Selling relatively low-priced products on Amazon is a great way to get started. But if you want to grow, if you keep selling low-priced products, you are going to have to shift huge volumes. And your profitability will probably stay roughly the same.
On the other hand, if you raise the average price you’re selling at for instance by introducing one new higher-priced product, you can increase your profits on a lower volume. Your fees per product will not rise nearly as much as your price, and you’ll have less prepping and shipping to worry about.
First of all, you need to know your ASP – average selling price. It’s there on Seller Central, you don’t have to work it out. It depends on both the price of each product and the mix of products you sell.
Then you need to identify your next step up. You might just decide to make a minor move up to the $30-35 area because you’re already comfortable with the low price items and these aren’t very different. If, let’s say, over a few months you got those products to make up half your total business, you could have boosted your average sales price by 20 to 25 percent. Profits would rise even more.
You could also create a higher-priced product very simply by creating a Value Bundle. Sell your coffee pot together with two packs of coffee, for instance, and you’ll add to the value of each sale. Make it a clear value proposition for the customer and you have a win-win situation; more profit for you and better value for your buyer.
The key to making this work is that you know how much you’ll save in fees on the Value Bundle. That’s how much you have ‘in the bank’ to give away as a price break to your customer, and still not lose money – and it may be more than you think.
Alternatively, if you sell a consumable, or something that comes in different flavors, colors or varieties, offer a multi-pack. This works well with garments; offer five pairs of socks together with different patterns, for instance, and while you’ll sell them for slightly less than five pairs of socks sold as regular single units, you’ll pay one set of FBA fees instead of five. That will make a lot more profit.
If you’re doing really well in a particular niche, like pet products, look for your next step up in that niche. If you’re selling dog and cat toys and grooming packs, maybe carriers or feeding stations are that next step up. The specific knowledge that made your original products successful should help you pick a great product in the higher-priced area.
Once you have higher-priced products in the portfolio, focus your marketing efforts mainly on those products. The more biased your sales are towards them, the higher your ASP will be – and of course, you will be tracking it every month, won’t you?
Don’t leave the lower-priced products out there in the dark. They still need some marketing spend, but you can give them a little less TLC. The idea is to get a well-rounded portfolio. (Of course, if you have a lower-priced product that is no longer making you money, it’s time to discontinue it. Or perhaps, just bundle it up or multi-pack it!)
This isn’t a one-off job. It’s a continuous process of getting the right products and the right mix. But if this is the first time you’ve looked at your ASP, you’ll probably find – if you get it right – that you get a step-change in your business’s profitability. So it’s well worth doing the work!
