Analysis of a Flip

I usually take a few days over the course of the week to figure out what I want to write about.  More often than not, I’ll have a few ideas and I’ll just let them sit in the back of my mind.  As the days go by, one will seem more interesting to me than another, I’ll think of a useful anecdote or metaphor to help illustrate the point, and by Thursday I have a pretty good idea of what I want to say.  

My routine got thrown off a bit this week because I wrote the article that went with Cordelia Blake’s podcast.  First, if you haven’t listened to it, you’re missing out.  Stop reading me and go have a listen.  Second, this meant that my energy was focused on that post instead of this post.  So, Thursday night and I needed to figure out what I was doing.  I decided to read through the FBAMaster Facebook Page and pick a question that seemed interesting and just run with it.  I have not done any prep for this question and I don’t even know for sure what my answer is going to be by the end of the post.

 

ferenk

 

  1.  Let’s start with BAD kneejerk reactions in either direction.  A) It’s far too simplistic to say, “Buy $40, Sell $125, Must buy.”  First, we don’t have very compelling reasons (yet) to believe that this item even sells for $125.  Second, you want to break yourself of the habit of only thinking in terms of ROI.  Assuming you can get a decent amount of inventory 40% ROI on a 1500 ranked item is generally better than 120% ROI on an item ranked 150,000.  B)  It’s also far too simplistic to say, “329k rank in toys, too high.”  Again, we don’t even know if that’s an accurate representation of sales (yet) and even if it were, it’s not out of the realm of possibility that an item where Amazon is off the listing and there is only one other seller (0 FBA) would be good at this rank.
  2. After reminding myself to ignore those two kneejerk reactions, I notice something immediately that I’d consider a mistake.  I happen to know off of the top of my head that 15% of $125 is $18.75, but even if you didn’t, you should have a sense that those fees seem a bit on the low side.  And, indeed, they are.  These are MF fees.  If Ferenk plans to MF an item this large, that’s fine, but we’re going to need to project sizeable shipping fees.  If we’re going to FBA, we want a better view of our fees.  At this price point, those fees are $29.58.  Remember, this is still before we’ve shipped the item, and even with UPS Partnered Carrier rates, it won’t be cheap to ship an item that is 25.2 x 14.8 x 5.4 inches.
  3. Next, I want to check out a Keepa chart to get a better idea of what the selling price should be and what the rank looks like at those price points.    
  4. This doesn’t look particularly encouraging to me.  If we only had the Q4 data (blue), then we might be able to conclude that if we just priced this at $84.99 then we might be able to see an improvement in rank and get some sales. At that point, we’d want to calculate our fees and projected shipping and probably conclude that it was a pass, but it might be marginal. However, seeing the item sit at rock bottom prices (59.99) where we couldn’t hope to profit and seeing the rank trend upward is not encouraging at all.  If we’re having a hard time selling the item at $60 for three months, we can’t reasonably expect that we’ll get anywhere near $125, even with only one competitor.
  5. If I wasn’t bearish on the item enough already, the recent reviews certainly don’t attract me:ferenkreviews
  6. Finally, I check Fisher Price and see that their price point is $49.99 and also see that there is a New In Box listing on eBay with a Buy It Now price at $49.99.

So, my conclusion is that like most of the time, $40 is a good retail price for the item and would be a good buy for your children.  However, as far as a OA flip, I’d rate it between bad and disastrous.

 

Hope that this helps out Ferenk on this particular product but also that the larger audience can benefit from my thought process on items like this.

 

As Always, Best Wishes
Mike

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