larger, more profitable quantities. This might fit into your brand image if you consider yourself a “low-cost leader” type brand.

Maybe this post has you feeling a bit sad. Maybe you feel like giving up on selling your low-cost product online. Guess what? That’s okay too. Depending on your company, you might have other products that are more profitable options. Or, you can continue with your brick and mortar store for now… and take the ecommerce leap later. 

If you’ve got some questions about your product in particular, and whether it’s a good candidate for online sales, we’re always open to chatting here. We know that every product presents unique challenges, and we’d love to talk to you about options.

 

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