Sourcing and Understanding the Value of a Book

Understand Used Books

Introduction to Sourcing

There are two key elements to sourcing - data analysis and finding sources. To begin we will talk about data analysis and using software to identify books to sell. The two most popular Scanning apps are Scoutly and Scout IQ. Whichever you prefer, it's important to first understand what the software is telling you. Scanning apps show you the 20 lowest prices for the book. This is useful to filter out low-value books, but it doesn't provide a complete picture. It is only a snapshot of the prices today. There are missing factors like season, average price and sales demand. You can only truly know a book's value by understanding how price and demand change throughout the year.  

The reality is you might buy a book today and the price drops tomorrow. There are also books that appear to have little value today but in a short time the price increases. When this happens the app may tell you to reject the book even though it is profitable. 

What is the true value of a book?

Looking at historical sales price and how it changes throughout the year provides helpful insight. Many books can spike in price as demand increases during the textbook season. (August, January, June). This creates an opportunity to increase the price for some books as the textbooks season begins.

Book prices can change frequently. They oscillate as supply and demand changes and this affects the books market price. October, for example, is a difficult time of year for booksellers. The textbook season has passed, sales have slowed, and the competition between sellers drive prices down. Sourcing during this time is also difficult because the prices are so artificially low that scanning apps tell you to reject books that are otherwise profitable.

How do we determine the true value of a book? (Keepa Graphs)

So far the best way to identify a book's value is to dig a few steps deeper. The best resource for this information is a site called Keepa. Keepa.com tracks an incredible amount of data for every single product on Amazon. This information includes the prices of all offerings over time, price changes, and every sale that has occurred since the product was first listed. This is powerful because their graph will help you determine how long it should be till the next sale and at what price you can list the book. Scanning apps provide a link directing you to the Keepa graph for every item you scan. Yet there is no scanning app today that makes full use of this information. When in doubt, make sure to look at Keepa to see a bigger picture.

Analyzing Keepa Data and Graphs

In the graph above, notice the green line jumping up and down. Every time the green line drops down, it represents a sale. The more you see this line dipping down, the more you can be confident the book sells. This book, for example, sells multiple times a day. If you listed this book for sale and priced it right, it would sell in no time. 

The colored dots represent the different offers (by condition) of the book for sale on Amazon. For example, every green dot represents a Used FBA book in Very Good Condition. Notice that over time, those green dots trend downward in price. In August the market price for this book was close to $30, in early September $25, and in October it dropped to $18. This illustrates how high prices prevail during peak season and gradually decrease as competition forces the price down.

We sold this book and found it to be a good example of the importance of shipping books quickly. At the time I purchased the book (late-August), I saw that the book would sell for close to $25, yielding a profit of about $15. By the time the book was cleaned, processed, shipped and received by Amazon at their warehouse (2 weeks), the market price was closer to $19.99. By the time it sold, the profit margin was closer to $10. Still not a bad yield for a book with a Cost of Goods of $1 - but this shows how prices can change quickly. 

Another thing to notice is that on October 22, Amazon had this book in stock and was selling it brand new for around $20. When this happened, most of the other used offers stabilized in price slightly below Amazon at around $18. This illustrates a few things. When Amazon has new offerings in stock, it creates a stabilization force that influences repricing software. Most sellers who use repricing software set their repricers to always stay below the Amazon price by a percentage. You can see that with this book, prices actually rose a bit compared to the week before.  

This might all seem a bit complicated, but the point is that market price changes due to many factors. Prices rise and fall, seasons influence prices and Amazon controls the market price when they are selling the book new. It's hard to get the total picture just by using a scanning app's information. Always check Keepa graphs when making buying decisions. 

Why Merchant Fulfilled Prices Matter

Merchant Fulfilled sellers are an important influence in the used books marketplace. Although FBA sellers are not competing with them directly, MF pricing strategy will affect how you can price books. The image below shows what is known as the "Prime Bump." This means you can buy a copy of this book for $19 from a Merchant Fulfilled Seller yet the lowest Prime offer is selling at $85.99. As a customer buying from a Merchant Fulfilled Seller, you should expect the book to take a few days longer to arrive. The MF seller is going to send the book to you via USPS Media Mail and the shipping time can vary from 2-10 days. Prime books arrive in 2 days. Many buyers are willing to accept the higher cost in order to receive the book faster. In some cases, Amazon buyers completely ignore the MF offers because they only want to see Prime offers. This is why the "Prime Bump" exists, but should we still look at MF prices when making buying decisions?

The short answer is yes. One reason you should pay attention to the MF prices is that they represent the floor price. The floor price tells you the absolute lowest price that the book can be purchased on Amazon. If this book doesn't sell often, FBA sellers will likely price their offers closer to the MF prices. This book has an average rank of 1.37 million. That means that the book sells once about every 10-15 days. When a book doesn't sell for one day, its rank drops by about 100,000. So an average rank of 1.3 million means the book sells about once every 13 days. The current rank of 510,000 means that the book likely sold around 5 days ago. Keep in mind these numbers are approximate. Sales data can be finicky and not truly representative of exact sales (when in doubt check Keepa).

This poses a question. If this book sells about once every 13 days how much higher can an FBA book be priced above the MF book? The answer really depends on demand for the book and the FBA sellers involved. This book has a market FBA price of about $89.99 with one seller undercutting to $85.99. If you look for the book elsewhere online the actual retail value of this book is $26 dollars! So what's going on here?

At the time this screenshot was taken, Amazon was not selling the book. When this happens, FBA sellers can raise their price. If Amazon was on this listing, they would sell the book new for around $26 dollars and the used FBA offers would be priced below that. The true used price for this book should be in the range of $19 to $26 dollars. With this book, the MF prices are more representative of the actual value of the book. 

It's hard to determine why this book is listed for $85.99. Maybe one FBA seller decided to create the market and go for a long shot. It may be that repricing software blindly matched that price. What we do know is that many Merchant Fulfilled operations are often "mega-sellers" that can have hundreds of thousands of books for sale. These sellers have custom pricing software not available to the public. This software may look at information such as retail value and other factors. The lesson here is to pay attention to MF pricing and use it as a guide to determining the market value. Always use MF prices as a guide. 

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