Should You Sell a Product Amazon Sells?
One of the most common questions I see new sellers ask “is it a good idea to sell a product Amazon sells.” For my business I have some products I sell that Amazon also sells. I have a specific process I go through when deciding if it’s a good idea or not. Competing against Amazon does have higher risk that you will lose money. For someone that doesn’t have a lot of money to invest it would be smart to stay away until your business can take the risk. I will explain my process I go through when deciding if it’s worth the risk. I will also share my repricing strategy that forces Amazon to share the buybox.
I will first start by explaining how to get Amazon to share the buybox. You will need to use a repricing software. There are a lot of softwares to choose from and I have tried a lot but the one that I have stayed with is BQool. You can click here if you want to check them out. You will need a repricer that will automatically drop your price by $0.01 against Amazon’s price. When Amazon drops their price to match you your repricer will drop again by $0.01. Every time you drop your price you will win the buybox for a period of time until Amazon drops their price. I normally will set a limit price about $1 to $2 below that price for my price to drop down to. After it hits the limit price you will want your repricer to automatically raise your price to your max price. When you increase your price Amazon will increase their price. You then will want your repricer to automatically turn back on with the $0.01 price drop. This will bounce up and down within that price range automatically for you. Giving you a share of the buybox.
I have my repricer set up to know the difference between other sellers and Amazon. If Amazon is not on the listing it will only match the other sellers price so it won’t drive the price down. As soon as Amazon does show up on the listing it will automatically recognize them and start running the price drop against Amazon. Some of the repricers I tried claimed they had this capability but they couldn’t get it to work properly. It wasn’t until I found BQool that it actually started to work correctly. I do have an affiliate link to BQool so for anyone who uses my link to sign up for their 30 day free trial I will personally explain how to set up your custom rules so it will work exactly like mine. Just send me a message on social media and let me know. Here is my link.
Now that you understand how to win the buybox I will explain what I look for when deciding if it’s worth the risk. The first thing you will want to use is a software called Keepa. This gives you a chart on the Amazon listing’s so you can see if Amazon has ever been on that listing. You can also see how long Amazon stay’s in stock. I will point out a couple things you need to notice when looking at these charts.
In this example below you will see an Orange color across the bottom of the chart. The orange is when Amazon was in stock on the listing. The white section is when Amazon was sold out. Over the course of 1 year you can see Amazon was in stock for about 90% of the time.
You can also see that when they were in stock they were selling between the price of $9.19 and $5.69. About 80% of the time they were selling at the price of $5.69.
These 2 are very important because let’s say at $9.19 you are making a $3 profit but when the price goes to $5.69 you are selling at a loss. You then have to think about what your odds are that Amazon will drop the price down to the $5.69 price range. In this example about 80% of the time they are at the $5.69 price so your odds are very high that if you buy this product you will either have to hold it for 9 months for Amazon to sell out or you will have to sell it at a loss to help your cash flow. This is a perfect example of a product that you should never buy.
Let’s say when you first come across this product Amazon's price is currently at the $9.19 price. You get excited thinking ok I can do the repricing strategy from $9.19 down to $8.19 and have a nice little range to make a decent profit. You get excited and don’t take the time to look at the price history over a year to see that Amazon stays in stock for about 90% of the year and during that time only 20% of it was at $9.19. This is an easy trap to fall into. By the time you get it in stock at Amazon they then drop down to $5.69 leaving you in a tough position.
The first example I would call high risk and would say you are almost guaranteed to lose money. In this next example I will call it a medium risk and I will explain why.
In this example you will notice Amazon is in stock about 50% of the time.
Their price ranges from $30 down to $10.99. They spent about 20% of the time at $30, 30% at $20, 30% at $13 and 20% at $10.99
If this product costed you $6 then at $30 you are making $16.14, $20 you are making $7.64, at $13 you are making $1.69 and at $10.99 you are losing $0.02
Adding this up you have about a 80% chance of making $1.69 or more in profits and 50% chance of making $7.64 or more. Another thing to consider is that when they are in stock they don’t keep it longer than 1-2 months so the worst case scenario holding the inventory for 1-2 months until Amazon sales out is not a bad idea.
This example comes down to your own business risk level. Can your cash flow take a 1-2 month hit if these products don’t sell during that time. If your business can handle that then this would be worth taking the risk. If your business can’t sit on inventory for that long then this would be a product to not buy.
This last example I would call super low risk and would say any business could take this risk with a limit on how much you buy depending on your business cash flow situation.
You will notice Amazon is in stock about 5% of the time.
When they are in stock their price is at $10.99 and going off the price of other sellers this does look like a significant price below other sellers.
Let's say this costs you $6 to buy and from this chart about 80% of the time other sellers are at $18. You will be making $5.75 in profits on this product. If by chance Amazon does show up then on this product you will be at a $0.21 loss. You have a very low chance they will show up during the year but if they do you then can hold it for maybe 1 month for them to sell out and be right back to selling at your normal price.
This would be a good example when you have a high chance of success with Amazon. You can never predict 100% of the time what Amazon will do. I am not saying this works 100% of the time because they could at anytime jump on a listing and stay for a couple years nobody really knows so I always use 1 last rule when selling a product Amazon has sold before. I never go too deep on buying that product. I always limit how much I buy so if by chance Amazon breaks their pattern it won’t break my business even if I have to sell at a loss.