This Post is part of the “FREE Wholesale Training Course”. You can view the entire course listing and introduction to the course here.
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Module 2: Wholesale Preparation
- Introduction to wholesale sourcing
- Understanding how the buy box works
- Understanding how Amazon’s Best Seller Rank (BSR) works
- Understanding ROI / Margin
- Analyzing competition and potential volume
- Setting your personal buying guidelines
- Determining your long term strategy
- Distributors / Wholesalers vs. Manufacturer Direct
- Ideal targets for wholesale sourcing
- Tools for wholesale sourcing
You can click on each of the links above to go directly to the area of the module the best interests you. That being said, lets get right into the content!
Want to skip reading the massive wall of text? After the entire course is released, I will make videos for each of the sections for easier consumption. Make sure you are on our mailing list to be notified when it’s released!
Understanding How The Buy Box Works on Amazon
As an Amazon seller, knowing what the buy box is, and how it works is one of the most important things you need to know. Since it’s so important, let’s first learn what the buy box is before we go into more details.
Taking a look at the image above, you can see this is a product detail page on Amazon for the product “Speak Out”. There are four specific sections that are highlighted – Buy Box Price, Buy Box Seller, Buy Box, and Other Sellers. Let’s break down what each of those mean:
- Buy Box – This is the large area of the page that one specific Amazon seller currently controls. In this “buy box”, you can see there is a very large, prominent “Add to Cart” button. When a customer looks at this page, most customers use that really large add to cart button, instead of the other smaller ones on the page in the “other sellers” section. Studies have shown that 70-80% of all customers that buy a particular item buy it from the seller that is featured in the buy box. This is important to know, because if you want the most sales possible, you want to be in this prime position as much as possible.
- Buy Box Seller – This is the name of the seller that currently controls the “buy box”. They are competing with sellers in the “other sellers” section for this prime position. This seller can potentially change at any given time based on factors we’ll mention below.
- Buy Box Price – This is the price that the “buy box seller” is currently selling this item for.
- Other Sellers – This area shows three other sellers that are selling the exact same item on that product detail page. They are attempting to compete with the “buy box seller” for the “buy box”.
Ok, great! Now we know what the buy box is. But the real question is – “How do I get to be the Buy Box Seller?” If that’s what you were thinking – you are a smart person! Here’s a quick answer on how Amazon determines which seller is the “buy box seller”:
No one knows 100% for sure how to be the buy box seller.
The reason why no one can know 100% for sure is because Amazon has a specific set of rules that they magically hide called an algorithm. If you don’t believe me, check out what Amazon themselves specifically says about winning the buy box:
Well, that’s really nice of them.
What is nice of them however, is on that same page Amazon does give us some clues of how they pick which seller controls the buy box. Over time, many sellers have done tests to determine which factors seem to have the most impact on a sellers ability to control the buy box. Below, we will outline the most important factors:
There are two different types of fulfillment methods on Amazon: Merchant Fulfilled, and Fulfilled by Amazon (FBA). Here’s the differences:
- Merchant Fulfilled: Products are shipped from some place other than Amazon’s warehouse to the customer. These can be from warehouses that are controlled by the seller, a manufacturer, or distributor.
- Fulfilled by Amazon (FBA): Products are shipped directly from Amazon’s warehouse to the customer. These items are available for customers to purchase using “Amazon Prime”.
The method that Amazon prefers is FBA. Definitely not a surprise. But Why? Amazon can control the customer experience in regards to customer service and fulfillment. They handle customer service calls, warehousing the product, and shipping the product directly to the customer.
How do we know this is a major factor? There are MANY examples of this, and here’s one of them. Take a look at the example to the right. The seller in the buy box is using FBA (denoted by the “Fulfilled by Amazon” message in the buy box) and is selling this item for $59.99. Looking at the other sellers area, there is another seller that is selling the item for $57.98. But, they are not using FBA. You know this because in the other sellers box, FBA sellers will say “& FREE Shipping on eligible orders” when it is FBA. This seller just shows “Free Shipping”. Amazon is giving the buy box to a seller that is selling the item for $2.01 more. This tells us Amazon favors FBA over price in regards to the buy box.
Based on this information, it is strongly recommended to use FBA for all of your Amazon products, instead of fulfilling the items yourself.
Price You Sell The Item For
In both of the examples you’ve seen so far, the prices in the buy box and other sellers are relatively close in price. This tells us that Amazon puts a premium on price for the buy box.
If you take a look at the Speak Out example again above, you’ll see the buy box seller is $17.69, whereas the sellers in the “other sellers” area show prices of $17.57, $17.74, and $17.75. They are all being sold FBA. Why is the buy box price at $17.69, when there is another FBA seller at $17.57? It’s 12 cents cheaper. For sure this would be a better value for the customer. Right? Well, this tells us there are other factors in play that are not just the price and fulfillment.
Based on this information, we have to assume you need to have a RELATIVELY cheapest price, but not necessarily the cheapest in order to control the buy box. You wouldn’t typically see a seller controlling the buy box at $19.99 via FBA, when all the other sellers are less than $17.75 selling FBA (I know, it randomly happens – especially when Amazon is involved, but lets throw out those random cases).
The lesson here is that you should be extremely close to the lowest price, but not necessarily the lowest price. We’ll talk more about the reasons why in Module 6 when we discuss repricers.
Specific Seller Account Health
There are multiple metrics that could potentially impact buy box performance. Here are some examples:
- Number of Feedback – We believe this is a much larger factor when you are a new seller and have limited feedback.
- Positive Feedback Percentage – Having 4’s and 5’s in customer feedback scores improves this number. If you are using FBA, most 3’s, 2’s and 1’s can be removed from your metrics, as long as they are regarding fulfillment or customer service.
- Order Defect Rate (ODR) – This includes Negative Feedback, A to Z claims, and chargeback claims. This can be controlled, as A to Z claims and chargeback claims typically do not occur with FBA transactions.
- Product Policy Compliance – This includes Product Authenticity Claims and Product Safety Claims. This is where a huge advantage can come in for using wholesale sourcing over other sourcing methods. If you do receive a claim, you have a better chance of fighting it if you have specific authorization from the brand owner.
- Shipping Performance – This includes Late Shipment Rate, Pre-Fulfillment Cancel Rate, and Valid Tracking Rate. All of these are effectively eliminated if you use FBA.
The bottom line is, use FBA, sell authentic product, and get as much negative feedback removed as possible. Doing these things will greatly increase your overall Account Health, which gives you a better chance to control the buy box.
You can view your own metrics by logging into Amazon Seller Central and navigating to Performance > Account Health.
Other nuances of the buy box
These are all rules from how we see things on the seller side. No one really knows what’s inside the black box. But there is one thing pretty much every seller can agree on:
Amazon breaks the buy box rules.
This means that Amazon doesn’t exactly play by the same rules we laid out above. When Amazon themselves are selling an item and it’s in stock, you can almost guarantee Amazon will control the buy box. You would have to severely undercut Amazon’s price to control the buy box against them, which is usually a losing situation. Bottom line – try to stay away from competing against Amazon if you can.
A few other quick nuances:
- You can’t win the buy box if you don’t have the item in stock! Keep items in stock as much as you can.
- Sellers can’t win the buy box for new books.
- There are some weird cases where it just makes no sense why a seller has the buy box. One example would be a “just launched” seller from China controlling the buy box over an FBA listing. Watch the competition, and it will likely work itself out over time.
In this situation, Amazon simply lists the cheapest prices for the item (or in some cases only gives you a link to show all the sellers selling the item). The buy box advantage disappears in this situation, so these are your options:
- Price the item competitively against other sellers, and make yours the lowest price. This ensures you will show up on the top of the list of sellers.
- Cut the price down until the buy box reappears. In my opinion, this is a bad idea, as you are just giving away margin. One exception to this rule: If making the buy box reappear makes the sales increase enough that it offsets the margin loss. It’s something you would need to test.
Here’s an example of a suppressed buy box:
When you click on “See All Buying Options”, this is what you see:
As you can see, not even being FBA pushes you up the list on a suppressed buy box. It’s 100% based on price.
That should be about it! Now, you are an Amazon Buy Box Master!