29/01/2022
Estimating your revenue, monthly sales, reviews and search volume is a great way to keep track of your success in selling your products on Amazon.
However, just knowing these numbers will not give you a clearer understanding of how well you perform or how much you really made for a particular period of time.
In order for you to get that complete picture that may help you make better decisions; the question that you should be asking for are:
How much should I sell my product to have a great monthly Return on Investments (ROI)? What is the best ROI for a particular product?
There are several factors that you should consider in pricing your amazon product. And one of the main considerations is the Amazon Fees that comes along in selling on Amazon.
One of the biggest mistakes that new sellers made is not factoring these costs when they make their product pricing decisions.
In order for you to get the most acceptable revenue, you should consider factoring the following amazon costs:
A. Seller account fee: It is the amount you pay to Amazon every month for your seller’s account.
B. Referral fee: The percentage of a product’s price that Amazon charges you for every sale you make.
C. Variable closing fee: The fee charge for shipping items taken off the total monthly sale.
D. FBA (Fulfillment by Amazon): The fee you’ll pay to amazon for letting them handle your fulfillment.
In other words, your ROI is not just the difference of your Selling Price and the cost of getting the product.
Now, how will you price your amazon product to get the best Return on Investment?
In order to get your best ROI, you should consider the following:
1. The 3x Rule – In order to get your Amazon Business up and running, especially when you are a startup, you should use the 3x rule when pricing your product. The idea of the 3x rule is that, you find a product that has the characteristics of being saleable plus consider the cost of a product. If you can purchase a product for $5 each, can you sell it for $15? Will the buyer buy your product for $15 each? This strategy aims to create a 100% return on your investment.
2. Being flexible – well, didn’t I say that the 3x rule works perfectly during startup? What I mean by that is, you need to accept the fact that your ROI will sometimes go up and down and the factors affecting this change might not be within your control. Being flexible on the ROI level that you want to accept would help you make better decisions.
For example: You might need to lower your ROI because there just won’t be enough items to buy at a lower price within the business-to-business market to fulfill the growing orders of your expanding business.
3. Monitor Price Movement – In order for you to get the best ROI on a regular basis, you need to keep track of your sales and the costs on a monthly basis. Bear in mind that prices fluctuate regularly and so as the cost of campaigns and keyword bidding. Hence, by monitoring these cost movements, you’ll be guided on how you’ll price your products to get your desired ROI.