The Book Market Monitor – 2017 Edition

February update:  The overall supply of used books dropped dramatically in February as existing sellers shed nearly a third of their existing inventory and some sellers quit altogether.   For used books with a sales rank under 1 million, the market lost 29% of its existing inventory from an average of 40.5 offers per listing in January down to 28.9 offers in February.  For used books with a sales rank under 5 million, the market saw 34% of its inventory disappear completely (26.2 offers down to 17.2 offers).  This means that for books ranked under 5 million, roughly 44.8 million books were removed from the market altogether!

The principles of economics held true as the market prices increased thanks to the decrease in supply.   The median price for a used book (with a rank under 1 million) increased by $1.88, from $6.96 in January to $8.84 in February.

The principles of economics held true as the market prices increased thanks to the decrease in supply.   The median price for a used book (with a rank under 1 million) increased by $1.88, from $6.96 in January to $8.84 in February.  For more detailed metrics, check out the charts below.

March update:  The supply of books in the marketplace leveled off in March, but the median and average used prices continued to rise as the market is still correcting and sellers are removing their lowest-priced books that they would be selling at a loss (i.e. under $5 for MF sellers, under $6 for FBA sellers).  The largest changes in the market were in these cheaper books.  In January, 33% of all books ranked under a million had sales prices of $4.00 or less (including shipping).  In March, only 3% of books are still for sale for $4.00 or less, and those won’t be there for long!  We are seeing signs of an efficient market here.  From a supply side, the market has corrected quickly and even with the new fees in play, higher overall prices mean that sellers shouldn’t see much of a difference in their net profits.  What remains to be seen is the demand side of the equation.  As the floor price for MF books seems to be $5.99 plus free shipping now, will fewer customers buy books on Amazon compared to the number of buyers who purchased $4.00 books?  Other eCommerce sites may be able to win over some of Amazon’s loyal customers, or perhaps customers will start to look for used books in their local markets at $2-3 price points.  Only time will tell!

May through June update:  The market has reached its equilibrium point as sellers appear to be cautiously coming back to the marketplace.  The number of offers is climbing slightly and as a result the average and median prices are coming back down a bit.  April is usually a slow month for booksellers, so we’ll see what happens as the mini-textbook rush in May occurs due to summer college classes.  Additionally, the floor price of $5.99 for MF sellers had been established in March, but the megasellers are starting to come down from that price a bit.  If they target the same profit levels as before the new fees, I would anticipate a new floor price in the $5.20 – $5.30 range.

December update: . The market stabilized through most of the second half of 2017.  This year slipped away from me thanks to the launch of ScoutIQ, so I unfortunately didn’t pull metrics during the peak of textbook season to see how the numbers looked before, during, and after the textbook rush.  Check out the charts below to see metrics from late December and compare them to the beginning of the year.

The Results:  We sub-divided our analysis into two categories – volume and price.  Volume metrics will reveal whether sellers are entering or exiting the market, and price metrics will help us visualize how the fee increases will impact the overall market.  Will the opportunities to find and flip profitable books be better, worse, or remain unchanged?  Let’s find out!

Volume Metrics:

For ALL books with a rank currently under one million, here are the average number of offers per listing for both used and new books:

Screen Shot 2017-12-30 at 2.13.20 PM

After more than 25% of the available offers disappeared from Amazon thanks to the large fee increases in February, the market stabilized and began to grow again throughout the rest of 2017.  We’ll monitor the market in early 2018 to see how the January textbook season compares to last year.

Here is the percentage of listings where Amazon is on the listing:

Screen Shot 2017-12-30 at 2.16.16 PM

As you can see, Amazon relies on third party sellers to provide nearly a third of all titles to their buyers.  (Perhaps this is why they are referred to as “third” party sellers??)  Amazon was slashing their new prices on many offers in early 2017, in what appeared to be a move on their part to sell out of their inventory and put the inventory risks on the shoulders of their third party sellers.  As the year progressed, Amazon remained on just over 70% of the available listings, so it appears they are happy to remain on roughly the same number of listings as they did in early 2017.

Price Metrics:

We can learn a lot by looking at the average prices on Amazon.  This chart shows the average of the lowest offer available, including shipping.  A penny book with $3.99 shipping would show up as $4.00 in this analysis.  If the lowest offer available is from a Prime seller, we are assuming shipping would be free.

Screen Shot 2017-12-30 at 2.19.40 PM

Using price averages can be misleading, especially when outliers exist where the lowest used offers start at more than a thousand bucks (these are usually the result of repricing software gone haywire – don’t quit your day job just yet!).  To give a more realistic overview, statisticians typically rely on the median price instead, which is the price smack dab in the middle of all of the offers.

Here’s a look at the median used prices:

Screen Shot 2017-12-30 at 2.20.36 PM

Now let’s go one level deeper and break down the percentages of books where the lowest used offer is less than $10.  We can call these “The Duds”.  Keep in mind that these prices reflect the TOTAL price, including shipping.  A $1.00 book plus $3.99 in shipping would be considered a $4.99 book in this analysis.

Screen Shot 2017-12-30 at 2.23.41 PM

In January, one third of all books ranked less than a million had at least one “penny” offer ($0.01 plus $3.99 shipping).  As the new fees were implemented, those offers quickly “shifted” two dollars higher, and now one third of books are at $6 or less.  There are still a few stragglers in the $4 range, so if you happen to want any of those titles for your own collection, snag them soon because we won’t be seeing prices that cheap on Amazon for the foreseeable future!

Here is the breakdown of books where the lowest used offer is higher than $10:

Screen Shot 2017-12-30 at 2.24.25 PM

According to the data, you have a 1-in-5 chance of scanning a book where the lowest used price is higher than $20, and you have a 1-in-20 chance of scanning a book where the lowest used price is higher than $50.  Why, then, does it seem like your odds of success in a thrift store aren’t nearly this good?  Three primary reasons come to mind:

  1. The thrift store may sell their books online, and remove most of the good titles before placing them on the shelves.
  2. Thrift stores typically set out only a small percentage of their donated books and recycle (or discard) the rest. Many of the books that sell well in thrift stores typically have no value online (think romance novels and fiction titles here).  And sadly, many thrift stores simply discard their textbooks because they assume no one would actually buy college titles in a thrift store environment.  It can pay off big time to have a conversation with a store manager to learn more about what they do with their books.
  3. Lastly, the proportion of books available for sale are never going to exactly mimic the distribution of books on Amazon. Niche, non-fiction titles typically have much smaller print runs than mass market fiction titles.  As such, your odds of finding penny books at your local thrift store may be higher than 1-in-3, simply because there are many more of these books in existence.

Thanks for following along as we monitored the market in 2017!   When you rely on your instincts, you may trick yourself into believing that the market is better or worse than it actually is.  Of course, your local market may change as new scouters enter the market and compete for your town’s limited resources.  Or perhaps your thrift stores may begin to sell their own books online.  This market analysis hopefully helped you understand how the book market – at a macro level – changed over time.

Do you have questions about the analysis, or have other data points you’d like for me to include in future reports?  Do you agree with the data, or vehemently disagree?  Please share your thoughts in the comments below!

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(For those who are seeing this post for the first time, here is the back story.)

Back Story:  2017 is shaping up to be a potentially bumpy ride for book flippers.  Amazon introduced a few changes that will impact everyone’s profit margins.  As a result, some sellers are planning to quit selling altogether, while others are saying that the upcoming changes are no big deal.  Who’s right?  No one knows for certain what will happen to the market.  Instead of relying on a hunch or letting your emotions guide your decision making this year, why not let the market data speak for itself?  Throughout 2017, I plan to keep tabs on key market metrics in Amazon’s book market and report them here for all of you to see on a monthly basis.  Over time we’ll gain a better understanding of what’s happening at a macro level and can base our strategies and business decisions on concrete evidence, not our often-misguided sense of “feel”.

Any market’s economics can be distilled down to two variables: supply and demand.  If some booksellers follow through on their promises to exit the market, the reduction in supply should theoretically cause the book market’s prices to rise.  Of course, that’s assuming et ceteris paribus, or all other things being equal.  As some sellers exit, new entrants may take their place.  Existing sellers may ramp up their volume significantly and further add to the supply side of the equation, potentially driving prices down.  Repricing softwares may play a further role in harming (or possibly helping) the market prices of books.  Regardless of what happens to the supply of books in 2017, the demand side of the equation remains a rather large question mark.  Only time will tell – which is why it’s important to objectively monitor the book market over the next few months.

Before we have a look at the data, let’s set the stage with a bit of background info.

What’s Different in 2017:  Two major changes will kick in during the first quarter:

  • The end of the single unit exemption for Long Term Storage Fees (LTSF) – Media sellers will no longer skip out on paying LTSF when they have only one of a particular ISBN. Starting on February 15, LTSF will be incurred in the amount of roughly 30 cents and 60 cents for books that have been in an Amazon warehouse for at least 6 months and 12 months, respectively. For a medium-sized bookseller with 5,000 books in inventory, your total bill on February 15 could be in the ballpark of $1,000 – $3,000, depending on the age of your inventory.
  • Increased selling fees for both MF and FBA sellers – Starting on March 1, the average fees for Merchant Fulfilled sellers will increase about $1.00.  The average fees for FBA sellers will increase about $2.00 (read more about the fee increases in this post).  At face value, these fees will hurt FBA sellers more than their MF counterparts, but keep in mind FBA sellers still enjoy a higher average selling price compared to MF offers on the majority of their books.

Background on the Data Analysis:  For the purposes of our analysis, we will include all books with a sales rank currently less than one million.  My twin brother – who conveniently happens to have a PhD in mathematics – advised me that we could draw statistically significant conclusions from a sample size of only 200 titles, but using a figure closer to a million sounds much more impressive!  Plus, it will give sellers a better idea of the true nature of the entire market.  We’ve spent thousands of dollars and hundreds of hours assembling a massive database of ISBNs and tracking them regularly as the foundation for our eFLIP software, so we might as well put that data to good use here.  If we used a smaller sample set, the data could potentially be skewed if we included too many (or too few) textbooks in our analysis.  In addition, there are new books entering the market every week, and if our sample didn’t factor in these new titles, we could also potentially misrepresent the market as a whole.  Long-tail titles are also included in this analysis.  When a super high-ranked title sells a single copy, its rank will drop to around 150k and our algorithm will detect the sale and add it to the analysis.  Once its rank drifts north of a million again, we won’t include it in the monthly analysis unless it sells again at a future date.  In this manner, we’ll include nearly all of the regular sellers on Amazon and also include a solid subset of long-tail titles.  By avoiding books that haven’t sold in years, we are attempting to provide a more accurate representation of the true state of the used book market.

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