The first question: What is the break-even point for a product that is currently priced at $11.99 on the platform? The answer is $8.
The second question: For a product that costs $8 and is currently priced at $11.99 on the platform, what price do you plan to use as the initial price to start building it?
The answer from many sellers is $10.99.
Why?
Because in the eyes of these sellers, the price of $10.99 is competitive with the leading peer sellers, and they can also make a certain profit.
Let’s start with the price of $10.99 and simulate the methods and logic commonly used by most sellers to build a product to see how such a method of building a product fails and disappoints people.
When a product that costs $8 and is priced at $11.99 by others is set at $10.99 to start selling, our inner sense of superiority is that such a price is competitive compared to our peers.
The reality is a bit embarrassing. Many sellers found that the product priced at $10.99 not only had no sales, but also no traffic. What should they do? Put in ads. Therefore, many sellers began to put in-site ads in order to obtain traffic and orders.
Let’s make another assumption. Suppose the budget for in-site ads is $50/day. What will the effect of the ads be? Sellers with a little operational experience should know that based on the current conversion rate of the Amazon platform, about 5 orders can be converted.
Put in $50 of ads every day, and convert 5 orders. The price of each order is $10.99.
At this time, ask the seller how the operation effect is, and the seller’s answer is probably: “It’s okay. I can get 5 orders every day, and each order has a profit of $3.” “That’s not bad, it’s already profitable!” “Not yet, the advertising cost is a bit high.”
Similar conversations may not happen to every seller, but similar plots have happened to many sellers.
With a $50 advertising investment, 5 orders were received, but in the end, a loss of about $35 was incurred. This is what many sellers encounter during their operations.
If this situation continues, it will only take about a month for the seller to lose more than $1,000 on this product, and the sales and rankings have not improved. The seller basically gives up on the product and concludes that this product cannot be built. Give up, clear the stock, and move on to the next product.
And what will the next product look like? Still the same.