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A New Sellers Guide to Interpreting Amazon Sales Rank and Forecasting Demand

War is ninety percent information.
-Napoleon Bonaparte

Understanding Amazon sales rank will make or break your business. Too many sellers “think” they understand sales rank, but really only learn that they don’t after they stare at the same products that have been sitting in their inventory since the day they sent in their first shipment.
Failure to understand sales rank means:
  • You will tie up money in products that won’t sell.
  • You will lose money by pricing products incorrectly.
  • You will miss out on opportunities to buy the right amounts of products.
  • You will waste time on products you should have passed.

Failure to understand sales rank = Failure to run an efficient Amazon business.

The original title of this article was “The Ultimate Guide to Amazon Sales Rank.” I revised the title and the content accordingly, because frankly, you could write an entire book on sales rank. I want to give you the most important pieces of information now (my goal after all is max value, minimum time commitment on your end).

This article will go over the most important aspects of sales rank and will save you money, make you more money and save you a lot of headaches. And yes, that is a promise. These principles are that important.

If you want to earn EVERYTHING about sales rank, pricing strategy and demand forecasting, I highly recommend Stephen Peterson’s book/web course “How to Keepa Camel.

how_to_keepa_camel-205x300

Quick Disclaimer

Ceteris paribus

I am going to say a lot of things here that are based on “all things being equal.” In my economics courses throughout college, this was widely used, although they made it a bit more confusing by using the Latin phrase Ceteris paribus.

What this means: My statements are going to be made to simplify the description of outcomes. When I share this, you should assume that all other variables except those under immediate consideration are held constant.

There are so many different factors at play for each product and sale and to make my points, I can’t touch on each one. So, I isolate the concepts and discuss them under the assumption that only the factors I mention have changed.

For example, if I say something will sell less at $29.99 versus at $19.99, that is based on the basic assumption of supply and demand. Now, if there is a shortage or some sort of change in demand, this may not be true.

Understanding this will help not just in following this article, but also in your understanding of sales rank. There are always more factors that must be considered. I mention this in concept #1, Amazon sales rank is not “complete” information, but rather a part of a bigger picture. It can be used, but not in a vacuum.

What Is Sales Rank?

Sales rank is a reflection of “recency,” of sales, NOT a reflection of overall popularity.

 

For example, The Easy Bake Oven has sold over 30 million units since it’s release in 1963, but you won’t find it in the top 10 sales ranks in the Amazon toys and games category.

At the time of this post, Cards Against Humanity owns the #1 spot. It has certainly not sold 30 million units but it holds the #1 spot though because it is selling more recently.

premier_model_easy_bake_ovenAmazon’s goal = Present buyers with the items that they are most likely to buy right now.

Easy bake oven may win in the long run, but (all things being equal) Amazon is more likely to sell more Cards Against Humanity games today than Easy Bake Ovens.

This helps us as sellers because we don’t care what people WERE buying, we care about what they ARE and WILL be buying.

There is much more that goes into sales rank and I have broken it down into key concepts.

Key Concept #1 Amazon Sales Rank Is Not Perfect

Repeat after me,

  • “Amazon sales rank is not perfect.”
  • “Amazon sales rank is not perfect.”
  • “Amazon sales rank is not perfect.”
  • “Amazon sales rank is not perfect.”
  • “Amazon sales rank is not perfect.”

Ok, that should be enough to hammer the point home.

Sales rank is extremely valuable but when viewed in a vacuum, it can be crippling and lead to serious mistakes.

Going back to the definition of sales rank: it is reflective of recency. Sales rank does NOT mean you can predict with complete certainty what is going to sell going forward. We will discuss more in the next point.

Key Concept #2 You Need to See the BIG Picture

Not everything that can be counted counts, and not everything that counts can be counted.
-Albert Einstein,

Sales rank is reflective of many factors.

  • Seasonality. Example: Valentine’s day candies will not sell as much as the sales rank would lead you to believe several days after the holiday.
  • Previous price. Example: A product that has a sales rank that would reflect 10 units sold per day based on an average price of $19.99 will not sell at that same rate if your price is above the $19.99 (all things being equal).
  • Changes in supply. Example: An item that became discontinued in stores will slow in sales once it is available again from places other than Amazon.
  • Condition. Example: If you plan on selling your unit as “Used-Like New” you may not see the same sales velocity as if it were a “Brand New” unit.
Sales rank reflects sales of any condition of units sold. If a used item is sold, it affects the sales rank as if a new unit was sold. However, it is wise to assume your item will sell less than the sales rank would estimate if you are selling in a condition below your next competitors at similar prices.

So, when you see sales rank, you need to understand WHY it is at that point and if those factors are going to remain constant when you buy and sell your unit(s).

Key Concept #3 One Sale Can Make a Huge Difference

Sales rank is most valuable when it shows an item is selling at high volumes. A sales rank showing that an item is selling 1/month isn’t something you should trust with a lot of certainty.

Why? Because sales rank reflects recency and that “1 sale per month” could just mean the item just sold, but hasn’t sold much at all in the past.

Stephen Smotherman says it well in his book How to Keepa Camel:

Imagine scanning two different books. The data for Book A shows you that it has a sales rank of 500,000 and Book B has a sales rank of 501,000. Even though both of these books have a similar sales rank, it doesn’t mean that both books have the same amount of sales velocity. In fact, Book A could be consistently selling once a week, while Book B could have sold only once in the last year. The only thing the books have in common is that they have both sold somewhat recently.

Smotherman also goes on to mention that in the example above, if Book B had sold today, it’s possible that the rank yesterday was 5 million!

One sale could have skyrocketed that rank up to 501,000. Now, ask yourself, would you buy a book ranked 5 million? Would you buy a book ranked 5 million if one sold today?

It’s relative to other factors, remember this.

So what do you do? See longterm history.

You can do this with tools like Keepa, CamelCamelCamel, or, my favorite, Flippin.it Pro (I will link to these at the end of the post).

If an item has a sales rank based on 1 recent sale, be hesitant. If it has a sales rank based on a number of sales spanning a long period, it should be more reliable (all things being equal).

Key Concept #4 Units Sold Is Relative to Buy Box Ownership

This may seem like a “no duh!” statement, but it is, surprisingly, often overlooked.

If something is selling 10 units per day, that is 10 units across all buyers. Whoever has the buy box will likely make more sales.

So, when you buy something because it sells 1/week, you better be prepared to price your product at a buy box competitive price or you can throw that estimate out the window.

Recommended Tools and Resources

There are a number of free and paid tools that will help you understand pricing and demand.

Free Tools

Keepa (website and extension)

Keepa is an Amazon price tracking tool that allows (as per their website):

  • Comprehensive price history graphs
  • Price Drop & Availability Alerts
  • Browser extensions – once installed the Keepa price history graph will be displayed directly on each Amazon product page
  • Deals, an overview of recent price drops
  • A huge and constantly updated product database

This is hardly an optional tool. Fortunately for you, it’s free (for normal use).

How to read keepa graph

CamelCamelCamel (website and extension) 

Similar to Keepa, CamelCamelCamel (just “camel” or “CCC” for short) is another free web based and chrome tool that lets your track price and sales history.

CCC Amazon

Jungle Scout Estimator (web tool)

To use this you need to enter an email address, but it is well worth it.

It is not a perfect tool (like I said, sales rank is not perfect and is relevant to many factors) but it does provide the most accurate estimates I have found.

Sales per category Amazon

FBAtoolkit.com (web tool)

When I started selling, I used this a lot.

Word started to spread that it was garbage and couldn’t be trusted. You can be the judge. I found it helpful, but like the estimator, it is not perfect.

Amazon Sales Rank Calculator

Paid Tools

Flippin.It Pro (Chrome Extension) $9.99/month. 

Flippin.It is a Google Chrome extension that puts the most critical sales history information right on the Amazon page.

You can see lowest, average and highest sales ranks and prices. Essentially, what you need to make a good buying decision is presented in this extension for you. Worth every penny.

 

Flippin.It Pro

Jungle Scout (web app and extension) 

The extension is going to allow you to see estimated sales per month, average price and other valuable data from the Amazon website.

2016-12-16_16-59-19

The web app doesn’t require you to run from within the Amazon website and can provide you with valuable insight into products and estimated sales.

Tactical Arbitrage Variation Analyzer (paid web tool)

Tactical Arbitrage is a premium tool ($99/month, get a free 10 day trial with code ER10 at checkout) and all uses get access to the product variation analyzer.

This is great because it lets you analyze sales for products with variations (which can be more difficult to understand). The tool uses the number of reviews left for different sizes to show you what sizes and colors people are actually buying of certain items.

Further Reading

As I said, theory on pricing and demand on Amazon can be discussed endlessly. Here are some additional articles I recommend for continued learning.

 

New Sellers, Grab a Free Copy of My Retail Sourcing Manual

Sourcing_checklist_(2)

A quick reference for sales rank, restricted brands and more.

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About Nate McCallister

Nate is the founder and main contributor of EntreResource.com. He is a lifestyle entrepreneur who spends his time building businesses and raising his two kids Sawyer and Brooks with his beautiful wife Emily. His main interests include copywriting, economics and piano.

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