Why Chris Anderson is Wrong (sort of) About Sales Rank Charts

If you don’t know Chris Anderson, you’re probably missing out.  He’s a moderator for FBA Master, a frequent contributor, an Amazon-to-Amazon flipping coach, and runs his own site SuperheroSellers.  Chris is a really sharp guy, a great teacher, and we have very similar business philosophies.  If he tells you something about shoes, bras, AZ flips, etc., you can pretty much take it to the bank and you ignore his advice at your own peril.

Because of that, I’m going to tell you why I think he’s wrong about Amazon sales rank charts.  If you believe a view to be wrong, you should always prefer to deal with the most complete, articulate expression of the view, not a weak straw man version of the claim.  Since Chris is so sharp, he’s a good person to use as an interlocutor.

ChrisA

If you’ve ever seen the question of whether sales rank charts should be used as a tool, you’ve almost surely seen Chris chime in with a plea not to use them.  If you’re unfamiliar, there are charts that will tell you which sales ranks correspond to the top 1%, top 3%, etc., in an Amazon category.  The logic being that the better an item is in the category, the more quickly it will sell.  So often has he made this plea, he finally wrote a blog to more fully articulate his distaste. You should know, though, that when I say ‘distaste’ I’m really softening the message.  He HATES sales charts and believes them to be the WORST thing to ever happen to Amazon sellers.  Strong language, perhaps, but he has his reasons.  Let’s start with seven of the things that I think Chris gets right:

1.  People use sales rank charts incorrectly all of the time. This is undeniably true.

2.  Sales rank is a snapshot in time and by itself does not tell you anything more than how that product is doing at that exact moment.

3.  The sales rank will not accurately predict how many units the item will sell, regardless of which site/service you use.

4. Myriad factors (including whether the item is in stock, what the price is, seasonality, etc) can dramatically affect sales rank.

5.  No experienced seller uses sales rank charts (probably an over-statement, but as a general rule is probably true).

6.  It’s much better to truly understand ranks than to rely on a crutch like a chart.

7.  Top 1%, for example, means something significantly different in each category (as far as I can recall, Chris hasn’t made this point, but it does bolster his argument).

 

Chris is absolutely right about all of these.  Usually, when you find someone saying that something is the WORST thing ever, it is pretty easy to rebut them, but I told you that Chris is a sharp guy and intelligent people generally have great nuance, as he displays here.

 

What I would say is that we can (and should) grant each of the preceding points and still reach a different conclusion.  My plea, contra Chris, would not be to “please don’t use sales rank charts” but to “please learn more about how rankings work so that you can better use a sales rank chart.”  To be fair, he might actually grant my point, so it’s certainly possible we’re not really disagreeing, but choosing to express it differently.

 

So, let’s look at one of the major issues.  As Chris explains in his blog, an Amazon Best Sellers Rank is really just a snapshot in time and it can fluctuate wildly.  Anybody who has ever scanned an item at a store and saw that it was 40,000 in beauty only to find out that it was 327,000 by the time they sent it to Amazon will understand how true this is.  Thankfully, however, there’s absolutely no reason that we need to only focus on the momentary/immediate rank of an item.  Chris is right that this is what a lot of novice sellers do, but the prescription should be to fix the misunderstanding.  So, let’s do that.  We want to be focused on the (1) average rank of an item, at the (2) price point we want to sell it at.  (There are other factors: For example, if we’re talking about Christmas ornaments that we want to sell in November, we’re much more concerned with the rank in November than we are an average of February-September.  Nevertheless, for most items, we can do fairly well if we consider average rank at the price point that we want to sell (it might appear that I’m leaving out that the item is in stock, but if there is a price point, then the item is in stock.  If the item is out of stock, there will be no price listed, and so it isn’t representative of the price point at which we plan to sell).

 

So, how can we do this?  The Keepa extension is (in my opinion, of course) by far the best free tool out there.  If you’re not using it, you really should just immediately stop reading this article, go to the chrome store, and download it.  Now, when we look at an item, we aren’t concerned with what the rank happens to be at this exact second.  We want to know the approximate average rank of the item when it is selling at the price we hope to sell it at.

Let’s look at some examples:

rankhigh

Here’s a Health and Personal Care item I recently bought at 350,000 rank that I spent $13 on, planning to sell at around $40 (turned out to be 37.99+4.99).  Many people would not have bought this item.  350k rank is not good.  But, as Chris explains: sales rank is just a snapshot in time.  This item had been out of stock (oos) for a full month and it was no wonder that the rank had drifted up (went all the way to about 395k).  However, I saw that before this when it was in stock (even at $40) the rank was down in the 110k-120k range.  Some people would still avoid this, but any rank chart that you use will tell you that 120k in Health and Personal Care is solid and will sell multiple units a week (in practice it’s about an item a day).  Since there were zero sellers on the listing, it shouldn’t take long to sell these.  Sure enough, I sold all of the units (maybe 5) within a week for quite a bit above 100% ROI.

 

Try this one.  What would you say the average sales rank is?
rankprice

If you answered with a number, you’re wrong and I’m sad. What you hopefully answered with is, “Depends what price we want to sell at.”  This is a great example because there are three pretty distinct price points and the ranks correspond to each of the three nicely.  If we plan to sell at $22-25 then the rank is about 25k.  If we want to sell in the $30-35 range, the average rank is probably something like 75k.  Finally, if we plan to sell up around $40 then the average rank is about 120k.  This item was $9.99.  I sold 24 units for about $40, but I knew that at that price point it was much more of a 120k rank than a 25k rank.  It would have been a huge mistake for me to buy this on July 1st and to think it was a 25k rank product and that I was going to sell it at $40.  It’s only a 25k rank product when below $25!
One more:

stable

 

This is the sort of product I love for my replenishable items.  I make something like 35-40% ROI on this product, it is the easiest money ever.  The number of sellers is almost always stable, the price is very stable, the rank is very stable (trending between 10k and 25k with maybe 17k as an average).  This is the kind of item I can just sell day after day for month after month and take my 35% return to the bank.

 

Now, Chris is right that no experienced seller uses these sales rank charts (for the most part).  It’s not like I saw any of these Keepa charts, pulled out some sales rank chart, discovered it was 2% in Health and Personal Care and decided that it was a buy.  Of course not.  But why?  It’s because I have versions of these charts ingrained into my seller’s mind.  I don’t need a chart because I’ve basically become the chart.  I know how 20k in beauty will sell.  I know what 120k in health will sell.  Etc.  But, this wasn’t magic.  It happened because I’ve sold in these categories for years.  When I first started, I didn’t know these things.  I used charts like the one’s we are talking about.  They weren’t perfect, but they were better than nothing.

 

training wheelsThis leads to a secondary point: calling the rank charts a crutch is accurate, but I prefer a different metaphor: training wheels.  It’s absolutely true that no experienced bike rider uses training wheels.  However, it does not follow from that that training wheels are not useful for people learning to ride bikes.  Indeed, when I first learned to ride, I absolutely had training wheels.  I got to focus on the mechanics of riding a bike without worrying about falling over every couple of seconds.  I think the same is true of these charts.  They aren’t perfect, but they’re a useful tool for people still getting started who have no understanding at all of what a rank might mean.  Sure, over time they’re going to realize how simplistic their understanding once was, but they’ll never even get to that point if they don’t start somewhere.

 

Finally, let’s acknowledge that there are severe limitations to these charts.  First, Top 3% doesn’t really mean anything.  For one category 3% might be fairly solid and in another category it might be absolutely atrocious.  Further, in some categories (specifically, the categories that Chris dominates) rank is even less useful (Clothing, Shoes, Bras) because the rank is for the parent ASIN and each individual variation only makes up part of that rank.  In a category like health (where I do well), sales rank might be like 80% science and 20% art.  In a category like shoes, the numbers might be reversed.  It’s possible that this fact makes up part of the gap between where Chris and I land on this issue.  Nevertheless, it remains my contention that IF a seller makes sure to use a chart in the way that it was meant to be used THEN it can function as a useful tool for new sellers to get some idea of what to expect with their purchases and develop a little confidence (Bias Alert: I would rather somebody makes a decision to buy something and be wrong than do nothing, because I think that analysis paralysis is a bigger problem for new sellers than mistaken purchases).

 

(Note: I’ve written on this subject before: What Sales Rank Do I Look For When Buying.  Interestingly, I don’t even agree with several of the ranks I noted in that article.  For example, I sell much higher ranked shoes now and I probably wouldn’t sell a 50k Pet product if Amazon paid me to do it.  Nevertheless, still might be worth glancing at.)

 

It’s possible Chris and I don’t really disagree.  It’s also possible he thinks everything I wrote is wrong!  If he wants to respond, you’ll see a link to it right here!

 

Until Next Time, Best Wishes

Mike

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