Concept 1: Amazon API
The first concept you should understand is the Amazon API (or Application programming interface). While more than likely as you begin to sell on Amazon you will never directly use the Amazon API the tools that you use will almost certainly directly access the API on your behalf.
So, what exactly is an API? An API is door that Amazon has created to allow third party developers to directly access Amazon systems. This allows a company to build an app that will allow you to scan an item and return Amazon pricing on an item. When you are using a software with this functionality the software developer is not providing the data but is instead asking Amazon via this API to provide the data. The advantage to this is that the data is live and accurate at the time of scanning. You will learn as you begin selling that price rarely stays the same on Amazon and are generally changing constantly. It is important that you have live and accurate data when sourcing inventory to ensure that inventory is profitable.
So, you might ask, well that is great, but this sounds like something a software developer needs to understand and not me. This is very true, but you do need to understand the data that is presented to you. Most of the API is done very well, but where the challenge comes in is with the prices you see on a third-party app. For instance, many of the apps people commonly use show the lowest 5 prices on Amazon and get confused because they will look at their app and it will show 5 prices and then open Amazon.com and expect to see the same 5 prices they see on the app match exactly with Amazon. In most instances they will not. The reason for this is Amazon will group prices together. For instance, the Amazon API will look at the top 20 prices and will find sellers that are similar. For an example let us say seller 1,3,5 and 7 are similar in many ways. Amazon will group those sellers together Under Price 1. So, on the App you will not see seller 3,5,7 prices and the app will return the Prices 1,2,4,6. This is something that will commonly throw off new sellers and is a very important concept to understand. If you are interested in learning more about this the software company Neat Oscan has a comprehensive document outlining these concepts that you can read below
https://neatoscan.com/WhatIsChanging.aspx
There document is tailored towards there software, but the concepts covered in the document are the same for any software that you might use that presents Amazon pricing data.
Concept 2: Amazon Best Sellers Rank (AKA Sales Rank)
The next concept we will discuss is the Amazon best sellers sales Rank. This is a number generated by Amazon which gives you an idea of how well a product sells on Amazon. This number is generated using Amazon sales data and is specific to the Amazon marketplace and in no way reflects how well it much sell via a different venue (IE eBay, Walmart.com etc.). The lower the sales rank generally means that item is a better seller.
Sales Rank is category specific which means that the Books category will have an item with rank of 1, while the Toys category will also have a product with the sales rank of 1 as well. What this means, while a item with a rank of 600,000 in books is considered pretty good, but an video game that has the same sales rank would be a terrible seller. It is important to understand what a good sales rank within your product category is and more importantly it is important to understand sales rank in all the categories you sell in. From one category to the next sales rank can change considerably. The below link takes you to a document that lays out category sales rank
http://cleartheshelf.com/amazon-sales-rank-chart/
My advice to any beginning seller to try and stay the top 3% of any sales rank in any category. Once you have learned the category you can make adjustments based on experiences.
There are number of limitations to sales rank, for one thing the sales rank on an item is constantly changing and if you were to check the item several times a day on Amazon you will see that this number can fluctuate several times and sometimes the item can make quite large jumps and/or drops. The sales rank is also heavily weighted based on how recent a sale occurred and less on how many sales occurred in a short period of time. This can lead to an item that may have recently sold, but the sale that just occurred may have been the first time the item sold in the past three years will show a sales rank that suggests the item is a much better seller than it really is.
Sales Rank is a critical tool to use when you are sourcing inventory as you want to not only know if you can sell the item for a profit, but also how long it might take for an item to sell. If you can buy multiples of an item, it is helpful to gauge how many of a product you should buy if the item has a much higher sales rank generally people will buy fewer of the item, if the rank is lower people more of the item.
While sales rank is critical tool Amazon provides to everyone to better gauge what items to buy as we discussed it has its limitations and because of this some clever companies have begun tracking the sales rank of item over a period and created an Average sales rank to give you a better idea of how well an item sells. We will be discussing this in further detail in the next section.
Concept 3: Average Amazon Best Sellers Rank
Many of the tools you will use while sourcing products to list on Amazon will have an Average Sales Rank included in their software. It is important to understand that this number is not generated by Amazon, but rather companies will track the day-to-day rank of an item on Amazon and calculate an Average rank for you. It is important to understand that because of this you may go from tool to tool and see an items average rank vary. This is because, each tool may be using its own system to track and calculate the average rank. Some may be checking ranks daily other tools may only be checking the rank every three days or some other similar schedule.
Regardless of how the rank is being tracked in my experience an average sales rank is always going to be better than using the regular sales rank Amazon provides. As we discussed when an item sells it will see a significant sales rank jump because of that sale, and when you use the regular sales rank, you are only seeing the item rank in that moment. With an average sale rank it will do a much better job of leveling out those spikes from sales and give you a more consistent result of how well the item sells on Amazon.
Concept 4: Amazon Buy Box
The final concept you need to understand is the Buy Box. Simply put the Buy box is the listing that shows on the main product page of the Amazon listing. If you do not have the Buy Box a customer will need to click the more sellers link which at the time of the writing will bring out an additional side bar that shows all the different sellers selling the item. It has been said that nearly 80% of all of Amazon sales flow through the Buy Box. What this means is, if you are selling an item and do not have the buy box in theory 80% of the customers buying that item will never see your listing. When Amazon has an item in stock, they will generally hold that buy box until they go out of stock.
Many people ask, what do I need to do to win the Buy Box? By design there is no fool proof way to win the Buy Box. Amazon uses an algorithm which they keep very secret to assign the Buy Box. Some factors that play a role in the Buy Box, how competitively priced an item is, your feedback rating, whether you are shipping the item using the MFN or FBA shipping models and the age of your account. It is important to note that there is a period when you first setup a new selling account that you will not be eligible for the Buy Box, this is a waiting period, and you just need to allow time and Amazon will automatically assign the Buy Box after a period has elapsed.
The most important thing to note about the Buy Box, is that you cannot game the algorithm to win the Buy Box. As soon as you feel like you have a system that works Amazon will change the algorithm and break your system. It is important for you to understand what the buy box is but also realize that it is something you cannot control. The best way to win the buy box on a consistent basis is to focus on sourcing quality inventory that you can sell at a competitive price with good average sales ranks and the Buy Box will be won organically on a lot of your items.
