How do Amazon Sellers Make a Profit Selling a Book for a Penny?
How can they possibly sell books so cheap?
Of all the questions that arise from new sellers just getting their start in the Amazon Marketplace, this is the one that comes up the most often: How can sellers afford to sell a book for a penny? Why would they want to acquire, list, and ship a book for a penny?
The answer is scale.
Online mega-sellers operate under a different set of rules and a different profit model then smaller operations like mine. At any given time, I have around 50 books offered for sale on the Amazon Marketplace. I don’t subscribe to the pro seller program, so for me and many other independent sellers, the financials of selling a book for a penny on Amazon break down like this:
When we sell a book for a penny, we take in $4.00 total, one cent from the book sale and $3.99 from the Amazon Shipping credit we are provided to deliver the book.
From this four dollar total we subtract our fees.
Individual Selling Plan No Subscription Fee .99
Variable Closing Fee on Media Items 1.35
1 LB Media Mail Amazon Shipping Label 2.69
Delivery Confirmation/Tracking .23
Amazon Shipping Transaction Fee .07
15% Referral Fee .00
That means that in order to sell a book for a penny on the Amazon Marketplace, we realize a loss of $1.33 and that does NOT include the cost of any shipping materials or the cost to acquire the book in the first place.
Here I will offer a spoiler. The prospects of selling books for a penny on the Amazon Marketplace never really look good for an individual book hunter. It’s not until we ramp up our operation to thousands of books and multiple employees that a small margin of profit emerges. While it never achieves a worthwhile level of profitability, for those interested, here are the steps to becoming a book selling juggernaut.
We need to shave some costs from our selling structure, and one of the biggest costs are the fees we are paying to Amazon. While there is nothing we can do about the majority of Amazon’s fees (after all, they did sell the book for us), we can eliminate the No Subscription fee by, well… subscribing.
The Amazon Pro-Seller Program
Becoming a pro seller costs 40 dollars a month. This means we won’t change the math on our equation above until our 41st book sale of the month. But once we cross that 40 book threshold, we can safely cash in on…
A loss of 34 cents per book.
Obviously, the key to making these low price listings profitable must lie in the shipping. It’s the second biggest chunk of what we pay to get our penny book sold. Sure we could cut the 23 cent tracking, but that would be a real shame. The discounted tracking offered online is one of the best values we have available as online shippers, and losing it will play hell with our metrics and customer satisfaction.
To crack the cheap shipping problem, I think it’s time for some detective work.
It’s time to buy some books.
In order to see firsthand how the big guys do it, I’m going to spend a few pennies on the Amazon Marketplace, and inspect the packages for clues as to how these packages were shipped. In this exercise, I’m not interested in the book’s condition, description, or the seller’s satisfaction rating… I don’t even care what book it is. The only metric I am using to choose these books are the seller’s sales volume.
Here’s a breakdown of the third-party sellers we purchased books from on the Amazon Marketplace:
Hippo_Books (691,937 ratings)
Friendlybooksforyou (120,822 ratings)
Quality Bargain Mall (628,403 ratings)
BetterWorldBooks_ (1,599,906 ratings)
Heavier books strain whatever slim margins there may be, and, hopefully, ordering them will reveal efficiency at its most bare. I was able two find two textbooks selling for a penny and settled for one trade hardcover and one trade paperback to add some variety to this sample group.
All packages arrived promptly, with a delivery time of about a week and a half. Three came through the USPS, one was delivered by DHL.
All four were shipped in unpadded envelopes.
In examining the postage sticker, we are able to determine two important pieces of information concerning the shipping methods these large sellers are using.
PRSRT BOUND PRINTED MATTER (BPM)
This was the method used to ship all four packages. Most individual sellers use Media Mail, a discounted shipping price offered for the shipping of educational material (books, dvds, cds).
Presorted BPM is a means to further pare down the cost of shipping, and the rules, regulations, and requirements to use PRSRT BPM are rigorous.
You can find the complete rundown over here on the USPS website.
Additionally, BPM requires volume. At least 300 pieces must be mailed in order to qualify for presort pricing. Still, for those interested in moving into bulk selling, the rates are attractive. Here is the price chart for Presort Bound Printed Matter.
The Electronic Verification System is a digital means of creating shipping manifests and paying postage. Shippers with consistently high volume are eligible to apply. The program cuts down on paperwork and creates a little more freedom to plan bulk mailings. More information on e-VS can be found here.
This means, assuming no other discounts, that for a one pound package, a volume seller is paying between $1.50 and $2, as opposed to the $2.99 charged for online Media Mail. Online information about the particulars of this shipping method are scarce, and what is online is dense as a law textbook. While this calculation is rough, it does give us the basic information we set out to find: Volume sellers use Presorted Bound Printed Matter as opposed to Media Mail to ship for less.
Estimated profit on a one pound book? 65 cents.
But wait! The packaging has to cost something right?
Three of the four books came in polyvinyl mailing bags. I comparison shopped a few vendors around the internet and found prices ranging from 25 cents (Amazon per 50) and four cents (topmailers.com per 3000). Assuming our new bulk book business will be taking advantage of quantity discounts wherever possible, this leaves us with a profit of….
The real question here isn’t how these sellers are making a profit, but why? Why go through all this effort for these razor thin margins?
Penny books are a byproduct of selling books on such a massive scale. Wholesale Used books are sold by the gaylord, a massive carton containing around a thousand books. Often, multiple gaylords of books are required to fulfill a minimum wholesale order. There isn’t a ton of information on used book wholesalers online, however, usedbookswholesale.com, the wholesale arm of used book dealer thriftbooks.com, sets its minimum wholesale order at 10 gaylords.
When you order a truckload or shipping container of books, there’s no way to say, “just the good ones, please.” When you buy in bulk, you get the good with the bad and once the wheat is processed, well… you’ve already invested in labor and a warehouse. You might as well process the chaff. Besides, something must be done with half a shipping container of worthless books. Storage is costly, as is disposal. So, for these high volume sellers, the best disposal method is a penny listing on Amazon.
There is clearly money in the bulk listing business, but setting up your operation requires a substantial initial investment. For those of us selecting inventory book by book, best practices sets a price threshold of about 10 dollars per transaction in order to make a book worth acquiring, listing, and shipping to a customer.
I hope this article has been helpful in clearing up the mystery of penny book listings. If you are a penny lister and have a comment on this article or care to share some inside knowledge on how bulk retail selling works, we’d love to hear from you!
Feel free to leave any questions or comments below.