Sales Rank Part 2: Implementing an Intelligent Book Scouting Strategy

(If you missed last week’s post where I explained how to interpret a book’s sales rank on Amazon, you may want to read that post first before jumping into this one.)

Now that you understand the basics about a book’s sales rank, it’s time to look at some actual metrics to see how rank plays out in the real world.  After reading this post you should have the tools you need to put together your own purchasing strategy.  For example, if you come across a book with a 3 million rank that is selling for $10, should you buy it?  If you don’t know the answer to that question, read on!

Background:  One of the most prevalent misconceptions among the bookseller community is the myth about books with a ranking higher than 1 million.  Most “experts” tell you to leave these on the shelf and move on to find inventory with a better rank.  It’s possible that they don’t understand sales rank, but my hunch is they are trying to trick you into leaving those books on the shelves for them to scoop up later.  (sounds like a pretty good strategy to me!)  Either way, don’t believe the hype – look carefully at actual data to make up your own mind.

The Experiment:  I wanted to dispel this 1MM myth using my own sales metrics, so I set up a monster spreadsheet to track the sales ranks on every book I listed (I’m part of the rare breed that actually enjoys playing with data… the good news is you can simply read this article and save yourself the headache of crunching numbers).  The sales ranks I use in my analysis are the current ranks on the day I actually listed the books.  (I get that data from my closed batches in InventoryLab.)  Since sales ranks are updated hourly, I wanted to provide an anchor point that most accurately reflected the rank from when I made the decision to purchase the book.  For this analysis, I only used books that have been on the market for at least 6 months to give them a fair chance to sell.  For my inventory, this sample size was a hair over 2,500 books.

The Results:  I broke out my sales ranks into several ranges, as you can see below.  The “% sold” for each category is what percent of the units have sold at 3 months, 6 months, and 12 months.  (Note:  Since I don’t have any 12 month data yet for my young business, this last column simply shows the maximum time frame that I have for every book’s listing.)  Here’s how the data shook out:

Sales Metrics

As you would imagine, the better a book’s rank, the more likely it is to sell.  At close to one year out, roughly 95% of my books with a rank of less than 100k have sold.  That’s higher than I would have anticipated!  Perhaps more surprising, however, is that 33% of my books with a rank between 2MM and 3MM have sold.  These are the very books that most people are leaving behind since their ranks are supposedly “too high” to sell.  While others may be ignoring these books, I am selectively adding them to my inventory and boosting my overall sales.  “Selectively” is the key word here, as you don’t want to add too many of these slower-moving titles to your overall inventory.

The 1MM Myth = Busted! So there you have it… books ranked higher than 1MM actually DO sell on Amazon.  In fact, when I added up my total sales for the books in this experiment, books ranked higher than 1MM made up 42% of my overall earnings.  Sure, they will sit in Amazon’s warehouse for longer, but at an average of 2 cents per month in storage costs, I can afford to let them into my inventory to raise my overall sales by 72.4%.

Now that we’ve debunked that myth, let’s go a step further and see if we can put any of this newly-acquired knowledge into practice.

An intelligent purchasing strategy:  When you’re out at the local thrift store scanning books, you now know that you can take a closer look at books ranked higher than 1MM.  But let’s take it a step further… let’s come up with some concrete numbers to apply to certain sales ranks.  For starters, let’s assume that your average cost per book is $1, and that you want to triple your money within six months of purchasing a book.  The margins in books can actually be much higher than this, but let’s assume that if you can at least triple your money within six months then it is worth adding to your inventory.  Once we apply a bit more math, we can come up with a target list price for a given sales rank:

Screen Shot 2015-09-03 at 9.41.30 PM

A few notes on how to interpret this:  first off, you should never be purchasing books that you think you can only sell for $5-6, as there will be little to no room for any profit after FBA fees.  So for the asterisks in the above chart, you should be aiming more for $8-10 as a target list price.  For the 2-3MM category, the target list price is $21.  We’re basically treating books like a collection of stocks: some of them will make you money and some will be losers.  When the dust settles, if your sales metrics are similar to mine, you will triple your money within six months if you follow the above chart.  Those are some pretty good margins for a “retail” business!  If you want to have higher margins, then find books with higher prices – or figure out how to sell a higher percentage of books… and then come do a guest post on my blog to share your secrets to success!

One note of caution when it comes to pricing: if you come across a book with a rank of 5MM that is selling Merchant Fulfilled for $5 but the lowest FBA price is $75, you probably shouldn’t buy it.  You can’t look only at the FBA price, especially if the book has a high sales rank.  Be sure to factor in the MF prices – in the case above I would want to see the MF prices closer to the target list price of $65 before I added it to my inventory.

Conclusion:  This was a fairly in-depth post with lots of facts and figures… congrats on reading it all the way through!  Hopefully this data will allow you to make wise business decisions to be even more profitable moving forward.  Here is a quick summary to wrap up this post:

  • Books with a sales rank over 1MM can be quite profitable… IF you approach them with a purchasing strategy backed by actual data.
  • 42% of my overall sales have come from books with a sales rank higher than 1MM.
  • If you’re out sourcing books, you can either print the “target list price” chart above and take it with you, or go by a simplified version that I use:
  • <1MM rank = $8-10 target list price (or higher)
  • 1MM-2MM rank = $10-15 list price
  • 2MM rank = $20 list price
  • 3MM rank = $30 list price
  • 4MM rank = $40 list price
  • 5MM rank = $50 list price
  • etc.

A quick request:  I believe this is the first time anyone has publicly gone into this much detail regarding sales ranks.  If you found this data helpful, would you take a minute to share it with your favorite social network?  The buttons to share it are on the bottom of the screen.  Thanks in advance!

Did you learn something new from this post?  Do you disagree with any of the data?  I’d love to hear from you – simply comment below to start a dialogue.  Happy flipping!

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